M&G reporters
The London and Frankfurt stock exchanges have agreed to merge, creating Europe’s largest stock market and a powerful regional counterweight to Wall Street, the London Stock Exchange announced this week.
The London exchange and Germany’s Deutsche Boerse would each own 50% of the new entity, which is to be called iX, for International Exchanges. Its headquarters are to be in London.
Under the merger agreement, shares in blue-chip companies would be traded in London, while shares in high-tech firms would be traded in Frankfurt.
The Anglo-German union includes a formal cooperation agreement with the technology- heavy United States Nasdaq market. The London exchange said this did not involve mutual ownership.
The Anglo-German merger underscores the growing power of Frankfurt as a financial centre rivalling London. While the London exchange has a larger market capitalisation, the Frankfurt market is more diversified and profitable.
The head of the Deutsche Boerse, Werner Seifert, is to become chief executive while chair of the London Stock Exchange, Donald Cruickshank, would become chair of the merged stock market.
Pressure on Europe’s national stock exchanges to consolidate has recently intensified, due to the introduction last year of a single European currency, the euro, with competition from US markets and electronic share-trading networks.
In a sign of potential consolidation yet to come, the London exchange confirmed that it and the Deutsche Boerse have also held talks with stock markets in Milan, Italy, and Madrid, Spain.
Share trading in Europe has soared in popularity as more private individuals invest for their retirement and institutions find it easier to buy shares in companies listed elsewhere in the Eurozone countries.
Nasdaq, which is eager to expand in the region, has unveiled a plan to create an Internet-based European network called Nasdaq-Europe.
Scheduled to begin operating late this year, the network is aimed at helping the region’s high-growth companies raise money and at making it easier for Europeans to invest in blue-chip American and Asian stocks.