The news that a few more European stock exchanges are putting their differences aside to in a bid to create a pan-European exchange is refreshing and welcome. Latest indications are that Paris, Milan, Madrid, Amsterdam, Brussels, Stockholm and Zurich are intent on joining the London-Frankfurt alliance.
But don’t hold your breath, this could take some time. By and large, stock exchanges are still built on foundations of national self-interest and domestic ownership. That has been a key sticking point in the past over any link-ups, most recently evidenced by the Paris Bourse’s objections to London and Frankfurt’s pre-eminence as founders of the latest alliance. That particular spat may temporarily be over but it’s easy to envisage it cropping up again if the new-found detente proceeds a little further. And if it’s not Paris then someone else will doubtless step into the fray.
But national self-interest and ownership in this context are fast becoming defunct. Members of national stock exchanges are no longer defined by national boundaries, nor are the shares of the companies in which they wish to trade. The market has recognized this and that’s a key factor behind the push to resolve differences: there’s money to be made.
Unfortunately, exchanges and other regulatory bodies don’t always have the same agenda – not on the same timescale, at least. In their case, in the short term, there’s a lot of power and influence to be lost, hence the marking out of territory at an early stage.
But market pressures are bound to win through. Easdaq has already learned that lesson to its cost. When it first appeared on the scene a few years ago it laid claim to being the pan-European future. The national stock exchanges responded by declaring that Easdaq was of little concern for them, before setting about establishing their own linked network of secondary markets – known as Euro.NM. The Milan Stock Exchange is set to be the latest addition early in the new year.
Easdaq goes on insisting it’s not in competition with national exchanges yet continues to see its future market slip away. With 37 listings to date, the first year target of 50 now rings rather hollow.
Again, Easdaq’s insistence on independence – rather than forging ties with the nationally-based markets – may have caused its eventual demise. It’s a bit like Apple deciding not to license its operating system.
Europe’s national exchanges should learn from these lessons of the past and wake up to the ways of the future. Fast. Those on the outside get left behind and often pay dearly for watching and waiting. You can bet global shares won’t be the preserve of just one company for long.
