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European Affairs
Special Report: Managing Europe's New Money
Europe Seeks Single Capital Market Equal to U.S.
A number of initiatives are now under way, mainly in Brussels, to create a single European capital market. This is the next big financial market challenge now that euro bills and coins have been successfully introduced. It will require a great deal of decision-making.
The European Commission has made a unified capital market one of its top priorities, and it has proposed a series of directives aimed at standardizing, for example, regulation on market abuse and the issuing of prospectuses. We are still struggling with the proposed common takeover directive, but that will also be adopted in due course.
A particularly important decision is that by the beginning of 2005 all European companies will have to apply international accounting standards. Europe always looks to a certain extent to the United States as a model in these matters, but on IAS we are moving faster. Our ambition is to create a standardized capital market, which is just as powerful as that of the United States, but with some of our own ideas and some of our own ways of doing things.
European exchanges have developed differently from those in the United States. The process of de-mutualization - that is converting from member-owned organizations to public companies - began in Europe a long time ago, first in Sweden, then in Germany, France and the Netherlands.
Now most European exchanges have been de-mutualized. They have become limited companies, with two sets of stakeholders: shareholders to whom they pay dividends and clients.
This is very important because it allows us to take decisions - for example on moving floor trading to screens - which are certainly in the interest of the market, but may not always be in the interest of each individual member.
Another important development has been a spate of mergers among European exchanges. Eurex is the result of a merger between the German and the Swiss derivatives markets. Euronext is the fruit of a merger among the Paris, Amsterdam and Brussels Stock Exchanges, which Lisbon has joined. Euronext has also recently acquired the London International Financial Futures and Options Exchange (LIFFE).
All this activity shows that once exchanges are de-mutualized, consolidation can occur quite rapidly. It will continue to do so. Europe will integrate top-down through deregulation from Brussels. It will also integrate bottom-up as a result of exchanges, banks or commission-houses deciding to merge.
One consequence is that in the end Europeans will have created a level of quality and depth in our markets such that we can rival the United States. We have different market models compared to the U.S. exchanges, but we could compete on liquidity, on company listings and many other things. We believe we are equals even where we are different.
In the near future, when Europe has united and standardized its market, we hope that globalization will help to open up markets for us in the United States. We aim to be very open to U.S. firms and exchanges and to build Atlantic bridges. That is the next step.
Such cooperation does not always have to be through mergers; it should start by mutual acceptance of each other's principles and ways of working. We should agree that while these are different, they are of equally high standards. That is one of the messages we are currently trying to convey to our American counterparts and to U.S. regulators.
We have come a long way, and we shall continue to move forward. We have very competitive markets. They are commercially driven. They are also driven by a quest for quality.
George Möller
President of the Federation of European Securities Exchanges (FESE) and Chief Operating Officer of Euronext.