Hotel Krasnapolsky, Amsterdam, 2 January 2003
Speakers
Jean-François Théodore (Speaking English)
Chairman and Chief Executive Officer, Euronext N.V.
George Möller (Speaking Dutch)
Chief Operating Officer, Euronext N.V.
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Jean-François Théodore:
Ladies and gentlemen,
"Another year over, and a new one just begun." These lines are from a Christmas song by the late Beatle John Lennon. His words fit the melody of the song, but they also reflect what we feel today - that the years seem to pass quickly and that every new year seems to come round even faster than the one before.
May be it was better 2002 would have gone faster.
For the industry in general, and probably for you in particular, it was a very difficult year, tough on the ground and with severe crises. What will the future bring us? We at Euronext are no better in predicting the future than you are, so we will let the market do that job. The only thing we know for certain is that the future holds surprises, such as the severity with which common unfounded over-optimism was corrected some years ago. We hope that the timing of the upturn will surprise us just as much, and prove common pessimism wrong.
The other thing we know for sure is that for the coming time, we at Euronext have to be realistic. To do our work, building a strong company. For the coming year, let us be realistic. Let us get our organisations in order, making them lean and mean. And let us consolidate our business so that we stay competitive and meet the demands of those for whom we work: Our clients. For Euronext, this will mean continuing to build towards our European concept. We have asked our clients, especially the Dutch ones, to make major changes in order to arrive at our European concept. We must deliver our promises to you to create an integrated European market. And we will deliver. We recognise your contribution to this process of change, and we are very grateful for the co-operation you have given us so far.
Though achievements have been impressive in 2002 with the Clearing 21 system introduced for the cash market and the floor to screen migration for derivatives, we will continue our work. This year we will integrate all of our derivatives clearing into our Clearing 21 system, a step that will mark the completion of the clearing consolidation process. After this we will integrate our derivatives platforms within Euronext.liffe, albeit in a reduced pace. We will continue to work together with Euroclear on the integration of the settlement function, which is the last, but by no means the easiest, part of integrating our markets. Once this has been achieved, our integration task will be complete. But even then, there will still be much work to do on harmonisation, and we invite you to participate in the debate on how to accomplish it.
Just before the year's end, we completed the historic migration of equity options trading from the floor to the screen. I was there on 6 December at the last seconds of trading on the floor, and I sensed with you that something momentous was happening. The atmosphere was emotional, but there was also a sense of expectation. With you, I share the hopes for our common and exciting future.
At the end of the year, we completed the plans to make Amsterdam the Euronext.liffe expertise centre for equity options. These plans were explained in the Netherlands at the time of the Liffe acquisition, but next year we will put them into practice. Amsterdam is the place in Europe where trading in equity option products started. It is the place where our derivatives business became very successful as well. We would like to take this opportunity to pay tribute to all of you who created this reality. We would like to keep the expertise build over years within Euronext by concentrating the activities relating to equity options in the Netherlands in our Euronext.liffe business line. We will start developing this concept during the coming month, and you will see the benefits of it soon.
Ladies and Gentlemen, I'd like to ask my colleague George Möller to continue. He will speak in Dutch.
George Möller:
Thank you, Jean-Francois.
Ladies and gentlemen, last year's speech stated very clearly that Euronext is a marketplace for all listed companies - for small ones as well as for large ones - and we meant what we said. So last year we paid tribute to this. Among others, we organised several events especially for smaller companies. Our event in Paris last September, where all the Euronext companies and members of the NextPrime and NextEconomy sectors could meet analysts and investors, was very successful. We have firm plans to build on this success by organising an even larger event this year. We are counting on all the Dutch members of the NextPrime and NextEconomy segments to participate in it. Moreover, we encourage all Dutch small and mid-cap companies to join our quality segments.
Last year a number of corporate incidents shook the trust that investors had in our business. It shook investors trust in how companies conducted their own business and how they conducted their financial reporting. Action needed to be taken to restore confidence. Issues of corporate governance need to be addressed in the USA, but also in the Netherlands. Euronext is willing to act as a partner in a debate on these issues, but Euronext realises that the role of an exchange in this process can only be a modest one.
Of course we are very mindful of the sensitivities involved in a debate on the role of equity analysts. We acknowledge that a lot of work needs to be done in order to restore confidence. But restoring confidence has its own risks, one of them being the risk of overdoing it. If it becomes more expensive to produce research, it will only make research more exclusive. If it becomes more exclusive, by definition the smaller companies and the smaller investors will suffer more than the larger ones. We need to repair the damage done to the reputation of the market, but we need to repair it with care.
In the Netherlands we also had our incidents. One of the incidents related to a professional individual who was very active in promoting small and mid-caps. He probably made an error of judgement. And more probably he made a serious error of judgement. But this particular case in my view, more than any other cases, raises an issue we never discussed before. It is the issue whether an action is an error of judgement or a deliberate criminal action.
Some people make mistakes through carelessness or an understandable lapse in professional behaviour. Some people make mistakes simply because they are incompetent. But other people make mistakes deliberately, often for the purpose of personal gain. Or people make mistakes as a part of an almost institutionalised system, often as a result of a misguided corporate culture.
In football, if a player misbehaves he can get a yellow card or a red card. The colour of the card depends on the seriousness of his foul. We all know the difference between these sanctions. With a red card a player is out of the game while with a yellow card he can still stay in the game provided he does not make a second mistake.
In a market that is almost as transparent and real-time as a soccer match, we need procedures that will allow us to pass judgement quickly. Justice should run its course but let it run quickly. And let it quickly be clear whether the misbehaviour and the motive justifies a red card for the rest of one's life, or if a yellow card is sufficient. With a yellow card, people should for example be allowed to come back in their profession, albeit under probation. This is not only for the benefit the individual involved, but even more for the benefit of the whole market.
In a much wider context the possibility of not getting our strict regimes right symbolises a business risk, especially for small and mid-caps.
We have always stated that public scrutiny improves the quality of management of companies regardless of the size of the company. This accounts for public listed companies as well as for private companies. However, public scrutiny should not come at a price or at a burden that companies cannot afford. The resulting departure of companies from the public market will not make the world a better place. On the contrary!
Euronext recognises the problem that public scrutiny is a heavy burden for mid- and smallcaps. Although Euronext does not have all the answers it is willing to participate in a discussion of how to resolve these dilemmas. Euronext is prepared to play a role in keeping small and mid-caps visible in a more demanding world. We have unique assets that have almost disappeared in the financial world: we are neutral, we operate on the basis of a single capacity and we are impartial. These are assets that can work for us in a world where people believe there is too much conflict of interest.
In a world that demands more information we have made the decision to rebuild our premise at Beursplein 5 into a news centre, the only financial news centre in the Netherlands. It will be a news centre, not only for traders, but also for the press and analysts. And above all for companies that would like to meet the press and the analysts. Beursplein 5 should remain at the centre of the Dutch and European capital markets, and it should remain at the service of those who wish to have a physical meeting point.
Ladies and Gentlemen, I conclude.
I want to toast on all of you. I hope you'll have a good year in business, but I also hope you and your family will have a healthy year.
I wish you all good luck in the year of 2003.
