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United Kingdom

The creation of iX

The London Stock Exchange and the Deutsche Börse announced on May 3 2000 that they would be merging through the creation of a new company – International Exchanges (iX). The merger aims to offer a unified trading platform using a common market model and regulatory approach – enabling easier trading in European equities.

With 45% of Europe's top 300 companies already having a primary listing on either the London or Frankfurt exchange, iX will provide 53% of traded volume of the European stock market and the largest derivatives market worldwide.

English will be the managing and operating language of the group. At the same time, iX and Nasdaq Europe signed a memorandum of understanding to create a pan-European, high growth market called Nasdaq iX.

Potential impact

So what impact will the creation of iX have on the functioning of the markets?

The merger could lead to a single pan-European exchange. Discussions with Milan and Madrid have already begun and may signal the next stage of consolidation of European exchanges. Speculation abounds as to what action other European exchanges will take. With Euronext (the merger of the Paris, Amsterdam and Brussels stock markets) announcing last month its vision of single membership, a single order book, one set of listing rules, and one clearing and settlement system, a pan-European market appears closer than ever. If a single European exchange emerges, is a single regulator needed? In fact, the suggestion that the London Stock Exchange/Deutsche Börse merger will lead to a European "super regulator" has already been raised in the UK parliament.

Second, London may see a move to later opening of the market. Having already moved its opening time to 8am, iX may eventually follow the Milan exchange's announcement that it plans to launch an after-hours trading service – with the ultimate aim of permitting trading until 10pm to coincide with the close of trading in New York.

Third, the question of which listing rules will apply to the new market must be resolved. At this stage it has not been determined whether iX will use techMARK's or Neuer Markt's listing rules, or some combination. While there has been no announcement about creating a single regulator for the new markets, there is a question as to whether the newly introduced UK listing rules — the Purple Book — will almost immediately become obsolete.

Finally, the UK may see the abolition of stamp duty on share dealing. At present, persons buying a UK-listed stock are subject to duty of 0.5%, but all other western European countries (with the exception of Switzerland) have abolished stamp duty on share dealing.

Stuart Hatcher

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