Battle rages for bourse supremacy
PARIS – The battle for supremacy among Europe’s bourses is far from over and London, Milan and Madrid must set the pace and dictate who wins the crown, the chairman of pan-European exchange Euronext told Reuters in an interview. «The (consolidation) pace depends mostly on countries that cannot be consolidators… Italy, Spain. Their choices may also set the decision pace of the London Stock Exchange,» Jean-Francois Theodore said. Within three years, two or three major players will have emerged from the industry shakeup, he said. «Consolidation in Europe will continue… along the lines of a US model which has a NYSE, Nasdaq and a few alternative exchanges with a niche strategy.» «Consolidation is certain on a three-year horizon but its pace within these three years is tied to political and strategic choices and also to market conditions,» Theodore said. Investors want bourse mergers in order to create a cheaper and more efficient market for buying and selling shares across borders as national boundaries give way to a single currency and industry group based trading. Europe’s top bourses, the LSE, Deutsche Boerse and Euronext, are competing for pole position in pan-European blue-chip trading, and analysts say that the exchange that can lure smaller peers into its orbit will emerge as a clear leader. London, Europe’s biggest equity cash market, has been left in the cold after a failed merger attempt with Deutsche Boerse and after Euronext snapped up the London derivatives exchange, LIFFE, from under its nose. «The LSE has a strategy to determine, alliances to forge. This may not necessarily be through a merger but it must clarify its position. The LSE will also set the pace (of consolidation),» Theodore said. Scenarios as to the LSE’s future choices vary. Sector analysts say the LSE may strike a deal with a smaller exchange like London-based virt-x – created by the merger of UK electronic exchange Tradepoint and the Swiss Exchange’s blue chip market – or else link up with an exchange in the United States. London may also seek to woo Milan or Madrid or become prey for its old suitors and rivals, Euronext and Deutsche Boerse. Athens keen to join The outcome is unlikely overnight. Madrid and Milan are under no great pressure to forge alliances as Milan seeks regulatory approval to float, while Spain’s equity and derivatives markets are being grouped under one holding company, with a view to float as well. «Madrid and Milan are not necessarily in a hurry to strike deals… They have to restructure. They are strengthening their hands for future discussions,» Theodore said. And Euronext, which is integrating trading between Paris, Brussels and Amsterdam, digesting the LIFFE takeover and a merger with the Lisbon bourse, has said that 2002 will be a year to start capitalizing on synergies. But this does not mean it will remain idle «if something happens that changes the picture,» Theodore said. He would not comment on talk that Euronext was in contact with Madrid or Milan but confirmed that Euronext had been approached by the Greek stock exchange. «The Athens bourse expressed interest in Euronext. We are in contact. It may initially lead to a technical cooperation as they need to renew their systems,» he said. Euronext already has cross-membership agreements with the Helsinki, Luxembourg, and the Warsaw stock exchanges. Deutsche Boerse has emerged as Euronext’s archrival in the consolidation game. Sources said last month that the German exchange was in talk with Milan and Madrid, which could lead to a single trading platform to pull these smaller exchanges in its orbit. Deutsche Boerse is also trying to grab market share from its rivals by offering trade in French, Dutch and US blue chips on its Xetra system, analysts say. Theodore said he was confident that Euronext’s model of «friendly linkups» was better suited to operators’ needs than the «more aggressive» Deutsche Boerse’s model of vertical trading-to-settlement integration. «Our strategy of friendly linkups makes it easier to have TotalFinaElf and Royal Dutch listed in the same integrated system than an aggressive strategy that displaces liquidities with all (the) problems it implies,» he said.
