Markets sign up for European exchange

THE LONDON and Frankfurt stock exchanges yesterday bowed to pressure from rival European bourses to abandon their go-it-alone strategy and work together with the other main Continental markets towards a $7 trillion pan-European exchange.

A deal setting the terms for the basis of a single European share-trading platform for blue-chip stocks was signed at a meeting in Madrid yesterday by Gavin Casey, the chief executive of the London exchange, Walter Seifert from Frankfurt and representatives from the Paris, Madrid, Milan, Amsterdam, Brussels and Zurich bourses.

The new trading system could go live as early as 2001.

Antonio Zoido, the chairman of the Madrid stock exchange, who hosted the meeting, said: "The aim of the alliance is to create an infrastructure for a low-cost, efficient and accessible stock market that will allow issuers, investors and market participants to take advantage of the opportunities offered by the development of pan-European capital markets."

He pointed out that together the eight markets involved in the deal had a capitalisation of $6.8 trillion and daily turnover of $8.7 trillion last year.

Mr Zoido said that the new stock market will take the form of a joint company whose ownership will be structured in a way which reflects how much business each exchange brings to the venture. Shares will be quoted in euros and the intention is to have one pan-European index or family of indices.

Yesterday's deal is a particular triumph for Jean-Francois Theodore, the chief executive of the Paris stock exchange, by far the most vociferous opponent of the deal struck between Frankfurt and London last July.

It follows more than five months of secret negotiations since a high- level meeting in Paris last November at which he persuaded the main European exchanges of the need to settle their differences in the interests of a wider agreement. He said yesterday: "We all share the same goal of creating a stock market infrastructure that will allow our economies to benefit from the growth of Europe's capital markets."

Efforts to secure a deal between the European exchanges were given a new urgency in February when the New York stock exchange said that it was considering extending its trading day in order to be able to compete more effectively with the European exchanges.

The one glaring omission from yesterday's deal is Stockholm, which went along to the initial meeting in November but decided against participating in the pan-European initiative on the grounds that anything which could be agreed on that basis would, in the words of one official yesterday, "not be a killer product".

Institutional investors broadly welcomed the move, although there was concern about the lack of detail which suggested that there are still some wide differences to be bridged.

Officials in London stressed that yesterday's agreement does not mean that the Frankfurt-London deal, whose first phase went live at the start of the year, will be shelved. However, any further progress, they admitted, would now have to be on a basis which is agreed by all eight exchanges.