Competition for the London Stock Exchange is to heighten with an announcement expected today that the Amsterdam, Brussels and Paris bourses will merge to form a new exchange to be called Euronext.
The merger, which sources said will be unveiled at a press conference in London today, will see the exchanges trade specific financial products. Analysts see the merger as a major move toward reshaping Europe's markets amid mounting global competition.
"They sealed the pact on Saturday," a source close to the tri-partite talks said yesterday. "The big innovation is that they'll trade different products."
The Belgian finance minister Didier Reynders, speaking on Belgian television yesterday, said he expected the merger to become effective by 1 January 2001 at the latest, although sources claimed the new exchange could be up and running by September. Mr Reynders called for an extension of the number of partners in the bourse alliance, mentioning Luxemburg, Madrid and Rome as possible members.
"For the small European exchanges, specialisation may be not only the name of the game but of survival," a banker at a Paris brokerage firm said.
The Euronext exchange would be Europe's second largest after London. It would be headed by Jean-Francois Theodore, president of ParisBourse, but based in Amsterdam. A European supervisory body is also under consideration to be set up in Brussels.
The Paris exchange's £2.2 trillion market capitalisation is already the second-largest in Europe, due to such heavyweights as France Telecom and media to utilities conglomerate Vivendi. Paris is expected to extend its blue-chip portfolio with the addition of top Belgian and Dutch companies.
Belgium is expected to become the hub for small- and medium-cap companies, a market that could become very attractive to growing numbers of small investors using on-line brokers, traders said. Analysts said Euronext, which will be incorporated under favorable Dutch laws, would handle futures and derivatives trading.
Mergers have drained Brussels's capitalisation, now down to about £115bn. It is is concentrated in a handful of major companies, including financial group Dexia, which also trades in Paris. Amsterdam's capitalisation of about £1.075 trillion is also mostly held among a few big issues, such as Dutch financial group ING, which is bidding for French bank CCF.
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