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Overview World Stock Markets

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					   World’s Stock
    Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)


Overview




                                       Chapter 17
                                      Segmentation
                                  & Integration in
                       International Stock Markets
                       Overview
   World’s Stock
    Exchanges
                       Background information
      (P. Sercu:
    International         How large & open are markets?
Finance: Theory into
      Practice)           How does Trading, Clearing & Settlement work?
                          Certificates, Receipts as various aliases for equity
Overview

                       Why don’t markets merge?
                         Home bias
                         Differences in Corporate Governance and
                         Legal/Regulatory Environment
                       Can Unification be Achieved by A Winner Taking All?
                         Centripetal v. Centrifugal Effects in Networks
                         The waning attractions of NY
                         The (re)emergence of London
                       CFO’s summary
                       Overview
   World’s Stock
    Exchanges
                       Background information
      (P. Sercu:
    International         How large & open are markets?
Finance: Theory into
      Practice)           How does Trading, Clearing & Settlement work?
                          Certificates, Receipts as various aliases for equity
Overview

                       Why don’t markets merge?
                         Home bias
                         Differences in Corporate Governance and
                         Legal/Regulatory Environment
                       Can Unification be Achieved by A Winner Taking All?
                         Centripetal v. Centrifugal Effects in Networks
                         The waning attractions of NY
                         The (re)emergence of London
                       CFO’s summary
                       Overview
   World’s Stock
    Exchanges
                       Background information
      (P. Sercu:
    International         How large & open are markets?
Finance: Theory into
      Practice)           How does Trading, Clearing & Settlement work?
                          Certificates, Receipts as various aliases for equity
Overview

                       Why don’t markets merge?
                         Home bias
                         Differences in Corporate Governance and
                         Legal/Regulatory Environment
                       Can Unification be Achieved by A Winner Taking All?
                         Centripetal v. Centrifugal Effects in Networks
                         The waning attractions of NY
                         The (re)emergence of London
                       CFO’s summary
                       Overview
   World’s Stock
    Exchanges
                       Background information
      (P. Sercu:
    International         How large & open are markets?
Finance: Theory into
      Practice)           How does Trading, Clearing & Settlement work?
                          Certificates, Receipts as various aliases for equity
Overview

                       Why don’t markets merge?
                         Home bias
                         Differences in Corporate Governance and
                         Legal/Regulatory Environment
                       Can Unification be Achieved by A Winner Taking All?
                         Centripetal v. Centrifugal Effects in Networks
                         The waning attractions of NY
                         The (re)emergence of London
                       CFO’s summary
                                 Outline
    World’s Stock
     Exchanges

      (P. Sercu:
    International                Background information
Finance: Theory into                How large & open are markets?
      Practice)
                                    How does Trading, Clearing & Settlement work?
                                    Certificates, Receipts as various aliases for equity
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various   Why don’t markets merge?
aliases
                                   Home bias
Why don’t markets                  Differences in Corporate Governance and Legal/Regulatory Environment
merge?

Will a winner take
all?                             Can Unification be Achieved by A Winner Taking All?
CFO’s summary                      Centripetal v. Centrifugal Effects in Networks
                                   The waning attractions of NY
                                   The (re)emergence of London


                                 CFO’s summary
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                 Key messages
    World’s Stock
     Exchanges
                                    Markets are fragmented
      (P. Sercu:
    International
Finance: Theory into
                                      organized by country, with recently a few exceptions
      Practice)                       different trading, clearing, settlement systems—but some
                                      convergence. Not a major issue anymore
Background info
Varying size & openness
                                      different aliases of underlying securities, often reflecting
How does Trading, C&S work?           regulatory concerns
Certificates, Receipts: various
aliases

Why don’t markets
                                    Why don’t markets merge into one world
merge?                              market?
Will a winner take
all?                                  home bias: investors aren’t pushing
CFO’s summary
                                      different regulation: mandarins won’t agree
                                    Will NY take all? (integration via the back door)
                                      there are centripetal forces, network effects, but also
                                      centrifugal ones
                                      NY is not the perfect solution, and may have overreacted
                                      London, HK, etc fight back—successfully
                                                                                          How large is which market?
                                                                                                                  Table 17.1: Domestic Market Capitalisation of World’s Stock Exchanges
    World’s Stock
     Exchanges
                                                                                                                      —1998—         —2005—         —2007—                                   —1998—         —2005—         —2007—
                                                                                                                      b$   %         b$   %         b$   %                                  b$    %         b$   %         b$   %
                          CHAPTER 17. SEGMENTATION AND INTEGRATION IN THE WORLD’S STOCK
                                                                             EXCHANGES

      (P. Sercu:                                                                           US, Cdn    NYSE          8880   40     13311 30.0     15421 25.4     Lat Am     Mexico          157   0.7       239  0.5       397  0.7
    International                                                                                     Amex           125  0.6        86  0.2       282  0.5                Buenos A         59   0.3        48  0.1        57  0.1
Finance: Theory into                                                                                  Nasdaq        1738  7.8      3604  8.1      3865  6.4                Colombia          0     0        51  0.1       101  0.2
                                                                                                      US           10742 48.3     17001 38.4     19568 32.2                Lima             17   0.1        24  0.1        69  0.1
      Practice)                                                                                       Canada         997  4.5      1482  3.3      2186  3.6                Brazil          255   1.1       475  1.1      1370  2.3
                                                                                                      US+CDN       11739   53     18483 41.7     21754 35.8                Santiago         72   0.3       136  0.3       212  0.3
                                                                                                                                                        0.0                Bermuda                              0.0         3  0.0
Background info                                                                            Europe     London        1996      9   3058     6.9    3851  6.3                Latin Am        561     2.5     972  2.2      2209  3.6
                                                                                                      A’dam          469    2.1                         0.0
Varying size & openness
                                                                                                      Brussels       139    0.6                                 Afr. ME    Cairo Aless       0       0      80    0.2     193    0.3
How does Trading, C&S work?                                                                           Paris          676      3                                            Mauritius         0       0       2    0.0       8    0.0
Certificates, Receipts: various                                                                        Euronext3     1284    5.8                                            Tehran           11     0.1      36    0.1      44    0.1
aliases                                                                                               Lisbon          39    0.2                                            Tel-Aviv         44     0.2     123    0.3     235    0.4
                                                                                                      Euronext      1323      6    2707    6.1    4223    7.0              J’sburg         212       1     549    1.2     828    1.4
Why don’t markets                                                                                     Helsinki        73    0.3                                            Afr+ME          267     1.2     790    1.8    1308    2.2
                                                                                                      Stockholm      265    1.2
merge?                                                                                                Copenhgn       338    0.4                                 Asia Aus   Australian      295     1.3     804    1.8    1095    1.8
                                                                                                      OMX            338    1.5     803    1.8    1243    2.0              Bombay            0       0     553    1.2    1298    2.1
Will a winner take                                                                                    Germany        825    3.7    1221    2.8    2105    3.5              Colombo           0       0       6    0.0       8    0.0
all?                                                                                                  Spain          290    1.3     960    2.2    1781    2.9              Hong Kong       413     1.9    1055    2.4    2654    4.4
                                                                                                      Athens          34    0.2     145    0.3     265    0.4              Jakarta          29     0.1      81    0.2     212    0.3
                                                                                                      Budapest                       33    0.1      46    0.1              Japan          2217      10    4573   10.3    4542    7.5
CFO’s summary                                                                                         Cyprus                          7    0.0      29    0.0              Korea            42     0.2     718    1.6    1122    1.8
                                                                                                      Irish SE        49    0.2     114    0.3     144    0.2              Kuala Lmpr       93     0.4     181    0.4     325    0.5
                                                                                                      Istanbul        61    0.3     162    0.4     286    0.5              New Zealnd       30     0.1      41    0.1      47    0.1
                                                                                                      Italy          345    1.6     798    1.8    1072    1.8              Philippines      31     0.1      40    0.1     103    0.2
                                                                                                      Ljubljana        2      0       8    0.0      29    0.0              Shanghai          0       0     286    0.6    3694    6.1
                                                                                                      Luxmbrg         34    0.2      51    0.1     166    0.3              Shenzhen          0       0     116    0.3     785    1.3
                                                                                                      Malta            0      0       4    0.0       6    0.0              Singapore       106     0.5     257    0.6     539    0.9
                                                                                                      Oslo            67    0.3     191    0.4     353    0.6              Taiwan          297     1.3     476    1.1     664    1.1
                                                                                                      Switzrlnd      575    2.6     935    2.1    1271    2.1              Thailand         23     0.1     124    0.3     197    0.3
                                                                                                      Vienna          37    0.2     126    0.3     236    0.4              AsPacAu        3577    16.1    9310   21.0   17285   28.5
                                                           642




                                                                                                      Warsaw          12    0.1      94    0.2     211    0.3
                                                                                                      Europe        6083   27.4   11416   25.8   17317   28.5   FIBV all                 22226   101.2   44315    100   60692   100

                                                                                          Source Computed from FIBV data, mid-December. The columns headed by “%” show the Exchange’s market cap as a fraction of the world total.
                                                                                          Foreign and cross-listings are not included.
                                                                               How open is which market?
                                                                                                         Table 17.2: Foreign and Cross-Listings in the World’s Stock Exchanges
    World’s Stock
                                                                                                             —1998—        —2005—       —2007—                                   —1998—        —2005—         —2007—
     Exchanges                                                                                               #    %        #    %       #    %                                   #    %        #    %         #    %
                                                                                   us, Cdn   NYSE           355 13.5      452 19.9     421 18.5     Lat Am       Mexico           4  2.0      176 54.0       242 65.9
                    c P. Sercu, K.U.Leuven. Free copying stops Oct 1st, ’08




      (P. Sercu:                                                                             Amex            63  8.9      100 16.8     104 17.4                  Buenos A         0  0.0        4  3.8         5  4.5
    International                                                                            Nasdaq         454  8.3      332 10.5     307 10.0                  Colombia                       0  0.0         0  0.0
Finance: Theory into                                                                         Chicago          0  0.0                                             Lima             3     1.2    31 13.8        38 16.8
                                                                                             Toronto         58  4.1                                             Rio de J         1     0.2
      Practice)                                                                              Vancouver        0  0.0                                             Santiago         0     0.0      1     0.4      3     1.2
                                                                                             Montreal        12  2.2                                             Sao Paulo        1     0.2      2     0.5      9     2.2
                                                                                             Canada TSX      70  2.1       39    1.0    70    1.8
Background info                                                                                                                                     Afr ME       Cairo Al                        0     0.0
Varying size & openness                                                            Europe    London         467    18.6   334   10.8   719   21.7                Mauritius                       0     0.0      3     4.3
How does Trading, C&S work?
                                                                                             A’dam          149    42.8                                          Tehran           0     0.0                     0     0.0
                                                                                             Brussels       127    47.9                                          Tel-Aviv         2     0.3
Certificates, Receipts: various
                                                                                             Paris          184    19.9                                          Joh’sburg       27     4.2     25     6.7     37     9.0
aliases
                                                                                             Euronext3              0.0
                                                                                             Lisbon           0     0.0                             Asia-Aus     Australian      60     4.9    71      4.1    85      4.3
Why don’t markets                                                                            Euronext4              0.0   293   23.3   225   19.5                Bombay                         0      0.0     0      0.0
merge?                                                                                       Helsinki          2    1.6                                          Nat’l SE IN                    0      0.0     0      0.0
                                                                                             Stockholm        16    6.1                                          Colombo                        0      0.0     0      0.0
Will a winner take                                                                           OMX             0.0     22   3.2     24   2.8                       Hong Kong       20     3.0     9      0.8     9      0.7
all?                                                                                         Germany                0.0   166   20.4   105   12.1                Jakarta          0     0.0     0      0.0     0      0.0
                                                                                             Spain            9     0.9                 39    1.1                Korea            0     0.0     0      0.0     2      0.1
                                                                                             Athens           0     0.0    2     0.7     3    1.1                Kuala Lmpr       3     0.4     4      0.4     3      0.3
CFO’s summary
                                                                                             Budapest                      0     0.0     2    4.9                New Zealnd      55    28.9    32     17.3    26     14.6
                    Formatted 2 July 2008—14:20.




                                                                                             Copenhgn        12     4.8                                          Osaka            1     0.1     1      0.1     1      0.2
                                                                                             Cyprus                         0    0.0     0    0.0                Philippin        0     0.0     2      0.8     2      0.8
                                                                                             Irish SE        19    18.6    13   19.7    13   17.8                Shanghai                       0      0.0     0      0.0
                                                                                             Istanbul         1     0.4     0    0.0     0    0.0                Shenzhen                       0      0.0     0      0.0
                                                                                             Italy            4     1.7     7    2.5     6    2.0                Singapore       40    12.0   122     17.8   290     38.1
                                                                                             Ljubljana        0     0.0     0    0.0     0    0.0                Taiwan           0     0.0     5      0.7     5      0.7
                                                                                             Luxmburg       228    80.3   206   84.1   227   87.0                Thailand         0     0.0     0      0.0     0      0.0
                                                                                             Malta                          0    0.0     0    0.0                Tokyo           60     3.2    28      1.2    25      1.0
                                                                                             Oslo            21     9.7    28   12.8    40   16.1
                                                                                             Switzrlnd      212    49.5   116   29.0    84   24.6   FIBV   all   foreign        3649           3533          3214

                                                                                             Vienna          37    26.8    19   17.1    17   14.3                local         44975          42041          40900
                                                                                             Warsaw           0     0.0     7    2.9    23    6.1                ratio, %       8.1            8.4            7.9

                                                                              Source Computed from FIBV data, mid-December. The columns “%” show the number of foreign listings as a percentage of the total (domestic +
                                 Stock markets: three hitparades
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                          by size            by # foreign Cies      by % foreign Cies
                                    NYSE            15421   London          719   Luxembourg      87.0
Background info
Varying size & openness
                                    Japan            4542   NYSE            421   Mexico          65.9
How does Trading, C&S work?         Euronext         4223   Nasdaq          307   Singapore       38.1
Certificates, Receipts: various
aliases
                                    Nasdaq           3865   Singapore       290   Switzrland      24.6
                                    London           3851   Mexico          242   London          21.7
Why don’t markets
merge?                              Shanghai         3694   Luxembourg      227   Euronext        19.5
                                    Hong Kong        2654   Euronext        225   NYSE            18.5
Will a winner take
all?                                Canada           2186   Germany         105   Irish SE        17.8
                                    Germany          2105   Amex            104   Amex            17.4
CFO’s summary
                                    Spain            1781   Australian       85   Lima            16.8

                                 Source Computed from FIBV data, mid-December 2007.
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                 Who’s who in Equitania?
    World’s Stock
     Exchanges                       Top dog
      (P. Sercu:                         NYSE, 30%
    International
Finance: Theory into                     even more so since merger with Euronext
      Practice)


Background info                      Running up
Varying size & openness
How does Trading, C&S work?              Tokyo: large (10%) but introvert
Certificates, Receipts: various
aliases
                                         Nasdaq, LSE, Euronext : 8 to 6%
Why don’t markets
                                                     ¨
                                         Deutsche Borse
merge?                                   Hong Kong rises fast
Will a winner take
all?

CFO’s summary
                                     An army of small markets

                                     Further consolidation
                                                    ¨
                                         Deutsche Borse bought IS, May 2007
                                         OMX (Scandinavian, Baltic exchanges)
                                         OMX-NASDAQ-Dubai seem to be clustering (fall 2007)
                                         Vienna club (Budapest, Bucharest, Zagreb)
                                      international rise is recent—and over?
                                 NY’s CHAPTER 16. SEGMENTATION AND INTEGRATION IN THE WORLD’S STOCK
                                  520                                                    EXCHANGES


    World’s Stock
     Exchanges

      (P. Sercu:                                                          Figure 16.1: US foreign listings, 1960-2004
    International
                                    800
Finance: Theory into
      Practice)                     700

                                    600
Background info
Varying size & openness             500
How does Trading, C&S work?                                                      listings
                                     400
Certificates, Receipts: various                                                   delistings
aliases
                                                                                 total number listed
                                     300
Why don’t markets
merge?                               200

Will a winner take                   100
all?
                                          0
CFO’s summary                        -100

                                     -200
                                              1960

                                                     1962

                                                            1964

                                                                   1966

                                                                          1968

                                                                                 1970

                                                                                        1972

                                                                                               1974

                                                                                                      1976

                                                                                                             1978

                                                                                                                    1980

                                                                                                                           1982

                                                                                                                                  1984

                                                                                                                                         1986

                                                                                                                                                1988

                                                                                                                                                       1990
                                                                                                                                                                                                               listings




                                                                                                                                                              1992

                                                                                                                                                                     1994

                                                                                                                                                                            1996

                                                                                                                                                                                   1998

                                                                                                                                                                                          2000

                                                                                                                                                                                                 2002

                                                                                                                                                                                                        2004
                                  Source From listing to delisting, blind paper submitted for WFA2007                                                                        .
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                 Trading systems
    World’s Stock
     Exchanges                      Quote-driven markets
      (P. Sercu:                        LSE, SEAQ International, NASDAQ
    International
Finance: Theory into                  + : immediacy, minimal liquidity
      Practice)


Background info                     Order-driven markets
Varying size & openness
How does Trading, C&S work?             public limit order book (PLOB)
Certificates, Receipts: various
aliases                                 Canadian and European markets
Why don’t markets                     + : aggregation of info from order flow; transparency
merge?

Will a winner take
all?
                                    Hybrids
CFO’s summary                           NYSE: specialist keep a book, besides mkt makers
                                        (which are, in fact, disappearing)
                                        Euronext: “liquidity providers” wpork via PLOB
                                        Vienna (XETRA): “Electronic Quote and Order -Driven
                                        System”; LSE’s SETS
                                        Platforms that coordinate info from market makers: MTS;
                                        NASDAQ Level-I; NASDAQ Level-II
                                  Clearing & Settlement
    World’s Stock
     Exchanges                             Independent of trading?
      (P. Sercu:                                 US: one C&S institution, the Depository Trust Corporation
    International
Finance: Theory into                             Eur: SE’s were “silos”, Eurobonds had Euroclear,
      Practice)                                  Clearstream (now DB);
                                 16.2.   INSTITUTIONAL DIFFERENCES BETWEEN STOCK EXCHANGES
                                                 Things move: Euronext: Liffe’s LCH & Paris’ Clearnet 523
Background info
Varying size & openness                          (now spun off and merged) clears while Euroclear, Crest
How does Trading, C&S work?
Certificates, Receipts: various
                                                 settle;
aliases
                                         Figure 16.2: Trading Costs in Europe: Scope for Improvement
Why don’t markets
merge?                                                                                                           trading
                                                Borsa Italiana
                                                                                                                 clearing
Will a winner take                                                                                               settlement
                                              Euronext Lisbon
all?

CFO’s summary                                 Euronext A'dam

                                                          LSE

                                                Euronext Paris

                                                        Virt-x

                                              Deutsche Boerse

                                                                 0   1           2          3         4         5        6
                                                                         Cost of equities trading (Euro per trade)

                                 Source Based on numbers from the EU Commision, quoted in The Economist, Sept 7, 2006         .
                                  Clearing & Settlement
    World’s Stock
     Exchanges                             Independent of trading?
      (P. Sercu:                                 US: one C&S institution, the Depository Trust Corporation
    International
Finance: Theory into                             Eur: SE’s were “silos”, Eurobonds had Euroclear,
      Practice)                                  Clearstream (now DB);
                                 16.2.   INSTITUTIONAL DIFFERENCES BETWEEN STOCK EXCHANGES
                                                 Things move: Euronext: Liffe’s LCH & Paris’ Clearnet 523
Background info
Varying size & openness                          (now spun off and merged) clears while Euroclear, Crest
How does Trading, C&S work?
Certificates, Receipts: various
                                                 settle;
aliases
                                         Figure 16.2: Trading Costs in Europe: Scope for Improvement
Why don’t markets
merge?                                                                                                           trading
                                                Borsa Italiana
                                                                                                                 clearing
Will a winner take                                                                                               settlement
                                              Euronext Lisbon
all?

CFO’s summary                                 Euronext A'dam

                                                          LSE

                                                Euronext Paris

                                                        Virt-x

                                              Deutsche Boerse

                                                                 0   1           2          3         4         5        6
                                                                         Cost of equities trading (Euro per trade)

                                 Source Based on numbers from the EU Commision, quoted in The Economist, Sept 7, 2006         .
                                  Clearing & Settlement
    World’s Stock
     Exchanges                             Independent of trading?
      (P. Sercu:                                 US: one C&S institution, the Depository Trust Corporation
    International
Finance: Theory into                             Eur: SE’s were “silos”, Eurobonds had Euroclear,
      Practice)                                  Clearstream (now DB);
                                 16.2.   INSTITUTIONAL DIFFERENCES BETWEEN STOCK EXCHANGES
                                                 Things move: Euronext: Liffe’s LCH & Paris’ Clearnet 523
Background info
Varying size & openness                          (now spun off and merged) clears while Euroclear, Crest
How does Trading, C&S work?
Certificates, Receipts: various
                                                 settle;
aliases
                                         Figure 16.2: Trading Costs in Europe: Scope for Improvement
Why don’t markets
merge?                                                                                                           trading
                                                Borsa Italiana
                                                                                                                 clearing
Will a winner take                                                                                               settlement
                                              Euronext Lisbon
all?

CFO’s summary                                 Euronext A'dam

                                                          LSE

                                                Euronext Paris

                                                        Virt-x

                                              Deutsche Boerse

                                                                 0   1           2          3         4         5        6
                                                                         Cost of equities trading (Euro per trade)

                                 Source Based on numbers from the EU Commision, quoted in The Economist, Sept 7, 2006         .
                                  Clearing & Settlement
    World’s Stock
     Exchanges                             Independent of trading?
      (P. Sercu:                                 US: one C&S institution, the Depository Trust Corporation
    International
Finance: Theory into                             Eur: SE’s were “silos”, Eurobonds had Euroclear,
      Practice)                                  Clearstream (now DB);
                                 16.2.   INSTITUTIONAL DIFFERENCES BETWEEN STOCK EXCHANGES
                                                 Things move: Euronext: Liffe’s LCH & Paris’ Clearnet 523
Background info
Varying size & openness                          (now spun off and merged) clears while Euroclear, Crest
How does Trading, C&S work?
Certificates, Receipts: various
                                                 settle;
aliases
                                         Figure 16.2: Trading Costs in Europe: Scope for Improvement
Why don’t markets
merge?                                                                                                           trading
                                                Borsa Italiana
                                                                                                                 clearing
Will a winner take                                                                                               settlement
                                              Euronext Lisbon
all?

CFO’s summary                                 Euronext A'dam

                                                          LSE

                                                Euronext Paris

                                                        Virt-x

                                              Deutsche Boerse

                                                                 0   1           2          3         4         5        6
                                                                         Cost of equities trading (Euro per trade)

                                 Source Based on numbers from the EU Commision, quoted in The Economist, Sept 7, 2006         .
                                 Trading internationally—Ad hoc:
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   investor        investor   investor       investor   investor       investor

Background info
                                    broker         broker      broker         broker     broker         broker
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various
aliases

Why don’t markets
merge?                              market          market                    market                    market

Will a winner take
all?
                                     LIST           LIST        LIST           LIST       LIST          LIST
CFO’s summary

                                     issuer         issuer      issuer         issuer     issuer        issuer

                                        domestic order              you buy aboad        your broker buys abroad
                                 Trading internationally—dual seats/listings:
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   investor        investor    investor          investor    investor              investor

Background info
                                        broker
                                    broker            broker    broker            broker      broker               broker
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various
aliases

Why don’t markets
merge?                                              market      market            market            single market

Will a winner take
all?                                                                                                quasi-single
                                     LIST            LIST        LIST              LIST               LIST
CFO’s summary

                                     issuer          issuer    issuer         issuer           issuer               issuer

                                     broker buys seat abroad     issuer gets cross-listing              Euronext
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 More about Euronext’s solution
    World’s Stock
     Exchanges                     Central idea:
      (P. Sercu:                     brokers “buy” one seat (→ legislation) but get single passport
    International
Finance: Theory into                 firms get one listing (→ legislation) but get single passport
      Practice)                      trading in EUR, GBP (and now USD)—stocks, bonds,
                                     derivatives
Background info
Varying size & openness
How does Trading, C&S work?
Certificates, Receipts: various     What else is common?
aliases
                                                          ´
                                     OS, – Nouveau Systeme de Cotation (NSC), Euronext-Atos
Why don’t markets
merge?                                    – Concept (at Liffe)
Will a winner take
                                     single passport: no aliases need to be created (><< US)
all?                                 Boards (Dir., Mgt): equal representation of all “countries”
CFO’s summary                        College of (five) overseers

                                   Other
                                     Alternext; “new” markets
                                     Clearing; settlement & custody: independent
                                     Bclear: clears for OTC deals
                                     Partnerships with Luxembourg (29,000 bonds listed), Tokyo, N
                                     E India
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Euronext: achievements
    World’s Stock
     Exchanges

      (P. Sercu:
                                    Internationalisation
    International                       2005III: 25% of trades were cross-border—9% in 2001III
Finance: Theory into
      Practice)                         Brussels: June 2005, two thirds of the orders came from
                                        foreign brokers—9% in 2001Jun
Background info                         Brussels: # of active brokers =120 (35 BE)— up from 80
Varying size & openness
How does Trading, C&S work?             (55 BE)
Certificates, Receipts: various
aliases

Why don’t markets                   costs
merge?

Will a winner take                      down from EUR 1.53 to 0.98 per order
all?                                    lower than DB and SETS?
CFO’s summary

                                    liquidity
                                        volume: +40%
                                        spreads: –20%
                                        volatility: –10%
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                 Local aliases for stocks
    World’s Stock
     Exchanges
                                     Bearer v Registered / anonymous or not
      (P. Sercu:
    International                         old v new def of bearer; (non?)deliverable; (a)nomymous?
Finance: Theory into                      deliverable bearer shares: gone, in Eur, in 2015
      Practice)
                                          conversion reg→bearer: custodian issues certificates, at
Background info                           the request of a depository institution—which often
Varying size & openness
How does Trading, C&S work?
                                          doubles as transfer agent and fiscal agent
Certificates, Receipts: various            conversion bearer→registered: similar
aliases

Why don’t markets
merge?                               US: need to register shares with SEC before you
Will a winner take                   sell
all?

CFO’s summary                             publicly listed : NY shares, ADRs Level 2 (SEO in US), 3
                                          (IPO in US)
                                          traded OTC: ADRs Level 1
                                          only bought by “qualified institutional buyers”: R144a


                                     GDRs (incl Reg S counterpart of R144A, EDRs, Global
                                     offerings): not US-listed or -traded securities
                                                                           ADRs by Type
    World’s Stock
     Exchanges
            Formatted 14:35 on 23 April 2007




                                               11:06 on 31 December 2006



      (P. Sercu:
    International
                                                                                                                               Table 16.3:   ADR   programs by type
Finance: Theory into
      Practice)

                                                                                                   broading shareholder base using exist-      raising new capital with new share issue in us or elsewhere—not in home
Background info                                                                                    ing shares                                  basis
Varying size & openness
                                                                                                  Level I              Level II               Level III             Rule 144a (rADR)      global offering
How does Trading, C&S work?
Certificates, Receipts: various                                               description          unlisted in us       Listed in major us     Offered and listed     Private placement     global offer of securities in
aliases                                                                                                                exchanges              in major us           to QIB                two or more markets, not in
                                                                                                                                              exchanges                                   issuer home market
Why don’t markets                                                            trading location     OTC  pink sheet      NYSE,   Amex or        NYSE,   Amex or       us private            us and non-us exchanges
merge?                                                                                            trading              NASDAQ                 NASDAQ                placement using
                                                                                                                                                                    PORTAL
Will a winner take
                                                                             SEC   registration   yes                  yes                    yes, also for         no                    depends:
all?                                                                                                                                          offering                                     (a) private placement: no;
                                                                                                                                                                                          (b) new issue: yes, also for
CFO’s summary                                                                                                                                                                             offer
            c : P. Sercu, K.U.Leuven SB&E




                                               P. Sercu, K.U.Leuven SB&E




                                                                             us reporting         exempt               yes, annual            yes, annual; also     exempt                depends:
                                                                             required                                                         for subsequent                              (a) private placement:
                                                                                                                                              offerings                                    exempt;
                                                                                                                                                                                          (b) new issue: yes, annual;
                                                                                                                                                                                          also for subsequent offerings

                                                                           Source: adopted from Karolyi (1998).
                       Outline
    World’s Stock
     Exchanges

      (P. Sercu:
    International      Background information
Finance: Theory into      How large & open are markets?
      Practice)
                          How does Trading, Clearing & Settlement work?
                          Certificates, Receipts as various aliases for equity
Background info

Why don’t markets
merge?                 Why don’t markets merge?
Home bias
legal & regulatory
                         Home bias
                         Differences in Corporate Governance and Legal/Regulatory Environment
Will a winner take
all?

CFO’s summary          Can Unification be Achieved by A Winner Taking All?
                         Centripetal v. Centrifugal Effects in Networks
                         The waning attractions of NY
                         The (re)emergence of London


                       CFO’s summary
                       Why don’t markets merge? (1): Home bias
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)


Background info

Why don’t markets
merge?
Home bias                 Home bias : investors aren’t pushing very hard
legal & regulatory

Will a winner take
all?

CFO’s summary
                       (2): Legal contexts are very different
    World’s Stock
     Exchanges
                           Corporate governance: relations with
      (P. Sercu:
    International
                           stakeholders
Finance: Theory into           is chairman of the Board also CEO?
      Practice)
                               independent directors on the Board;
Background info                an audit committee ;
Why don’t markets
                               comprehensive information provision towards investors;
merge?                         do poorly performing CEO’s get fired?
Home bias
legal & regulatory
                               can board be fired by AGM? staggered board?
Will a winner take
                               can AGM formulate binding instructions?
all?

CFO’s summary              Other institutions in the shareholders
                           environment
                               Legal rights of shareholders: class actions, derivative
                               actions
                               Independent investment banks, house banks? Active
                               shareholders? Independent analysts? Financial Press?
                               Takeover market — incl hostile?
                       (2): Legal contexts are very different
    World’s Stock
     Exchanges
                           Corporate governance: relations with
      (P. Sercu:
    International
                           stakeholders
Finance: Theory into           is chairman of the Board also CEO?
      Practice)
                               independent directors on the Board;
Background info                an audit committee ;
Why don’t markets
                               comprehensive information provision towards investors;
merge?                         do poorly performing CEO’s get fired?
Home bias
legal & regulatory
                               can board be fired by AGM? staggered board?
Will a winner take
                               can AGM formulate binding instructions?
all?

CFO’s summary              Other institutions in the shareholders
                           environment
                               Legal rights of shareholders: class actions, derivative
                               actions
                               Independent investment banks, house banks? Active
                               shareholders? Independent analysts? Financial Press?
                               Takeover market — incl hostile?
                       Legal systems
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)           General Legal Systems
                           • English-based West: Australia, Canada, Ireland, Israel,
Background info
                             New Zealand, UK, US; other: Hong Kong, India, Kenya,
Why don’t markets
merge?                       Malaysia, Nigeria, Pakistan, Singapore, South Africa, Sri
Home bias                    Lanka, Thailand, Zimbabwe.
                           • French-based West: Belgium, France, Greece, Italy,
legal & regulatory

Will a winner take
all?                         Netherlands, Portugal, Spain; other: Argentina, Brazil,
CFO’s summary
                             Chile, Colombia, Ecuador, Egypt, Indonesia, Jordan,
                             Mexico, Peru, Philippines, Turkey, Uruguay, Venezuela.
                           • German-based West: Austria, Germany, Switzerland;
                             other: Japan, South-Korea, Taiwan.
                           • Scandinavian Denmark, Finland, Norway, Sweden.
                       Legal systems
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)           General Legal Systems
                           • English-based West: Australia, Canada, Ireland, Israel,
Background info
                             New Zealand, UK, US; other: Hong Kong, India, Kenya,
Why don’t markets
merge?                       Malaysia, Nigeria, Pakistan, Singapore, South Africa, Sri
Home bias                    Lanka, Thailand, Zimbabwe.
                           • French-based West: Belgium, France, Greece, Italy,
legal & regulatory

Will a winner take
all?                         Netherlands, Portugal, Spain; other: Argentina, Brazil,
CFO’s summary
                             Chile, Colombia, Ecuador, Egypt, Indonesia, Jordan,
                             Mexico, Peru, Philippines, Turkey, Uruguay, Venezuela.
                           • German-based West: Austria, Germany, Switzerland;
                             other: Japan, South-Korea, Taiwan.
                           • Scandinavian Denmark, Finland, Norway, Sweden.
                       Legal systems
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)           General Legal Systems
                           • English-based West: Australia, Canada, Ireland, Israel,
Background info
                             New Zealand, UK, US; other: Hong Kong, India, Kenya,
Why don’t markets
merge?                       Malaysia, Nigeria, Pakistan, Singapore, South Africa, Sri
Home bias                    Lanka, Thailand, Zimbabwe.
                           • French-based West: Belgium, France, Greece, Italy,
legal & regulatory

Will a winner take
all?                         Netherlands, Portugal, Spain; other: Argentina, Brazil,
CFO’s summary
                             Chile, Colombia, Ecuador, Egypt, Indonesia, Jordan,
                             Mexico, Peru, Philippines, Turkey, Uruguay, Venezuela.
                           • German-based West: Austria, Germany, Switzerland;
                             other: Japan, South-Korea, Taiwan.
                           • Scandinavian Denmark, Finland, Norway, Sweden.
                       Legal systems
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)           General Legal Systems
                           • English-based West: Australia, Canada, Ireland, Israel,
Background info
                             New Zealand, UK, US; other: Hong Kong, India, Kenya,
Why don’t markets
merge?                       Malaysia, Nigeria, Pakistan, Singapore, South Africa, Sri
Home bias                    Lanka, Thailand, Zimbabwe.
                           • French-based West: Belgium, France, Greece, Italy,
legal & regulatory

Will a winner take
all?                         Netherlands, Portugal, Spain; other: Argentina, Brazil,
CFO’s summary
                             Chile, Colombia, Ecuador, Egypt, Indonesia, Jordan,
                             Mexico, Peru, Philippines, Turkey, Uruguay, Venezuela.
                           • German-based West: Austria, Germany, Switzerland;
                             other: Japan, South-Korea, Taiwan.
                           • Scandinavian Denmark, Finland, Norway, Sweden.
                       Different Legal systems 2
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)         • Shareholder? English-based law is more shareholder-friendly,
                          and French- and German-based code less so; Scandinavia
Background info           scores in-between.
Why don’t markets
merge?
                        • Creditor? English-based law is also more creditor-friendly,
Home bias                 French-based code less so; German-based and Scandinavian
legal & regulatory
                          law scores in-between.
Will a winner take
all?                    • Rule of Law? Scandinavian and German-based code does best
CFO’s summary             on rule of law, followed by English-type law and, lastly,
                          French-based code.
                        • But huge differences within groups, often dwarfing those within
                          groups
                       Different Legal systems 2
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)         • Shareholder? English-based law is more shareholder-friendly,
                          and French- and German-based code less so; Scandinavia
Background info           scores in-between.
Why don’t markets
merge?
                        • Creditor? English-based law is also more creditor-friendly,
Home bias                 French-based code less so; German-based and Scandinavian
legal & regulatory
                          law scores in-between.
Will a winner take
all?                    • Rule of Law? Scandinavian and German-based code does best
CFO’s summary             on rule of law, followed by English-type law and, lastly,
                          French-based code.
                        • But huge differences within groups, often dwarfing those within
                          groups
                       Different Legal systems 2
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)         • Shareholder? English-based law is more shareholder-friendly,
                          and French- and German-based code less so; Scandinavia
Background info           scores in-between.
Why don’t markets
merge?
                        • Creditor? English-based law is also more creditor-friendly,
Home bias                 French-based code less so; German-based and Scandinavian
legal & regulatory
                          law scores in-between.
Will a winner take
all?                    • Rule of Law? Scandinavian and German-based code does best
CFO’s summary             on rule of law, followed by English-type law and, lastly,
                          French-based code.
                        • But huge differences within groups, often dwarfing those within
                          groups
                       Different Legal systems 2
    World’s Stock
     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)         • Shareholder? English-based law is more shareholder-friendly,
                          and French- and German-based code less so; Scandinavia
Background info           scores in-between.
Why don’t markets
merge?
                        • Creditor? English-based law is also more creditor-friendly,
Home bias                 French-based code less so; German-based and Scandinavian
legal & regulatory
                          law scores in-between.
Will a winner take
all?                    • Rule of Law? Scandinavian and German-based code does best
CFO’s summary             on rule of law, followed by English-type law and, lastly,
                          French-based code.
                        • But huge differences within groups, often dwarfing those within
                          groups
                                                 Different Legal systems 3
    World’s Stock
     Exchanges
              Formatted 14:35 on 23 April 2007




      (P. Sercu:
    International                                                                                            Table 16.4: Stylized differences in legal environments
Finance: Theory into                              Shareholders v Directors                                                                               Engl   Id, w   Fra     Id, w    Deu     Id, w    Scan      US      UK
      Practice)                                   One share, one vote: Each ordinary share has one and only one vote, and all votes can be used          0.17   0.00    0.29    0.00     0.33    0.00     0.00     0.00     0.00
                                                  Proxy voting by mail allowed:                                                                          0.39   1.00    0.05    0.14     0.00    0.00     0.25     1.00     1.00
                                                  Shares not blocked before AGM: No need to deposit shares for a number of days before AGM               1.00   1.00    0.57    0.14     0.17    0.17     1.00     1.00     1.00
Background info                                   Cumulative voting OR Proportional representation: Shareholders can cast all their votes for one
                                                  candidate director OR Minority shareholders may name a proportional number of directors
                                                                                                                                                         0.28   0.33    0.29    0.14     0.33    0.33     0.00     1.00     0.00

Why don’t markets                                 Oppressed minority protection: Minority (! 10% of shares) can challenge mgt decisions in court, or     0.94   1.00    0.29    0.14     0.50    0.50     0.00     1.00     1.00
                                                  force company to buy them out in case of major changes
merge?                                            Preemptive rights: Current shareholders have first right to buy new stock unless they vote otherwise   0.44   0.17    0.62    0.74     0.33    0.33     0.75     0.00     1.00
Home bias                                         % of equity needed to call an extraordinary AGM                                                        0.09   0.08    0.15    0.11     0.05    0.07     0.10     0.10     0.10
legal & regulatory                                TOTAL anti-director right: Sum of the above                                                            4.00   4.33    2.33    2.50     2.33    1.66     3.00     5.00     5.00
                                                  Mandatory dividends: Percentage of net income that must be distributed to ordinary shareholders         —      —      0.11    0.05      —       —        —        —        —
Will a winner take                                Creditor protection
all?                                              No automatic stay on secured assets: Reorganization does not suspend creditors rights on
                                                                                                                                                         0.72   0.50    0.26    0.14     0.67    1.00     0.25     0.00     1.00
                                                  assets pledged as security
CFO’s summary                                     Secured creditors first: Secured creditors are paid first, even ahead of workers and government        0.89   1.00    0.65    0.71     1.00    1.00     1.00     1.00     1.00
                                                  Restriction for going into reorganization: reorganization is possible only subject to restrictions,
                                                                                                                                                         0.72   0.67    0.42    0.29     0.75    0.67     0.75     0.00     1.00
              c : P. Sercu, K.U.Leuven SB&E




                                                  like creditor consent
                                                  Management does not stay: Court or creditors appoint person(s) in charge of reorganization,
                                                                                                                                                         0.78   0.67    0.26    0.14     0.33    0.33     0.00     0.00     1.00
                                                  thus replacing management
                                                  TOTAL anti-director right: Sum of the above                                                            3.11   2.50    1.58    1.43     2.33    3.00     2.00     1.00     4.00
                                                  Legal reserve: Minimum percentage of share capital needed to avoid dissolution                         0.01   0.00    0.21    0.16     0.41    0.23     0.16     0.00     0.00
                                                  Source: adapted from La Porta et al., 1998. Key: Engl, Fra, Deu, and Scan refer to legal systems; “Id, w” refers to western countries within that legal group. Country entries in
                                                  “Shareholders an Directors” are dummies (Yes=1, no=0), so 0.17 means that 17% of countries have a yes. “Rule of Law” entries are on a scale of 10. Table shows averages per
                                                  group or subgroup, plus raw data for US and UK.
                                                   Different Legal systems 4
    World’s Stock
                Formatted 14:35 on 23 April 2007



     Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)                                                                                          Table 16.4 cont’d: Stylized differences in legal environments
                                                    Rule of Law
                                                    Efficiency of legal system: Business International (BI)’s assessment of investors’ 1980-83
Background info                                     assesment of efficieny and integrity of legal environment as its affects [.] particularly foreign firms.   8.15   9.71   6.56   7.14   8.54    9.50    10.00 10.00 10.00
                                                    10 = best

Why don’t markets                                   Rule of Law: International Country Risk (ICR)’s assesment of law and order tradition, 1983-1995;
                                                                                                                                                               6.46   8.74   6.05   8.57   8.68    9.75    10.00 10.00        8.57
                                                    10 = best
merge?                                              Corruption: ICR’s assesment of corruption in government; 10=best                                           7.06   9.01   5.84   8.00   8.03    9.16    10.00     8.63     9.10
Home bias                                           Risk of expropriation: ICR’s assistemt of risk of outright confiscation or forced nationalisation,
                                                                                                                                                               7.91   9.46   7.46   9.16   9.54    9.86     9.66     9.98     9.71
legal & regulatory                                  1982-1995; 10=best
                                                    Repudiation of contract by Gt: Risk of […] repudiation postponement, scaling down of contract ,
                                                                                                                                                               7.41   8.87   6.84   8.68   9.47    9.78     9.44     9.00     9.63
Will a winner take                                  1982-1995; 10=best
all?                                                Accounting standards: Center for International Accounting and Auditing Trends: checkboxing for
                                                    presence of 90 items in balance sheets of ``representative sample’’ of industrial (70%) and                69.62 72.00 51.17 58.71 62.67 61.33 74.00 71.00 78.00
                                                    financial (30%) firms
CFO’s summary                                       Ownership concentration
                c : P. Sercu, K.U.Leuven SB&E




                                                    Ownership, 10 largest private firms: Average percentage of common shares owned by top-3
                                                                                                                                                               0.43   0.29   0.54   0.49   0.34    0.49     0.37     0.20     0.19
                                                    shareholders in top-10 non-financial company with no Government investors
                                                    Source: adapted from La Porta et al., 1998. Key: Engl, Fra, Deu, and Scan refer to legal systems; “Id, w” refers to western countries within that legal group. Country entries in
                                                    “Shareholders an Directors” are dummies (Yes=1, no=0), so 0.17 means that 17% of countries have a yes. “Rule of Law” entries are on a scale of 10. Table shows averages per
                                                    group or subgroup, plus raw data for US and UK.
                               Outline
     World’s Stock
      Exchanges

      (P. Sercu:
    International              Background information
Finance: Theory into              How large & open are markets?
      Practice)
                                  How does Trading, Clearing & Settlement work?
                                  Certificates, Receipts as various aliases for equity
Background info

Why don’t markets
merge?                         Why don’t markets merge?
Will a winner take               Home bias
all?                             Differences in Corporate Governance and Legal/Regulatory Environment
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                               Can Unification be Achieved by A Winner Taking All?
CFO’s summary                    Centripetal v. Centrifugal Effects in Networks
                                 The waning attractions of NY
                                 The (re)emergence of London


                               CFO’s summary
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why financial centers grow
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   finding people
                                       demand for experts
Background info
                                       supply of eager, greedy yuppies
Why don’t markets
merge?

Will a winner take                 finding outside help & expertise
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London
                                   contacts and visibility
CFO’s summary
                                   signaling

                                   outlets for risk
                               Why expansion stops somewhere
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                  Clienteles for Regional and Niche Players?
Background info
                                      fixed cost and company size: NYSE=RR, Timbuktu=Yugo
Why don’t markets
merge?                                Insiders’ interest in poor corporate governance!
Will a winner take
                                      Cost & Hassle of travel; language; legal system
all?                                  Home bias: familiarity helps (with retail investors)
centrifugal, -petal
The waning attractions of NY
                                      Time zone: 24/8 = 3, so need 3 centers
The (re)emergence of London
                                  Next to NY, London: Tokyo? Zurich, Hong Kong,
                                                              ¨
CFO’s summary
                                  Dubai?
                               Why expansion stops somewhere
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                  Clienteles for Regional and Niche Players?
Background info
                                      fixed cost and company size: NYSE=RR, Timbuktu=Yugo
Why don’t markets
merge?                                Insiders’ interest in poor corporate governance!
Will a winner take
                                      Cost & Hassle of travel; language; legal system
all?                                  Home bias: familiarity helps (with retail investors)
centrifugal, -petal
The waning attractions of NY
                                      Time zone: 24/8 = 3, so need 3 centers
The (re)emergence of London
                                  Next to NY, London: Tokyo? Zurich, Hong Kong,
                                                              ¨
CFO’s summary
                                  Dubai?
                               Why expansion stops somewhere
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                  Clienteles for Regional and Niche Players?
Background info
                                      fixed cost and company size: NYSE=RR, Timbuktu=Yugo
Why don’t markets
merge?                                Insiders’ interest in poor corporate governance!
Will a winner take
                                      Cost & Hassle of travel; language; legal system
all?                                  Home bias: familiarity helps (with retail investors)
centrifugal, -petal
The waning attractions of NY
                                      Time zone: 24/8 = 3, so need 3 centers
The (re)emergence of London
                                  Next to NY, London: Tokyo? Zurich, Hong Kong,
                                                              ¨
CFO’s summary
                                  Dubai?
                               The waning attractions of NY (1)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Exogenous factors
Background info

Why don’t markets
                                      competitors clean up their act
merge?                                political risks, political considerations—investors,
Will a winner take                    companies
all?                                  finance has become more footloose
centrifugal, -petal
The waning attractions of NY          eg IT, VC, hedge funds etc used to be NY’s preserve,
The (re)emergence of London
                                      now it’s wordwide
CFO’s summary                         US immigration controls
                               The waning attractions of NY (1)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Exogenous factors
Background info

Why don’t markets
                                      competitors clean up their act
merge?                                political risks, political considerations—investors,
Will a winner take                    companies
all?                                  finance has become more footloose
centrifugal, -petal
The waning attractions of NY          eg IT, VC, hedge funds etc used to be NY’s preserve,
The (re)emergence of London
                                      now it’s wordwide
CFO’s summary                         US immigration controls
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (2)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into               Legal and regulatory issues in the US
      Practice)
                                       SOx 404: audits, controls cost several millions
Background info                        Accounting rules: too complicated (FASB133’s 800 pages
Why don’t markets                      on derivatives), and RoW adopts IFRS not US GAAP
merge?
                                       May 2007: SEC may soon accept IFRS for non-US and
Will a winner take                     US quoted companies!
all?
centrifugal, -petal                    Litigation and tort law: Cy responsible, not managers /
The waning attractions of NY
The (re)emergence of London
                                       juries not judges / contingency fees for lawyers / judges
                                       never let guilty party pay all costs / punitive damages /
CFO’s summary
                                       suing a firm over fall in stock price /
                                       Shareholders’ rights : Chair = CEO? staggered boards;
                                       AGM cannot impose strategy, decide on pay; poison pills;
                                       Financial Regulation — pto
                               The waning attractions of NY (3)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Legal and regulatory issues in the US Cont’d
Background info                        Financial Regulation
Why don’t markets
merge?
                                           SEC competing with the Spitzers
                                           too much enforcement/too little evaluation of current
Will a winner take
all?                                       rules, by lawyers not economists
centrifugal, -petal
The waning attractions of NY
                                           SEC has over 700 lawyers paid more than SEC
The (re)emergence of London                Chair
CFO’s summary                              fragmentation: SEC, CFTC (futures), office of
                                           comptroller. state commissions for banking,
                                           insurance
                               The waning attractions of NY (3)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Legal and regulatory issues in the US Cont’d
Background info                        Financial Regulation
Why don’t markets
merge?
                                           SEC competing with the Spitzers
                                           too much enforcement/too little evaluation of current
Will a winner take
all?                                       rules, by lawyers not economists
centrifugal, -petal
The waning attractions of NY
                                           SEC has over 700 lawyers paid more than SEC
The (re)emergence of London                Chair
CFO’s summary                              fragmentation: SEC, CFTC (futures), office of
                                           comptroller. state commissions for banking,
                                           insurance
                               The waning attractions of NY (3)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Legal and regulatory issues in the US Cont’d
Background info                        Financial Regulation
Why don’t markets
merge?
                                           SEC competing with the Spitzers
                                           too much enforcement/too little evaluation of current
Will a winner take
all?                                       rules, by lawyers not economists
centrifugal, -petal
The waning attractions of NY
                                           SEC has over 700 lawyers paid more than SEC
The (re)emergence of London                Chair
CFO’s summary                              fragmentation: SEC, CFTC (futures), office of
                                           comptroller. state commissions for banking,
                                           insurance
                               The waning attractions of NY (3)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Legal and regulatory issues in the US Cont’d
Background info                        Financial Regulation
Why don’t markets
merge?
                                           SEC competing with the Spitzers
                                           too much enforcement/too little evaluation of current
Will a winner take
all?                                       rules, by lawyers not economists
centrifugal, -petal
The waning attractions of NY
                                           SEC has over 700 lawyers paid more than SEC
The (re)emergence of London                Chair
CFO’s summary                              fragmentation: SEC, CFTC (futures), office of
                                           comptroller. state commissions for banking,
                                           insurance
                               The waning attractions of NY (3)
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into
      Practice)
                                   Legal and regulatory issues in the US Cont’d
Background info                        Financial Regulation
Why don’t markets
merge?
                                           SEC competing with the Spitzers
                                           too much enforcement/too little evaluation of current
Will a winner take
all?                                       rules, by lawyers not economists
centrifugal, -petal
The waning attractions of NY
                                           SEC has over 700 lawyers paid more than SEC
The (re)emergence of London                Chair
CFO’s summary                              fragmentation: SEC, CFTC (futures), office of
                                           comptroller. state commissions for banking,
                                           insurance
                               The (re)emergence of London
                                       CHAPTER 16. SEGMENTATION AND INTEGRATION IN THE WORLD’S STOCK
     World’s Stock
      Exchanges                540                                                        EXCHANGES

      (P. Sercu:
    International
Finance: Theory into
      Practice)                            Figure 16.5: Wall Street v Threadneedle Street, 2006

Background info

Why don’t markets
merge?

Will a winner take
all?
centrifugal, -petal
The waning attractions of NY
The (re)emergence of London


CFO’s summary

                                         Graph 1                                                Graph 2
                               Source The Economist, Nov 26, 2006 (graphs)   .


                               other reasons are the us’ own making. We review these in turn.


                               Exogenous factors
                               The (re)emergence of London
     World’s Stock
      Exchanges

      (P. Sercu:
    International
Finance: Theory into                                          UK   US    JP   FR    DE    other
      Practice)
                                Cross-border bank lending     20    9     8    9    10     44
Background info                 International bonds trading   70    ?     ?    ?     ?      ?
Why don’t markets               Foreign equities listed       15   39     0   13     5     27
merge?                          Foreign equities turnover     40   34     0    0     3     23
Will a winner take              Forex turnover                32   18     8    3     5     34
all?
centrifugal, -petal
                                OTC derivatives turnover      43   24     3   10    17
The waning attractions of NY    Hedge-funds assets            21   66     1    1     0      10
The (re)emergence of London


CFO’s summary
                               Source FIBV (number of foreign listed stocks); International
                               Financial Services London (other data) as quoted in The Economist,
                               Oct 19 2006
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                               The (re)emergence of London
     World’s Stock
      Exchanges                   red Big bang (Oct 1986)
      (P. Sercu:                      Old London: fixed commissions, small jobbers - brokers -
    International
Finance: Theory into                  inv-bankers (separated), LSE run for brokers (owners)
      Practice)
                                      Big Bang: end of cartel; one-stop-shop institutions
                                      (Warburg, BZW, and many US (+, later continental)
Background info
                                      banks)
Why don’t markets
merge?                                New spirit: long hours, huge bonuses
Will a winner take
all?
centrifugal, -petal
                                  Why did it go so well?
The waning attractions of NY
The (re)emergence of London
                                      Internationalisation: Gvmnt did not “protect” local firms
CFO’s summary
                                      Light-touch regulation by FSA – e.g. small versus big inv
                                      US shooting its own foot (e.g. regulation, foreign policy)

                                  Related fields
                                      legal services (200 firms; 3 of 4 biggest)
                                      ?insurance?
                                      shipping
                       Outline
   World’s Stock
    Exchanges

      (P. Sercu:
    International      Background information
Finance: Theory into      How large & open are markets?
      Practice)
                          How does Trading, Clearing & Settlement work?
                          Certificates, Receipts as various aliases for equity
Background info

Why don’t markets
merge?                 Why don’t markets merge?
Will a winner take       Home bias
all?                     Differences in Corporate Governance and Legal/Regulatory Environment
CFO’s summary

                       Can Unification be Achieved by A Winner Taking All?
                         Centripetal v. Centrifugal Effects in Networks
                         The waning attractions of NY
                         The (re)emergence of London


                       CFO’s summary
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully
                       CFO’s summary
   World’s Stock
    Exchanges

      (P. Sercu:          Markets are fragmented
    International
Finance: Theory into        organized by country, with recently a few exceptions
      Practice)
                            different trading, clearing, settlement—but that can be
Background info             handled
Why don’t markets
                            different types of securities, often reflecting different views
merge?                      on markets
Will a winner take
all?                      Why don’t markets merge into a world market?
CFO’s summary               home bias: investors aren’t pushing
                            different regulation: manadarins won’t agree
                          Will NY take all?
                            there are centripetal forces, network effects, but also
                            centrifugal ones
                            NY is not the perfect solution, and may have overreacted
                            London, HK, etc fight back—successfully

				
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