05 June 2006

AFX: NYSE/Euronext merger aimed at granting US investors easy access to euro zone

One of the attractions of Euronext NV rather than London Stock Exchange PLC as a merger partner for NYSE Group Inc is the fact that Euronext's cash markets trade in euros and together form the biggest stock exchange in the eurozone, John Thain, NYSE CEO, has told investors. The merger will therefore provide US investors with easier access to the euro zone and vice versa.

The same will apply to listed companies, with NYSE-quoted stocks having the option to be quoted in euros on Euronext's markets and the European markets' listed business having easier access to obtaining an NYSE quote.

There will be no compulsion involved, so any company happy to remain quoted on its present market will be quite free to do so, according to Thain.

The NYSE will be bolted on to Euronext's existing federal cash market system, whereby its four bourses, in Paris, Amsterdam, Brussels and Lisbon, each have their own lists of quoted stocks and are regulated by the national authorities of their own countries.

This already allows companies to be listed on more than one Euronext market - for instance Fortis bank is listed in Amsterdam as well as Brussels while Dexia is listed in both Paris and Brussels. Euronext also counts as a federal member the MTS government bond market and will start talks this week to link up with Borsa Italiana, operator of the Milan stock exchange.

NYSE Euronext as a group will not have regulated exchange status. Its shares will be listed in dollars in New York and euros at the European end. This federal approach means that companies will continue to be able to float on Euronext markets without complying with the US corporate governance standards known as the Sarbanes-Oxley rules, which analysts believe are a deterrent to companies from other parts of the world listing in New York.

The merged group will be eager to win business from the many Chinese and Russian companies which are considering flotations outside their home country stock exchanges.

Thain said he believes that the merger will make NYSE Euronext more attractive for international listings when compared with markets which have been winning the lion's share of those IPOs, notably London and Hong Kong.

The NYSE also intends to draw on Euronext's all-electronic trading arrangements to enhance its own electronic platform, while still retaining its traditional stock exchange floor.

The 214-year-old exchange company bought electronic rival Archipelago Holdings Inc in March, which also turned NYSE into a public company.

NYSE and Euronext have stated they intend to harmonise their cash trading software, though Thain was cagey about the extent to which NYSE will adopt Euronext's NSC system, saying that the merged company will adopt the best features of each system.

Similarly, in the derivatives sector, NYSE plans to draw on Euronext's succesful Liffe Connect software platform to build up its US futures and options operations.

'We haven't really had a derivatives business before,' Thain admitted in a conference call on Friday

© AFX