Supervisory Board Chairman Dr. Rolf-E. Breuer affirmed that the Supervisory Board and Executive Board, together with their London partners, stood behind the strategic consolidation concept of iX-international exchanges as planned: "The merger of Deutsche Börse and London Stock Exchange is still the most attractive option from Deutsche Börse's point of view," Breuer said. With its leading position in blue chips, growth stocks and derivatives, iX-international exchanges will be the leading stock exchange in Europe, as he put it. The merger of the top two European stock exchanges will create the nucleus for the consolidation of the European capital market, he said. Milan and Madrid are two further major exchanges that want to be involved in this process of consolidation. "We can now realize the vision of a European capital market that has been called for by all sides for such a long time, and rightly so," Breuer said in Frankfurt.
Deutsche Börse and the London Stock Exchange want to form iX-international exchanges as a merger of equals. As of the end of 2001, blue chips and growth stocks would then be traded Europe-wide on the Xetra electronic trading system according to uniform rules for each market. As of the year 2002, synergies amounting to 83 million euros per year are expected to be achieved in day-to-day business through the merger, excluding any possible impact on combined revenues as a result of the merger. Of even greater importance, however, is the economic benefit of the planned merger, the company said. According to a study, iX-international exchanges would enhance market quality and therefore would be beneficial for investors, issuers and intermediaries. Frankfurt would also gain as a financial center by this move. The study indicates that iX-international exchanges offers advantages that go far beyond the bourse.
Higher capital market efficiency works in favor of investors
According to this study, the merger will result in considerable cost savings for investors due to narrower spreads, in other words, smaller differences between the bid and ask prices at a given time, as well as lower fees for trading and clearing/settlement. CrestCo and Clearstream International, the clearing organizations for the German and British market, have presented a model for iX-international exchanges that reduces the costs for cross-border transactions by 90 percent, to the level of a domestic transaction.
Investors will also benefit from the international diversification of their portfolios, which will be easier due to the European focus of the iX-international exchanges' markets. Through international diversification, the risk of an investment in equity could be reduced sustainably and growth opportunities abroad exploited.
Lower cost of capital for issuers
The advantages for the issuers lie in the concentration of investor interest in an open order book and thus in expanding the available supply of capital. Moreover, the trading volumes increase due to the uniform trading platform. As a result of both effects, the value of newly listed companies goes up, the cost of capital goes down and further growth can be financed more quickly and more cheaply. Above all segments with a lower level of investor interest, such as small and medium-size enterprises outside of Neuer Markt- in other words, the typical German medium-size stock corporations from more traditional industries - profit from a bundling of liquidity.
Intermediaries: Greater volume, higher efficiency
iX-international exchanges will expand the range of products and services offered for intermediaries, introduce a uniform trading technology and overcome the fragmented European regulation. In this way, iX-international exchanges will make the two core processes of intermediaries on the capital market - the organization of initial public offerings and support for investors as trading becomes increasingly international -more efficient, and the volume of business transacted there will grow. The economies of scale that are achieved in the process and the creation of a price structure that is superior to the competition will enable a further reduction in transaction prices. This contributes to profitability and employment-creating growth of the intermediaries.
Frankfurt becomes more important as a financial center
iX-international exchanges will lead to much higher added value in Frankfurt and the Rhine-Main area - especially in activities related to the growth market, securities trading and exchange and clearing technology. Basing the European market for growth stocks in Frankfurt will result in more jobs for banks, lawyers, auditors, PR agencies and consultants in Frankfurt and, consequently, in higher tax payments. Neuer Markt has led to the creation of 6,000 jobs in issuing-related services since the segment was launched. If only half of the business potential of the European growth market can be concentrated in Frankfurt, this can be expected to generate over 60,000 jobs in IPO-related business by the year 2005.
As a result of the trading on an electronic platform, the physical presence on other markets, such as London, for example, no longer has any advantages to offer. Since trading and sales functions are interrelated to a growing degree, both areas of operation will remain in Frankfurt. There is no other country in Europe with such rapid growth in the proportion of private investors and in the role of institutional investors as a result of the financing problems of the state pension system.
The Frankfurt financial center has established its position as a technology leader through the use of the German Xetra system at iX-international exchanges. The entire technological development of iX-international exchanges will be concentrated in Frankfurt. This means that all of the investments already planned for future-oriented technology in Frankfurt and the considerable size of future investments in the development of new market systems and functionalities will be entirely to the benefit of Frankfurt's economic development. All activities in e-commerce (B2B) will also be concentrated at the Frankfurt location.
