Easdaq is the open sesame to Europe

William Gleeson on the importance of a new market

The opportunity for the private investor to invest direct in smaller foreign companies is something relatively unheard of. If you want to get a piece of the action in Spain or Malaysia the usual thing is to invest in a unit trust growth fund specialising in a particular geographical region.

The the pan-European stock market, Easdaq - European Association of Securities Dealers Automated Quotation - which starts trading on 30 September may change all that. When the market is up and running both institutional and private investors will be able to buy and sell shares in European and American growth companies with the same ease as domestic shares.

The first two companies, Artwork Systems, a Belgian software company, and Innogenetics, a Belgian bio-tech company, have just asked for a listing. The new market is, as its name implies, modelled on the Nasdaq market in the US. It is not a high-risk market such as AIM run by the London Stock Exchange. For admission to Easdaq, companies will have to fulfil entry requirements closer to those required by the London full list or the New York Stock Exchange rather than the scantier requirements of AIM. Companies must have the backing of sponsors, who will be liable for ensuring that the flotation prospectus and ongoing trading statements and results announcements meet full blown US GAAP or International Accounting Standards.

The sort of company they want to see on the market is likely to have a trading record and a management with a proven track record. It may well be active in European markets and may want to benefit from an increased profile overseas. By listing on Easdaq, companies will get exposure for their press releases on results, trading conditions, contracts and prospects in newspapers across Europe.

Almost by definition, a multi-national market will be bigger than any one national market. There will be more investors than in any one country's stock market - a point which is particularly true for Continental growth companies. This means more buyers and sellers, which together with the market maker system Easdaq has opted for, should result in higher levels of liquidity or price-earnings ratios than might be anticipated should the same company float on its national market. Consequently capital growth should be more dynamic.

The history of the Nasdaq market in the US is a good omen for its new European sibling. Since its launch in 1974 the main Nasdaq index, the Nasdaq 100, has outperformed the indices of all other main stock markets in the US and Europe. The historical and projected p/e ratios of Nasdaq companies tend to be higher than those of the traditional blue-chip style companies that list on the NYSE.

The Easdaq attempt to recreate the same market conditions in Europe offers the investor an opportunity to scrutinise European companies and a chance to be the first to spot the next Microsoft or Cisco systems. Yet if Easdaq is such a good idea, why has it not been thought of before? At least one part of the answer is that the regulatory framework for the new market has only relatively recently fallen into place with national governments enacting the principles in the EU's Investment Services Directive and the Prospectuses Directive.

Under the ISD, recognition as a stock market in one EU country means that recognition is automatically granted in other EU countries. The same goes for the financial intermediaries. A stockbroker authorised by one financial regulator in the EU has the automatic right to trade throughout Europe.

It is the same for issuing a prospectus to raise money on a public stock market. Approval of a prospectus in one country means the same document can be used across Europe.

European stock markets have been nationally focused and concentrated on events within their own borders. Nowadays though, much business is conducted in an multicultural and indeed global context. Companies are seeking to integrate the way they operate across the world. Indeed the buzzword among management consultants is "globalisation". Once the trading mindset is in place it is not a big leap to deciding to try to raise capital internationally.

Whether there is an appetite for the new market in Europe is something that only time will tell. Traditionally, Europe, with the exceptions of Sweden and the UK, has not had a strong equity culture. Companies have been family owned and the state has been sufficiently generous with pensions to forestall the need for a large and active stock market for pension funds to invest in.

However in a recent report, Flotations in Continental Europe, HSBC James Capel speculates that this was about to change The pensions issue is at the top of the political agenda in many European countries. Europe, says the report, is set to be the next emerging market.

As if to prove the point, fund manager M&G has announced a new European smaller companies fund. It believes the time is right to launch what it is hoping will prove to be one of their mainstream funds, attracting pounds l00m- plus from investors. Easdaq, believes M&G, will create the interest and liquidity in smaller companies shares on the Continent that has been missing to date. The offer for the fund opened on 10 September and the fund starts trading on 30 September, the day Easdaq expects to open its doors for business.

Easdaq is clearly a radical idea. It may even be controversial. One can foresee the Eurosceptics getting upset.

All states need their institutions, including economic ones like central banks and stock markets. Commentators of the future may look back to this autumn and conclude that Easdaq was as vital a step in the creation of the European superstate as the common currency.

But might it all, eventually, go further? Could there one day be a Globex - a world-wide stock exchange, open 24 hours a day with dealers trading on the same screens whether located in Sydney or San Francisco? At the moment all that is preventing a Globex is the regulatory framework.

Suggested Topics
Life and Style
healthMovember isn't about a moustache trend, it saves lives
Life and Style
food + drinkFrom Mediterranean Tomato Tart to Raw Caramel Peanut Pie
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Armstrong, left, and Bain's writing credits include Peep Show, Fresh Meat, and The Old Guys
TVThe pair have presented their view of 21st-century foibles in shows such as Peep Show and Fresh Meat
Arts and Entertainment
Keys to success: Andrew and Julian Lloyd Webber
arts + entsMrs Bach had too many kids to write the great man's music, says Julian Lloyd Webber
Arts and Entertainment
Hand out press photograph/film still from the movie Mad Max Fury Road (Downloaded from the Warner Bro's media site/Jasin Boland/© 2014 Warner Bros. Entertainment Inc.)
films'You have to try everything and it’s all a process of elimination, but ultimately you find your path'
Boys to men: there’s nothing wrong with traditional ‘manly’ things, until masculinity is used to exclude people
indybest13 best grooming essentials
Arts and Entertainment
Imelda Staunton as Dolores Umbridge in the Harry Potter films

New essay by JK Rowling went live on Pottermore site on Friday

Russia Today’s new UK channel began broadcasting yesterday. Discussions so far have included why Britons see Russia as ‘the bad guy’

New UK station Russia Today gives a very bizarre view of Britain

Arts and Entertainment
Keira Knightley and Benedict Cumberbatch at the premiere of The Imitation Game at the BFI London Film Festival
filmsKeira Knightley tried to miss The Imitation Game premiere to watch Bake Off
Finacial products from our partners
Property search

How to cut the cost of car insurance: A five-step guide to getting a better deal

Premiums are on the rise again but motorists don't have to take a back seat on the price of their cover, says Rob Griffin

Shareholders can hold a company to account

Ever wanted to hold to account a company you invest in, but didn't know how to go about doing it? Simon Read shows how individual shareholders can make their voices heard

How shops make you spend: The subtle art of the savvy retailer revealed

'A third extra for free', gift sets, recommendations for a present for Grandpa - just some ways to make you pay more than you intended

Many people unwittingly end up invested in sectors at odds with their ethical beliefs.

Simon Read: It is time to think again about ethical money

The ethical investment industry is giving itself a makeover, but the problem seems to lie more with getting its message and its methods into the mainstream

Going down the wrong road: parking fines are
nudging people into debt difficulties

Charges related to car parking rising and leading to serious money woes

Going down the wrong road: parking fines are nudging people into debt difficulties

Stacks of income: Drax is among the companies in Neil Woodford’s portfolio that he believes will pay strong dividends

Mark Dampier: Woodford’s young companies could be the stars of the future

Stacks of income: Drax is among the companies in Neil Woodford’s portfolio that he believes will pay strong dividends

A trader works on the floor of the New York Stock Exchange

Simon Read: The markets might not be calm but you should be

Don't panic, it’s a wise idea to check investments regularly to ensure they are on target for your hoped-for returns

Only six per cent of the 13,000 new homes bought during Help to Buy’s first nine months were in London

Money Insider: Help to Buy must be boosted by building

With little or no wage growth being seen in the UK, increasing house-price inflation could see the number of first-time buyers slide further, unless there’s a new accelerated house building programme

House buyers can take their pick of more than 3,500 home loans, the most available since the financial crisis

Simon Read: Those cheap home loans may be built on shaky foundations

You should ignore the headline offers and trickery and work out the total cost of borrowing under different deals

Denise Leigh, who appeared in a production
of Rigoletto with Alan Opie, was left without an essential service

The opera singer, the broadband delay and why customers aren’t divas if they expect a good service

Denise Leigh, who appeared in a production of Rigoletto with Alan Opie, was left without an essential service

Problem debt adds £8bn cost to the economy

A charity has calculated the cost to us all of unmanageable debt – from lost productivity to the extra demands on the NHS

Payday loan stores are to face tougher regulations after moves proposed by the Financial Conduct Authority (FCA) call on more responsible lending

Calls for payday lenders to sign up to an officially recognised price comparison site

The regulators are at last tackling the high-profile payday lenders, but they appear to be ignoring the growing problem of internet loan firms

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    The benefits of Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Trainee Recruitment Consultants

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Finance Assistant - Part time - 9 month FTC

    £20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...

    Marketing Manager

    £40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...

    Day In a Page

    Bryan Adams' heartstopping images of wounded British soldiers to go on show at Somerset House

    Bryan Adams' images of wounded soldiers

    Taken over the course of four years, Adams' portraits are an astonishing document of the aftermath of war
    The drugs revolution starts now as MPs agree its high time for change

    The drugs revolution starts now as MPs agree its high time for change

    Commons debate highlights growing cross-party consensus on softening UK drugs legislation, unchanged for 43 years
    The camera is turned on tabloid editors in Richard Peppiatt's 'One Rogue Reporter'

    Gotcha! The camera is turned on tabloid editors

    Hugh Grant says Richard Peppiatt's 'One Rogue Reporter' documentary will highlight issues raised by Leveson
    Fall of the Berlin Wall: It was thanks to Mikhail Gorbachev that this symbol of division fell

    Fall of the Berlin Wall

    It was thanks to Gorbachev that this symbol of division fell
    Halloween 2014: What makes Ouija boards, demon dolls, and evil clowns so frightening?

    What makes ouija boards and demon dolls scary?

    Ouija boards, demon dolls, evil children and clowns are all classic tropes of horror, and this year’s Halloween releases feature them all. What makes them so frightening, decade after decade?
    A safari in modern Britain: Rose Rouse reveals how her four-year tour of Harlesden taught her as much about the UK as it did about NW10

    Rose Rouse's safari in modern Britain

    Rouse decided to walk and talk with as many different people as possible in her neighbourhood of Harlesden and her experiences have been published in a new book
    Welcome to my world of no smell and odd tastes: How a bike accident left one woman living with unwanted food mash-ups

    'My world of no smell and odd tastes'

    A head injury from a bicycle accident had the surprising effect of robbing Nell Frizzell of two of her senses

    Matt Parker is proud of his square roots

    The "stand-up mathematician" is using comedy nights to preach maths to big audiences
    Paul Scholes column: Beating Manchester City is vital part of life at Manchester United. This is first major test for Luke Shaw, Angel Di Maria and Radamel Falcao – it’s not a game to lose

    Paul Scholes column

    Beating City is vital part of life at United. This is first major test for Shaw, Di Maria and Falcao – it’s not a game to lose
    Frank Warren: Call me an old git, but I just can't see that there's a place for women’s boxing

    Frank Warren column

    Call me an old git, but I just can't see that there's a place for women’s boxing
    Adrian Heath interview: Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room

    Adrian Heath's American dream...

    Former Everton striker prepares his Orlando City side for the MLS - and having Kaka in the dressing room
    Simon Hart: Manchester City will rise again but they need to change their attitude

    Manchester City will rise again but they need to change their attitude

    Manuel Pellegrini’s side are too good to fail and derby allows them to start again, says Simon Hart
    Isis in Syria: A general reveals the lack of communication with the US - and his country's awkward relationship with their allies-by-default

    A Syrian general speaks

    A senior officer of Bashar al-Assad’s regime talks to Robert Fisk about his army’s brutal struggle with Isis, in a dirty war whose challenges include widespread atrocities