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London Stock Exchange announces merger with Germany's Deutsche Boerse |
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May 4, 2000
LONDON, MAY 3 (AP) - The London and Frankfurt stock exchanges announced Wednesday that they will merge, creating Europe's largest stock market and a powerful regional counterweight to Wall Street.
The London exchange and Germany's Deutsche Boerse would each own 50 percent of the new entity, which is to be called iX, for International Exchanges. The merger is to be completed by mid-2001 and the headquarters are to be in London.
Under the merger agreement, shares in blue-chip companies would be traded in London, while shares in high-tech firms would be traded in Frankfurt, the London Stock Exchange said.
The Anglo-German union includes a joint venture agreement with Nasdaq Europe Ltd., the European subsidiary of the technology-heavy U.S. Nasdaq market, to create a European market for high-growth stocks.
Eyeing further expansion, the iX partners said they signed memorandums of understanding Wednesday with the exchanges in Milan, Italy and Madrid, Spain. No date was set for concluding those negotiations.
The London-Frankfurt agreement is subject to approval by British and German regulators, and by stockholders.
"This merger will create benefits for investors, issuers and intermediaries regardless of their size. All market participants will benefit from lower spreads due to higher liquidity," said Werner Seifert, chief executive of Deutsche Boerse, who will be chief executive officer of iX.
Don Cruickshank, chairman-designate of the London Stock Exchange, will be chairman of iX.
The London and Frankfurt began trying in 1998 to form the hub of a pan-European stock market and later enlarged their plan to include six other national stock markets.
The ambitious effort foundered when London and Frankfurt apparently failed to agree over issues of ownership and the type of trading platform to be used.
The two exchanges have resolved their differences over technology by adopting Frankfurt's Xetra trading platform, the London exchange said.
The Anglo-German merger underscores the growing power of Frankfurt as a financial center. While the London exchange has a larger market capitalization, the Frankfurt market is more diversified and profitable.
Pressure on Europe's national stock exchanges to consolidate has recently intensified due to the introduction last year of a single European currency, the euro, together with competition from U.S. markets and electronic share-trading networks.
Last month, stock markets in Paris, Brussels and Amsterdam formed a three-way regional exchange. The trio tried, without success, to persuade the London exchange to join. Such a move would have left the Frankfurt bourse relatively isolated in Europe.
Share trading in Europe has soared in popularity as more private individuals invest for their retirement and institutions find it easier to buy shares in companies listed elsewhere in the 11 euro-zone countries.
Nasdaq, which is eager to expand in the region, unveiled a plan in November to create an Internet-based European network called Nasdaq-Europe.
Scheduled to begin operating late this year, the network is aimed at helping the region's high-growth companies raise money and at making it easier for Europeans to invest in blue-chip American and Asian stocks.
"What we've done here today gets that done in a matter of months, rather than a matter of years, and we think that's a good deal." said Frank Zarb, chief executive of Nasdaq.
The Nasdaq Japan market will start taking applications from companies wanting to list their shares next week. Trading is to begin June 30, Nasdaq announced Tuesday.
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