Latin American Capital Markets

188 RUBEN LEEexecuted on Euronext via Clearnet; and a unified settlement and custody platformwith Euroclear Takeover rules will continue to be imposed domestically.Listed companies will remain listed on their current exchanges, but listing requirementswill be harmonized, all shares will be traded on the single integrated tradingplatform, and each listed security will be accessible to all members of Euronext,regardless of the nationality of the issuer or the member Companies seeking a listingon Euronext can choose to do so in any one of the three member financial centers.By choosing their entry point, they will automatically choose their home country asfar as regulation is concerned. Although companies could consider more than one listingagreement with Euronext in different financial centers, this would provide themwith no added value, as there would be only one order book for their equities regardlessof the number of listings on Euronext.The jurisdiction of a listing agreementdetermines the regulator to which Euronext's market surveillance department reports,concerning irregularities in trading in the securities issued by a company.The regulators in the three member countries have agreed that a marketparticipant licensed in one country will automatically receive a passport to operate inthe other Euronext countries. Market participants will be subject to the supervisionof the regulator of the country in which they are granted their main license. TheEuronext entry point chosen by a market participant will determine the jurisdictiongoverning the membership agreement concluded between Euronext and the marketparticipantThe main reason that Euronext was created was to reduce costs by using asimpler structure rather than attempting to negotiate complex linkage agreementsbetween the three different partner exchanges. In addition, it would provide a simpleand flexible regulatory environment for listed companies, members, and the exchanges.Euronext anticipates making cost savings amounting to €50 million a year,mainly from savings in information technology. It also hopes to achieve enhanced liquidity,transparency, and price discovery resulting from the creation of a single orderbookSeveral lessons may be drawn from the Euronext experience. First, it is possibleto merge large exchanges from several countries, each of which has a strongtradition of national sovereignty and ambition for creating a local financial center Second,in order to achieve such a merger, it is essential to have the goodwill of all theregulatory authorities involved. Third, clarity and simplicity both in ownership structuresof markets and in regulatory environments are attractive propositions to marketparticipants.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub