EALIC
European Association of Listed Companies AISBL-IVZW CONSOLIDATION OF STOCK EXCHANGES European issuers question the merits of the contemplated merger proposals from a users’ point of view Press release 11 October 2006 The European Association of Listed Companies (EALIC) welcomes a consolidation of stock exchanges that would lead to a further integrated, well functioning European capital market. A consolidation that would result in higher liquidity and lower costs, not in additional regulatory burdens, would be a clear asset. The prime concern of any consolidation of exchanges should lay with the overall and long term economic benefits it could bring to all of its users. The Board of EALIC has serious doubts that these goals will be reached with the existing or contemplated proposals. EALIC urges all stakeholders, shareholders and other parties involved in the decision making process, to carefully check how the said goals could be met in the possible combinations.
Following new reports regarding possible combinations of stock exchanges, the Board of Directors of EALIC recently convened to take stance and to draw the public’s attention again to the issues that are of key interest to the exchanges’ users - listed companies not in the least. The Board confirms its previous statements that a higher degree of consolidation should have a positive impact on Europe's capital markets, their level of integration and the efficiency of their organization. However the decision makers must keep the long term objective in mind and let themselves guide by the prime goal of creating an integrated financial market to the benefit of all stakeholders, issuers, investors and intermediaries alike. “The exchanges’ utility function must be preserved, and freedom of access, both in a horizontal and vertical manner, ought to be actively strived for.”, says Alain Joly, Chairman of the association of companies whose securities are traded on Europe’s stock exchanges. “A smooth and unencumbered access to capital markets is indeed of vital importance for our economy.” he adds. “It will encourage fair and healthy competition.” A consolidation with a federal like, ‘global but local’ structure, that respects the existing national platforms, is therefore preferred by issuers. The synergies and subsequent cost reductions of such a merger must flow back to all stakeholders. “Our members express serious doubts that these goals will be reached with the combinations that are currently being discussed.” continues Joly. Of major concern for European issuers remain the consequences of a spill-over, across markets, of legal, regulatory and supervisory rules in case of a Trans-Atlantic merger, as would be the case, for instance, with the proposed deal between Euronext and NYSE. The recent agreements reached by the SEC and the Euronext College of Regulators, and the governance arrangements that are set forward as a remedy against such spill-over, only seem to confirm the limitations of the available remedies. In addition, EALIC fails to see how this deal will improve the liquidity of Euronext listed companies, neither what cost reductions it could bring to users as there would be no integration of post-trading platforms. Should synergies nevertheless result in cost reductions, it is not clear whether and how they will flow back to the users. Finally, the proposed governance structure that puts NYSE in control, gives no assurance in the long run as to the preservation of the interests of European issuers.
Secretary General Mrs. Dorien FRANSENS Mail address Rue Belliard 4-6 1040 BRUSSELS Telephone +32 (0)2 289 25 70 Fax +32 (0)2 502 15 60 e-mail dorien.fransens@ealic.org
EALIC
European Association of Listed Companies AISBL-IVZW As regards some of the other contemplated proposals, European listed companies stress that they could only endorse a merger proposal that includes long-term binding provisions to uphold Euronext’s federal model. Moreover, they could not accept a reduction of competition in derivatives markets and the Board of EALIC notes that Euronext and Deutsche Börse are, at present, strong competitors in this field. EALIC’s Board further underlines the importance for listed companies that a consolidation of securities exchanges within the Euro area should comprise a strong commitment to create more efficient post-market infrastructures open to competition. “It is high time that strong measures be taken to render cross-border trading less costly for investors”, their Chairman explains. In this context, the Board of EALIC welcomes the Commission initiative to promote a Code of Conduct for all trading platforms and providers of post-trading services, designed to maintain an open and competitive environment and prevent monopolisation in the field of clearing and settlement. The success of such Code of Conduct will depend on the effective implementation of the commitments taken regarding price transparency, interoperability and open access of infrastructures, separation of accounts and unbundling of network services and commercial services, as well as strict verification of compliance with commitments and deadlines. In the same spirit, EALIC also welcomes the initiative by the European Central Bank to set up a common system to provide efficient settlement services for securities transactions, leading to the processing of both securities and cash settlements on a single platform through common procedures – a Target-2 for securities. Stock exchange consolidation has major implications for all the stakeholders, including issuing companies, whose interests should be acknowledged and taken into account. As representative of the companies whose securities are crucial for the concerned stock exchanges’ core business, namely trading, EALIC calls upon all parties who are to decide about the proposed transactions to stay focused on the above described common goals. ____________________
Information for the Editor: EALIC, the European Association of Listed Companies, promotes the common interests of European issuers on a European level. Its scope of activities includes the legal and regulatory framework specific to listed companies in general and to the issuing and trading of securities on European markets in particular. EALIC was incorporated in December 2002 as an international non-profit association. Its current memberbase counts six national associations of listed companies, namely VEUO (Netherlands), ANSA and AFEP (France), ABSC-BVBV (Belgium), ASSONIME (Italy) and SEG (Poland). In addition, more than seventy leading public companies from the mentioned countries, as well as from Portugal and Spain, are direct members of our association. As such EALIC represents many hundreds of leading issuing companies to date. EALIC is based in Brussels. Further information: Dorien FRANSENS, Secretary General Tel. 00 32 2 289 25 70 Fax. 00 32 2 502 15 60 e-mail : dorien.fransens@ealic.org Website: www.ealic.org
2