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Euronext: a strategic move towards one European Stock Exchange

The European Stock exchanges have recently experienced significant technological and regulatory changes, a continuing evolution in customers' preferences and the introduction of the single currency. This has resulted in mergers, alliances and strategic agreements between stock exchanges that are driven by three main elements.

Firstly, mergers between markets result in the integration of transactional systems in order to offer improved services to customers. Secondly, stock exchanges themselves open up their capital to non-members and become quoted companies. Finally, this globalisation requires links at the regional level and technological cooperation.

Being a medium-sized stock exchange, which is confronted with the euro and unprecedented competitive pressures, Brussels Exchanges has, over the past three years, made several strategic moves towards an integrated European market for financial instruments. In 1998 the Belgian and French stock exchanges created by way of a reciprocity agreement, the Euro.NM, and the three Benelux Stock Exchanges decided to cooperate by signing a cross-membership agreement. Both agreements established direct access by each stock exchange member to each others' markets. In 1999, Belfox, CIK and the Brussels Stock Exchange Company merged into one entity, called the Brussels Exchanges (BXS), operating as a Corporation of Public Law (Act of 10 March 1999 and Royal Decree of 11 April 1999). On March 18, 2000, the Brussels (BXS), Amsterdam (AEX) and Paris (Paris bourse) stock exchanges agreed a merger into the largest stock exchange on the Continent, called Euronext. Although a significant amount of legislative work will have to be carried out in order to harmonize the three national legislations on various issues, the merger is to be effective by September 2000, and Euronext itself should be listed on the stock market by January 2001.

Euronext will be incorporated under Dutch Law and will have its registered offices in The Netherlands. Apart from the Executive Committee, which will comprise the current CEOs of the participating exchanges and will be located in Brussels, the Board of Directors consists of 12 members. Market supervision will be performed by a common entity. As to the division of current know-how, the futures, options and other derivatives will be traded in Amsterdam. Blue chip companies will be listed in Paris, and the small- and mid-caps will be listed in Brussels. Euronext will operate using common trading systems in the three markets, namely, the Paris-NSC-system for stocks, and the Brussels BTS or the London Connect system for derivative products.

Incorporating Euronext, its founders aim to take the lead in creating a single pan-European Stock Exchange, offering listed companies a larger capital market on an international platform, lower trading costs, larger visibility of listed companies, increased market transparency and liquidity. Further, Euronext aims to perform pioneering work regarding the harmonization of national legislations on access conditions, market and trade regulation, supervision, take-over bids, penalization of exchange offences, and related company and tax law matters. In this respect, discussions with the European Commission have already started.

Kristof De Creus

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