The merger trend

Jean-Francois Theodore, CEO of Euronext, previously said that for the next few years trading in financial markets will be dominated by two or three global exchange groups. At present, integration of the exchanges is in its second stage-trans-ocean integration. Pan describes this stage as a "Federative Alliance"-a legal entity comprised of different, correspondingly independent, exchanges under a common brand name.

After Euronext and the NYSE released their merger plan, the NYSE and the Tokyo Stock Exchange also announced that they have reached an alliance agreement. At the same time, Euronext is still negotiating for the acquisition of the Italian stock exchange Borsa Italiana. Global exchange integration is an "ever- advancing trend."

What changes has the merger of the NYSE and Euronext brought to your organization and the enterprises preparing to list on Euronext?

The merger of the NYSE and Euronext is not a simple addition of the two. It is a complementary, mutually beneficial alliance of strengths. For example, Euronext's London International Financial Futures Exchange will strengthen the NYSE's development capabilities in this area.

The combined NYSE-Euronext conglomerate will be the largest and most dynamic exchange group in the world. The total market value of the group will reach 21 billion euros ($27 billion) and the total market value of all listed companies will reach 19.5 trillion euros ($25.8 trillion, or approximately 195 trillion yuan). It will be a world leader in derivative products, market information and technology. With a daily trading volume reaching 77 trillion euros ($102 trillion), it will be the top choice for company listings internationally.

The stock prices of the two exchanges have been trending favorably, which not only creates value for the shareholders, but also brings tangible benefits to investors in terms of market operation. In the next three years, the benefits of the merger will pass to the listed enterprises, reducing service charges by 10 percent to 15 percent.

What is your opinion on the merging of international exchanges?

Historically, there were more than 30 stock exchanges in the United Kingdom. There have also been a number of stock exchanges in Japan. Exchanges in many countries became stronger through mergers. Euronext pioneered cross-country mergers, an innovative model with historical significance starting the regional exchange merger trend.

In Europe, the London Stock Exchange currently occupies up to 28 percent of the market share. The ratio for Euronext is 26 percent.

In the next three to five years, the number of exchanges in the world will gradually decrease. The surviving exchanges will be bigger, more globally oriented, and have better services. Also, the merger of the NYSE and Euronext will not stay at the present level. Integration and consolidation are only the beginning.

In mid-November 2006, seven major investment banks-Goldman Sachs, Merrill Lynch, Morgan Stanley, Citigroup, Credit Suisse, Deutsche Bank and Swiss Bank-announced the establishment of a pan-European securities trading platform in 2007. What impact will the action of these investment banks, which account for half of the stock trading volume in Europe, have on Euronext?

Investment banks are the biggest users of financial markets, such as the stock and bond markets. They have to pay certain costs to develop their respective businesses. Through establishing their own trading platform, the costs can be effectively lowered.

The move of the seven investment banks is unconventional and will heighten competition. On the other hand, competition is good for us. We must improve the quality of our services and lower our service charges to attract enterprise listings. Subsequently, our overall quality will increase.

(Xinhua Finance)