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Euro superbourse created
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May 3, 2000: 2:26 a.m. ET
London, Frankfurt exchanges tie, join Nasdaq for European growth market
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LONDON (CNNfn) - Germany's Deutsche Boerse and the London Stock Exchange unveiled plans to merge Wednesday, combining Europe's two biggest stock markets in a new entity called iX. IX said it signed a deal with the U.S.-based Nasdaq market to form a new pan-European exchange for growth companies.
IX would eclipse its newly created rival, Euronext, formed by the merger of the Paris, Amsterdam and Brussels stock markets.
Companies listed on iX will have a combined market value of  4.6 trillion ($4.1 trillion), according to figures from FTSE International, almost on a par with the capitalization of the Tokyo stock market but trailing the New York Stock Exchange and Nasdaq.
The widely anticipated deal makes LSE chairman Don Cruickshank the chairman of the new group, while Werner Seifert of the Frankfurt-based Deutsche Boerse is set to become chief executive. Combining the two exchanges provides "the opportunity to build a global market,"  said Cruickshank.
The participants announced that the Milan and Madrid exchanges have already signed up to merge with iX at an unspecified date in the future. Eventually, iX would hold an initial public offering of its own shares, they said.
The new arrangement with Nasdaq, in which Nasdaq and iX will be equal partners, will combine the European exchanges' existing forums for high-growth stocks, London's techMark and Frankfurt's Neuer Markt. This business, which will be managed in London and operate in Frankfurt, will account for 80 percent of European trading volume in high-growth shares, the exchanges said. It will trade all existing Neuer Markt and techMark shares as well as stocks in the Nasdaq 100 index and other international stocks.
Nasdaq and iX will discuss extending their cooperation, including the option of exchanging shareholdings and creating a global share-trading platform under the Nasdaq brand. A source close to the new venture indicated that iX would create a new series of indexes to track the performance of its listed stocks.
The new venture already provides the primary listing for 45 percent of Europe's top 300 companies, and accounts for 53 percent of traded stock volumes in Europe.
IX will use the Frankfurt exchange's existing Xetra trading system as its operating platform. Adopting a single trading system should generate "significant" cost savings, the exchanges said.
"IX will provide a level playing field for all participants," Deutsche Boerse's Seifert said in a statement.
Political hot potato
Plenty of thorny issues remain to be decided, however, including trading hours. At present, London and Frankfurt operate on the same timetable, but the German exchange has announced it will later this year extend the trading day into the evening, a move the LSE rejected.
The issue of currencies may also stir up controversy. The creation of iX will inevitably be seen as a further U.K. push toward economic and monetary union with other European Union countries and the adoption of the euro as its currency. The U.K. government has said it will not consider joining the euro-currency zone until a national referendum has been held - and opinion polls consistently show a majority of Britons favor maintaining sterling.
U.K. representatives of iX on Wednesday declined to be drawn on the implications the merger of the exchanges could have for Britain's stance regarding the euro, but their venture will be a sensitive matter for politicians and technocrats to discuss.
LSE chief executive Gavin Casey, who won't be part of the management of iX, told the news conference the new platform would permit investors to choose whether to trade in euros or British pounds, adding that U.K. retail investors might prefer to continue to use sterling.
The new market's managers and national financial authorities must also reconcile the differing regulatory codes of the merging markets to establish a single standard of practice for companies traded on iX. For example, London-traded shares are now governed by a takeover code that is stricter than equivalent rules in Frankfurt. Cruickshank told the news conference that iX intends to make the U.K. regulatory regime the centrepiece of the new venture.
Nasdaq jumps into Europe
Nasdaq announced last year that it was setting up Nasdaq Europe, a pan-European electronic stock market that was to be based in London. It had been due to open in the fourth quarter of this year, but Nasdaq officials said the deal with iX fulfilled its European ambitions in one step.
In a statement released Wednesday Nasdaq said the goal of its venture with iX would be eventually to link to other Nasdaq markets round the world, creating a global, real-time trading platform, 24 hours per day.
"The markets will follow the sun for the biggest companies," said Frank Zarb, chairman of the National Association of Securities Dealers, which controls Nasdaq. Speaking at the iX news conference Wednesday, Zarb refused to set a limit on where further talks between Nasdaq and iX could go, telling journalists, "It's a blank sheet of paper." (413K WAV) (413K AIFF). 
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