The Week Ahead: Easdaq makes strides using outmoded quote-driven system
Monday 29 September 1997
Easdaq, still little known, is, in effect, the European version of Nasdaq, the highly successful US computerised market famous for its Bill Gates involvement. Like John Jenkins' fringe Ofex market, Easdaq was created as a result of Exchange rationalisation.
It was born out of the study which followed the decision to kill the old Unlisted Securities Market. The time was then ripe, says Easdaq's chairman, Stanislas Yassukovich, former head of Merrill Lynch's European operations, to launch a market "dedicated to entrepreneurial, high-growth companies with pan-European business aspirations". Its dream is to find another Bill Gates-like Microsoft giant.
The market made its debut nearly a year ago. First recruit was a British company, Dr Solomon's, producing anti-virus software products. There are now 15 constituents with Debonair, the airline, joining Dr Solomon's as the British contribution.
Companies are traded in the currency of their choice. Dr Solomon's opted for US dollars; Debonair for sterling. Value of the market is near to $3.35bn. Turnover so far clocked up is around $650m.
Shares of Dr Solomon's and Debonair have performed well. The computer virus group was floated at $17 and closed at $25.75 on Friday; Debonair arrived at 450p; it stood at 620p at the end of the week.
Other constituents include Esprit Telecomes, trading in Austrian schillings; Chemunex, a French biotech business which has attracted a buy recommendation from Nomura; and Topcall, another Austrian player, which has also won a London buy accolade - from Credit Lyonnais Laing.
Easdaq has an array of shareholders, none with substantial stakes. They range from Nasdaq, with around 4 per cent, the UBS securities giant, stockbroker Beeson Gregory and former Tory defence minister Sir John Nott.
The Exchange's order-driven system is due to be launched on 20 October, uncomfortably close, for some, to the anniversary of the 1987 crash. Trading will be confined to the 100 Footsie constituents. The shares in the supporting FTSE 250 index will be pulled in as soon as possible. In order-driven trading potential deals are computerised and displayed on an order book. They remain there until they can be fully or partly matched or withdrawn.
Quote-driven trading, which the Exchange seems likely to preserve for the 1,750 shares outside the top 350 as well as AIM shares, is the system adopted by Easdaq.
At least two market-makers must be prepared to deal in an Easdaq stock. They enter buying and selling prices on the market's trading terminals.
Says Easdaq: "Competition among market-makers produces efficient pricing and provides the market with the capacity to absorb large increases in volume without trading halts."
So far Easdaq has concentrated on institutional trades. It admits it has yet to come to terms with accommodating the private investor, but it seems to appreciate the need to cater for the small player and is likely to pay more attention as the market gathers pace and strength.
It is, however, possible for private investors to deal. And they do. They have to operate through their stockbroker who, if not an Easdaq member, has to put the order through one who, in turn, will trade with the market- makers. Cost of a small deal, say pounds 1,300, would be about pounds 30.
The Euro market does not see itself as a rival to "small-cap" markets such as AIM or the Nouveau Marche. In the fullness of time it could, however, emerge as a serious challenger to the Exchange and other big European markets (there are more than 20). It is modelled on the US Nasdaq market which from a small, slow start mushroomed into a market with a $17bn-a- day turnover, and happy to splash out $10m on a British television campaign.
Of course Easdaq does not, at least at this stage in its development, see itself rivalling national share markets. Still existing markets are largely composed of mature companies and Easdaq hopes it can steal their thunder by aiming to collect high-growth, entrepreneurial businesses - the companies of tomorrow.
As well as facing predictable and possibly fierce resistance from the more alive entrenched markets, it is having to contend with another European venture, Euro-NM, which covers Belgian, Dutch. French and German markets. But Easdaq's main challenge could come from its very inspiration, Nasdaq. On Sunday it launches another $10m television advertising campaign aimed at attracting British private investors. It is in talks with ShareLink and NatWest Securities.
If the Nasdaq campaign goes according to plan it will then be extended to Europe - a daunting prospect for existing markets.
Meanwhile, Manchester United is expected to announce its new television role when it produces year's figures tomorrow. It should score profits around pounds 27m, up from pounds 14.5m. The week's big hitter is Bank of Scotland, likely to offer pounds 357m against pounds 324m on Wednesday.
Engineer McKechnie should produce year's results of pounds 54.8m (pounds 50.3m) today.Northern Leisure should dance in with pounds 8.5m.
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