Nasdaq Takes Another Step Toward Global, Round-the-Clock Stock Trading
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2 Stock Exchanges in Europe to Merge, With Nasdaq Link
A German-Energized Market Merger in the New Europe
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By ALEX BERENSON
HE Nasdaq stock market took another step toward its goal of worldwide, round-the-clock trading yesterday with an alliance that is sure to intensify the already fierce competition between the Nasdaq and the New York Stock Exchange.
In an announcement that drew dozens of reporters to the Nasdaq's flashy investor center in Times Square, Nasdaq officials said they would join with the London and Frankfurt exchanges to build a European exchange specializing in high-growth stocks.
When it opens next year, the new market, called Nasdaq iX, will give European investors the chance to trade high-growth technology companies based in both Europe and the United States, said Frank G. Zarb, the chairman of the National Association of Securities Dealers, the parent of Nasdaq. "The markets will follow the sun for the biggest companies," Mr. Zarb said in televised comments from London. "Our intent will be to interlink with all key financial pools."
The market, a 50-50 joint venture of Nasdaq Europe and iX, the combination announced yesterday by the London Stock Exchange and the Deutsche B”rse, will be based in London and managed from there but regulated in Germany, the partners said. It will initially offer investors the chance to trade the stocks in the Nasdaq 100, including technology giants like Microsoft and Cisco Systems, as well as European securities that are now listed on the German Neuer Markt and the London techMARK.
Along with Nasdaq Japan, which Nasdaq has said will be running by September, the new market is the linchpin of Mr. Zarb's plan to create a 24-hour global stock market.
Whether Nasdaq can meet that goal, and on its timetable, is unclear. Already, technology problems have forced Nasdaq to ask the Securities and Exchange Commission for permission to delay its plans to quote stock prices in decimals rather than fractions. And the London Stock Exchange, one of Nasdaq's partners in Nasdaq iX, suffered a fiasco of its own last month when a computer problem left it closed for most of one of the year's busiest trading days.
Still, Mr. Zarb said he believed Nasdaq and its partners had the technical expertise to open the market on schedule.
The Big Board, meanwhile, has been noticeably mum on its global expansion plans, although it has discussed joint ventures with exchanges from Hong Kong to South America. "We're talking with everyone," Ray Pellechia, a spokesman for the New York Stock Exchange, said yesterday.
Daniel Weaver, associate professor of finance at Baruch College, said the Big Board must compete with the Nasdaq's growing web of alliances, which could eventually enable the Nasdaq to offer companies around the globe access to a worldwide pool of capital with a single stock listing.
"The New York Stock Exchange is going to have to respond to this," Mr. Weaver said. "As you increase the number of people who know about a company, your cost of capital goes down."
Douglas Atkin, the president and chief executive of Instinet, which trades stocks listed on more than 40 markets worldwide for institutional investors, said the Big Board had so far been successful in persuading leading European and Asian companies to list their stocks on its exchange, where they are traded in dollars. In contrast, the stocks on Nasdaq iX will be traded in the local currencies used by investors, said Andy MacMillan, spokesman for the N.A.S.D. So share prices will be quoted simultaneously in euros for most European investors and dollars for United States investors, a complex technical hurdle.
"For the N.Y.S.E., the issue is do they want to venture into trading those instruments in local currencies," Mr. Atkin said.
Despite all the publicity, the practical effect of the new market will initially be limited for United States investors, who will not be able to trade European companies on Nasdaq.
"U.S. investors are not going to be immediately able to tap into the Nasdaq iX joint venture right away," Mr. MacMillan said. It will take time for companies to meet S.E.C. accounting and disclosure standards, he said. "The companies still have some hoops to go through."
John Heine, a spokesman for the S.E.C., said that even when United States investors finally do get the chance to trade on Nasdaq iX, they should not expect regulators in the United States to protect them from such things as fraud and violations of insider-trading rules.
"Our jurisdiction is limited to the U.S.," Mr. Heine said. "If it occurs in the U.S., it's ours. If it's not in the U.S., it's not ours." |
