It is all change in the world of financial markets with 2007 set to be a year of consolidation. European regulators have just approved the merger of pan-European bourse operator Euronext with the New York Stock Exchange to form the first transatlantic bourse. Last June Euronext rejected a rival offer from Deutsche Boerse.
EuroNews asked Euronext boss Jean-François Théodore about what this means and why it has taken so long to happen:
Monsieur Théodore, there are surely good financial reasons for Euronext to merge with the NYSE, but why wasn’t it possible to create a large, purely European bourse?
Stock exchanges are companies just like any other. Making a takeover approach to other markets is a way of offering a better service to their customers, more liquidity, more products and a way to reduce their costs, while increasing the activity through our information processing systems at a time when the European Competition Commissioner has come up with a major directive on deregulation and competition which is going to come into effect in November of this year – 2007.
So, we looked in Europe, we looked at London, we looked to the East, it was complicated, and with the New York Stock Exchange we saw an opportunity – it’s not financial, it’s corporate – to bring together, for the first time, the top European exchange and the top American exchange, with also a very large European exchange economy, and create the first global market, beginning with the first transatlantic world market and then later perhaps moving into Asia.
Over the past almost two years we’ve witnessed Euronext and various other big European financial institutions dancing around each other without anything coming from that. What really happened with Deutsche Boerse and with the London Stock Exchange?
No, I don’t believe in rehashing the past.
On the European level, initially what the European
authorities rightly would like to develop is competition and that what’s made these various possible mergers at one time or another more complicated.
The agreement between the New York Stock Exchange and Euronext has a number of benefits for Europe: one – it’s the first global network; two – it means the NYSE and the pan-European bourse Euronext have parity.
European companies’ shares will therefore be quoted in New York and on Euronext in euros. That will give a boost to the euro, it will be the second major currency of the stock market, therefore (this merger) is a good thing for Europe and good for the euro.
You’ve stressed the fact that this merger will particularly lead to cost savings and greatly benefit to companies with their initial public offerings of shares, but there is also an important cultural aspect which is that the financial ethics rules are not the same on the two sides of the Atlantic?
The NYSE Euronext merger is a merger of equals, with the American markets remaining American and the European companies, the Europeans markets, remaining European, under the control of European regulators.
Euronext is the only pan-European bourse: it was born out of the euro!
We quote the shares of four euro zone countries, we quote Euribor which is the principal product of the derivatives markets and we’ve created – with the world’s biggest stock market – the NYSE – an alliance of equals: the dollar and the American market on one side, the euro and the European market on the other.
In 2006 Euronext turned in an exceptional performance, with a record number of trades and initial public offerings of shares. After this merger, is there a risk that you won’t be able to repeat that level of performance?
There is a pan-European bourse and right now only one and that’s Euronext, which united five European countries: Belgium, the Netherlands, Portugal and France and in Britain the derivatives market.
2006 was a brilliant year for Euronext, our trades increased by 35%; in terms of numbers of registered trades, we are the leading European bourse, a little in front of London, clearly ahead of Deutsche Boerse, and so Euronext is dynamic and that dynamism will be reinforced by our new increased liquidity and the new cost savings.
So with the merger with the NYSE, will the Euronext name be changed to something more …. global?
You don’t change a winning brand!