The new IX as it is called has the potential of becoming huge, and Frank Zarb, head of the nasdaq, is trying to link the two together to add cross listings for twenty four hour trading between the two.
I've heard very little talk about this on the various threads, and I would like to hear your views on the subject.
cbs.marketwatch.com
IX: It's a very big deal
By Paul Erdman, CBS.MarketWatch.com
Last Update: 6:16 PM ET May 3, 2000 Commentary
Latest headlines
SAN FRANCISCO (CBS.MW) -- The merger of the London and Frankfurt stock exchanges, which was signed and sealed Wednesday, is a very big deal.
It will be called IX, the short form of International Exchanges. The merged exchange will control 53 percent of Europe's trading volume. That will increase substantially when the stock exchanges in both Milan and Madrid join the group, as they have indicated they will do as soon as possible.
Finally, European companies will have the same array of possibilities for financing growth that American companies have had.
All share prices will be quoted in euros, except that in London British-based companies will have the option of having their shares listed in pounds.
A bigger IX
But there is more to come. When the merger signing ceremonies took place in London, an American, Frank Zarb, shared the podium with the heads of the London and Frankfurt exchanges. Zarb runs the Nasdaq. It is his intention to establish a link with the IX, cross-listing Nasdaq issues on the new exchange and allowing for 24-hour trading. The IX will open at 9 p.m. Eastern time, allowing European investors to trade Nasdaq stocks by day, and Americans to trade IX stocks by night.
Under the new arrangement, European trading in high-tech companies will be centered in Frankfurt. It is estimated that it will account for 81 percent of Europe's growth market. London will get the old-economy, blue-chip stocks.
Stateside impact
What the American investor gets out of this is a simplification of doing business in Europe. One phone will do. The rules and transparency, American-style, will be the same in London, Madrid and Milan. And due to its sheer size, this market will, in time, rival the liquidity of New York.
This is also very important for Europe in the macroeconomic sense. For it means that, finally, European companies will have the same array of possibilities for financing growth that American companies have had.
Not that long ago, they had to get their money from those so-called universal banks -- giving up an arm and a leg in the process. They could float bonds, but the market for them was usually restricted to a single country, since interest rates varied very considerably within Europe. So, often, they had no choice but to go the eurodollar route. Now they can float continentwide bond issues, denominated in euros, with buyers getting the same interest rate in Spain, Portugal or Germany, and with no foreign exchange risk. Over a trillion dollars was raised this way last year.
'IPO engine'
Now comes the missing element: a Europe-wide equities market, again denominated in euros, that can handle large-scale public offerings. This exchange will be especially significant where high-tech stocks are concerned.
Frank Zarb says that the IX will be "the IPO engine of choice for Europe."
Taken together, this will means that European companies, old and young, will be able to raise capital as never before.
If you agree that capital drives capitalism, Europe has now entered a new era.
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