Latin American Capital Markets

PROMOTING REGIONAL CAPITAL MARKET INTEGRATION 189IXOn May 3, 2000, Deutsche Bourse and the LSE announced that they had agreed tomerge to create a new exchange, called iX-international exchanges pic (iX). 42 Theplan was that LSE shareholders, in aggregate, and Deutsche Bourse were each to own50 percent of the shares in iX.The new exchange would be headquartered in Londonand have two main subsidiaries in London and Frankfurt. The London-basedmarket would be a pan-European blue chip market subject to U.K. regulation. TheFrankfurt-based market, which was to be developed in association with NASDAQ,would be a pan-European high-growth market subject to German regulation. Otherelements of the merger proposal concerned Eurex.the futures exchange of DeutscheBourse, and various issues concerning clearing and settlement.Existing listed companies on either of the two merging exchanges would notbe required by iX to give up their home country listing in order to be admitted totrading on iX's markets or to adopt a particular currency in which to raise capital,state their accounts, or pay dividends. Newly admitted companies could choose to belisted through the regulatory authority of their choosing. iX would operate a singleelectronic trading platform based on the German Xetra technology for all its cashmarkets and offer support to users in mitigating the costs of technical migration. iXwould also adopt common market models and a consistent regulatory approach andoffer facilities for trading in equities from other European markets.It was anticipated that the merged organization could better provide a singlemanagement, a single trading platform with international remote access, and a singlepricing model, than could the two exchanges apart. In addition, the size of the combinedexchange was seen as a major advantage in the competition between Europeanexchanges. iX would be the leading European exchange in terms of volume andvalue of equity trading. On a combined basis, the two exchanges accounted for justover half of European equity traded volume in the 12 months prior to March 31,2000, with 41 percent of Europe's top 300 companies having their primary listing oneither the Frankfurt or London exchange. Through Eurex, the group would have an80 percent economic interest in the world's leading derivatives exchange.It was also argued that the merger would create significant value for shareholdersand significant benefits for customers, including private client brokers, dealers,investors, and issuers. iX was expected to deliver operating cost savings, excluding any42 This section draws on Deutsche Bourse and LSE (2000); Hilton and Lascelles (2000); and Lee (2000).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub