Nasdaq Chairman, Frank G. Zarb, noted: "Today’s announcement moves us closer to achieving our strategic vision of an international Nasdaq. This transaction begins to put into place the third leg of our global trading platform-Nasdaq Europe, Nasdaq U.S., and Nasdaq Japan.
Chairman of Easdaq, Stanislas Yassukovich added: "Easdaq was originally modelled on Nasdaq - with a broad base of shareholders and the highest standards of regulation - the market was designed to be compatible with Nasdaq. This transaction represents the culmination of many years of effort to create a pan-European stock market for growth companies that will be part of a global trading platform. The founding members will strongly recommend that shareholders approve this transaction."
With this agreement, Nasdaq will establish a presence in Europe, an important link in its unfolding global strategy. It will acquire a majority ownership position in Easdaq, a pan-European stock exchange and benefit from a European passport. The plan is subject to approval by the Easdaq shareholders, expected later this month.
Nasdaq will restructure the company into a globally linked, pan-European market called Nasdaq Europe. Nasdaq views this transaction as its first step in playing a major role in the further consolidation of trading in Europe. Its discussions with other markets and major market participants, however, will continue.
Knight Trading Group, Inc. (Nasdaq: NITE), will remain as a strategic investor and eight major securities firms have indicated their intent to join Nasdaq in this transaction, with other strategic investors to follow.
This transaction presents Nasdaq and its strategic investors the opportunity to:
- expand and consolidate European order flow in Nasdaq-listed and other US stocks;
- create the European initial public offering (IPO) market of choice with an expanded product range to include US, European, and Asian equities; and
- expand and capture a significant proportion of European cross-border trading.
Expanded Product Range
The Nasdaq Europe market will expand and deepen the existing product range to offer investors the widest choice of liquid investment opportunities, including linkages to European, Asian, and US stocks, exchange traded funds, and warrants. Retail and institutional investors will be able to trade efficiently and cost effectively during European trading hours.
Market Model
Nasdaq intends to deploy a hybrid market model that will combine the best features of order-driven and quote-driven market models to serve the requirements of both retail and institutional investors.
In the May/June 2001 time frame, Nasdaq Europe will launch the newly developed ETS (to be known as the European Trading System). It will offer similar functionality as the current Nasdaq Stock Market while being fully adapted to the needs and requirements of the European market. Features will include executable Market Maker quotes, matched trade reporting, and an electronic broker-to-broker negotiation facility.
Before the end of 2001, Nasdaq Europe intends to introduce a hybrid market model customized to European best practices. This market model will integrate attributable Market Maker quotes into an anonymous, voluntary limit order book, provide expanded negotiation facilities, and trade reporting.
Clearance and Settlement
Nasdaq Europe will work closely with its market participants to establish a user-controlled European central counterparty (CCP) that leverages existing post trading processing and risk management capabilities. The new central counterparty will enter into a facilities management arrangement with the Depository Trust & Clearing Corporation (DTCC), under which DTCC will provide operating systems, plant and internal operational support to the CCP. This user-controlled clearance and settlement solution, designed in conjunction with market participants, is expected to reduce significantly the operational costs and inefficiencies associated with cross-border transactions.
Ownership Structure and Regulation
Nasdaq will initially acquire approximately 58 percent of the company on a fully diluted basis. After the exercise of warrants outstanding and the issuance of additional shares, Nasdaq's ownership in the company will stand at about 51 percent. Nasdaq Europe will be under the supervision of the Belgian Market Authority, the Belgian Banking and Finance Commission, and the Belgian Minister of Finance.
