1. On behalf of FESE, good morning and welcome to the Federation’s 8th Annual Convention and to the city of Frankfurt. Thank you for being here with us for this recognised forum for European and global discussion of capital market issues.
2. We are delighted that thanks to close co-operation
between FESE and Deutsche Börse Group we have managed to organise
this 8th Convention, the first of which took place in this same
city in 1997. A warm thanks to our host, Deutsche Börse.
The FESE Convention may now be called a success series with well
over 300 participants every year. I pay tribute to the FESE Secretariat’s
performance. I would also like to thank our sponsors who in their
own and in our interest provide a crucial contribution to maintain
the high levels we have managed to reach before.
3. The core business of the Federation of European
Securities Exchanges is the legislative and policy processes in
Brussels to contribute to the development of a large, liquid European
capital market. In fact, this is particularly true in the 21st century
economy: great forces of competition and technology are accelerating
change and the mobility of capital and investors’capital commitment
is influenced by the degree to which markets and economies encourage
and reward investment, risk-taking, profits and growth. As the President
of the Deutsche Aktieninstitut said the other day in Brussels, up
to 80% of nationally applicable rules of capital markets come from
Brussels. Five years ago, the Commission proposed its Financial
Services Action Plan with a very broad remit across capital markets
and financial services.
The Commission has fulfilled its role and duty to come up with all
the various proposals and led them to the Council and to the European
Parliament. These two Institutions deciding on all final texts,
have done their work to a very large extent, in great transparency
and in a helpful, constructive and informed fashion. This last point,
of information to the Parliament, was helped by FESE which through
its Secretary General has held the Chairmanship of the European
Parliamentary Financial Services Forum for 3 years, a heavy investment
of his time in crucial aspects of EU legislative activities.
In those years the role of CESR has been growing and FESE has welcomed that, even though we may have our differences with CESR at times.
My overall judgement is cautiously positive thanks also to the consultation mechanisms that Lamfalussy so carefully put into his recommendations. The emphasis now is on Lamfalussy two levels and on implementation.
Over the last years the Exchanges have radically
changed and therefore the timing to focus this Convention on the
interests of our clients is particularly well chosen. In the next
one and half days we have panels with Authorities, Institutions,
market players and all sorts of clients: listed companies, intermediaries,
international service providers, investors both large and small.
It is for us Exchanges crucial to spend time to listen to our customers.
Our purpose is to provide them with products and services characterised
by maximum transactional efficiency, high level of liquidity, best
value for money and to contribute to reduce systemic risk and improve
investor protection in an increasingly competing world where we
cannot ignore that Japan’s markets are recovering and China
and India are booming.
I trust that our clients will be outspoken at this event, I trust
too that William Wright as our conference moderator and our panel
chairs will ensure lively debate. The program of the two days provides
for highly valuable keynote speakers and panellists, who will give
us their views on the European integration path and regulatory framework.
4. In history, Exchanges had only one single business model; most of them were owned by their intermediaries and regulated for the benefit of these intermediaries and behind them companies and investors. Today we have many models and it is crucial that Exchanges can continue to offer their own business model and then it’s up to the market to decide. Not only intermediaries, not even only regulators but it’s up to market forces to decide who and whose models will win.
Exchanges may limit themselves to equity and cash trading only or they may chose to serve the entire gambit of products and services, whether derivative products with widening variety, clearing and settlement or custody, data provision services, corporate governance or frankly whatever. In any case in this electronic day and age they serve their markets on a European and sometimes on a global scale. And they serve very well. We are happy to note that the FESE market capitalization is again on the rise, (its overall value being now above Euro 7,000 bn ) as well as equity turnover (the daily average of FESE members’ order book transactions exceeding Euro 27 bn in the first four months of this year) . Moreover, the number of companies with listed shares is over 7,000. In year 2003 the seven largest European Exchanges showed aggregated revenues of more than 3,600 million euro, with net profits for around 700 million euro. This is all possible as Securities Exchanges have aligned their corporate strategies with the business potential. They have trained their staff and invested in infrastructure. They have provided stimulus and improved risk management through derivatives markets. They continue to support equity savings through pension and other retirement schemes and participate in the reorientation of finance from bank loans into securities. The European Exchanges also play a vital role in promoting the increase in cross-border investment trading.
5. FESE is not only looking at the European Union
and trying to influence processes. As you know legislation so quickly
becomes extra-territorial of which Sarbanes-Oxley is the recent
example that comes to mind. This is a hot issue across the Atlantic
ocean in two senses and it is therefore comforting to note that
both the informal transatlantic dialogue as well as discussions
between CESR and the SEC are of a constructive nature, aimed at
solving differences and creating appropriate forms of convergence.
Recent studies have shown the advantages of a closer relationship
EU-US which allows to lower trading costs and increase trading volumes,
with a consequent decline in the cost of equity capital.
We, European electronic exchanges should have had our trading screens in the US years ago but we do believe that Chairman Donaldson was serious when he said that he wanted to take steps in this dossier before the year is over, partially linked to the discussion on US National Market Structure.
6. Over the last few years the Federation has appropriately established itself as the voice, the eyes and the ears of its Members, Europe’s regulated markets, vis-à-vis the European Union Institutions. FESE has on many occasions co-ordinated views with similar financial services and financial sectors organisations, both here in Brussels and in other European capitals. At the same time FESE has never shirked away from taking its own views when it felt it was necessary or desirable. FESE has consistently tried to be constructive and practical. Well before others started stressing the importance of actual implementation, FESE made proposals to that extent, the Market Abuse Directive is only one example. As implementation of European Union legislation in actual practice is what we strive for, I feel justified in mentioning to you that the FESE proposal for a European Ombudsman to settle disputes between professionals in the securities markets and Regulators, other than their own, will enter it’s next phase as we have a feasibility study prepared which will be distributed and sent around in weeks to come. We believe this proposal is practical and helpful for the implementation under Lamfalussy Levels III and IV. We also believe that the proposal is timely as the Lamfalussy recommendations will be extended to banking, insurance, pension funds and alike. We believe that the FESE Ombudsman proposal may be applicable to that wide array of cross border services.
7. FESE is also a strong promoter of academic research, especially if it has innovative and important findings for the business of Exchanges. For this reason, the Joseph de la Vega Prize was established several years ago and indeed it attracts the best young researchers from our continent and beyond. The awarding ceremony will take place tomorrow morning.
8. FESE opened its doors of Membership to Exchanges from accession countries 5 years ago to help them ease their transition process. They all are now Full Members and we look forward to their continued active participation. At the same time, I wish to highlight the stimulating contribution of EACH (the Association of European Clearing Houses) on the effectiveness of CCP and its close relationship with FESE, as a sign of shared views and actions encompassing trading and post-trading.
Ladies and Gentlemen, let us work together,
master the new challenges and benefit from the new opportunities
we face to succeed in continuing to strengthen investor confidence
and making the European market more robust, more competitive and
more liquid.
Thank you very much for your kind attention.
