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Published online by Cambridge University Press: 17 February 2009
In the last two decades there have been many examples of co-operation between national stock exchanges in Europe. However, most of these have been cooperation on a very low scale. Starting in 2000, this pattern seems to have changed. Stock exchanges have committed themselves to “alliances”, or even “mergers”, entailing a co-operation which is far more intensive than most former examples of co-operation. In the last couple of years many such alliances have been formed, some have been dissolved, and even more have been considered.
1 Cf. further COM (85) 310, para. 107.
2 Cf. Directive 79/279/EEC, OJ [1979] L 66/21, amended by Directive 82/148/EEC, OJ [1982] L 62/22.
3 Cf. Directive 80/390/EEC, OJ [1980] L 100/1.
4 Cf. Directive 87/345/EEC, OJ [1987] L 185/81.
5 Cf. Directive 82/121/EEC, OJ [1982] L 48/26 and Directive 88/627/EEC, OJ [1988] L 348/ 62.
6 The five directives just mentioned have now been consolidated in one directive, cf. European Parliament and Council Directive 2001/34/EC on the admission of securities to official stock exchange listings and on the information to be published on those securities, OJ [2001] L 184/1. The new Admission and Information Directive does not make any substantial changes to the original directives.
7 Cf. Directive 89/592, OJ [1989] L 334/30.
8 For a critical remark on the method, see Benn, Steil (ed.), The European Equity Markets, The State of the Union and an Agenda for the Millennium (European Capital Markets Institute 1996) 114Google Scholar, and Guido, Ferrarini, “Towards a European Law of Investment Services and Institutions”, 31 Common Market Law Review (1994) 573.Google Scholar
9 For further information on the British regulation and its consequences, see Steil, supra n. 8, p. 4; Marco, Pagano, “The Changing Microstructure of the European Equity Markets”, in: Guido, Ferrarini (ed.), European Securities Markets, The Investment Services Directive and Beyond (Kluwer Law International, 1998) 179Google Scholar; Brian, Scott-Quinn, “EC Securities Markets Regulation”, in: Benn, Steil (ed.), International Financial Market Regulation (Wiley 1994) 124.Google Scholar
10 Cf. Directive 93/6/EC, OJ [1993] L 141/1, and Directive 93/22/EC, OJ [1993] L 141/27.
11 Cf. Benn, Steil, in: Prerequisites for Increasing Nordic and Nordic-Baltic Securities Market Co-operation, TemaNord 1999:576 (a report commissioned by the Nordic Council of Ministers) (Copenhagen: Nordisk ministerråd) at p. 25.Google Scholar
12 Cf. Section 4 below. One of the most controversial subjects in the preparation of ISD was the question of the “concentration provisions”. At that time, some Member States (France, Belgium, and Italy) had provisions requiring listed securities to be traded on the relevant national stock exchange, unless one of the exceptions applies. Other Member States, such as the UK and Germany, did not impose concentration provisions and accepted that investors and investment firms traded off-market. The French delegation insisted that the Member States should be allowed to uphold such provisions, whereas other Member States attacked these provisions on competition grounds. Again, a compromise was found which allowed concentration provisions requiring that certain transactions must be conducted on a regulated market. This compromise means that a Member State cannot demand that the trade must be conducted on a national regulated market, as it is accepted that all regulated markets are equivalent. Furthermore, according to Art. 14 (4), a Member State invoking concentration provisions must give domestic investors the right to authorize transactions on their behalf to be carried out outside a regulated market. Thus, it is obvious that the traditional concentration provisions are not in accordance with ISD. However, on several points, the wording of Art. 14 is vague and it cannot be excluded that the Member States can oppose an erosion of the concentration provisions, cf. Steil, supra n. 8, p. 128, and Guido, Ferrarini, “The European Regulation of Stock Exchanges: New Perspectives”, 36 Common Market Law Review (1999) 569, at p. 585Google Scholar. For a more detailed discussion of this problem, see Houghton, Kerry J., “The Economic and Political Debate Over the Regulation of Off-Exchange Securities Trading in the European Community's Single Financial Market”, 32 Virginia Journal of International Law (1992) 747–782Google Scholar, and Steil, supra n. 8, at p. 116.
13 Further, in 1998 the EU enacted a directive on settlement finality in payment and the securities settlement system – the so-called “finality” Directive. The aim of the directive is to contribute to an efficient and cost-effective operation of cross-border payment and securities settlement arrangements within the EU. The regulations of the Member States will minimise the disruption to settlement systems caused by insolvency proceedings against a participant in the system. See further Section 6.3.
14 Cf. COM (1999) 232.
15 The latest proposal for a takeover directive was a “framework” directive setting up certain minimum rules for the Member States' regulation of public takeover bids and the protection of minority shareholders in connection with the transfer of control in listed companies. The directive has been pending as a proposal since the end of the '80s, but on 4 July 2001 the European Parliament rejected the directive by a draw vote (273/273). However, it is expected that the Commission will put forward a new proposal in 2002/2003 based on the proposals from the High Level Group of Company Law Experts that submitted its report on issues related to takeover bids on 10 January 2002.
16 These proposals will improve the mobility of companies and it must be assumed that the European securities market will be further integrated. The first step in this direction was taken with the Council's adoption of the European Company Statute on 8 October 2001. See Regulation 2157/2000, OJ [2001] L 294/1. For a discussion of the European Company Statute, see Christian, Roth, Is the European Public Limited-Liability Company announcing the European Private Company? (The European Legal Forum 2000) at p. 396Google Scholar; Sorika, Pluskat, “Die neuen Vorschläge für die Europäische Aktiengesellschaft”, Europäische Zeitschrift für Wirtschaftsrecht (2001) 524Google Scholar; Peter, Hommelhoff, “Einige Bemerkungen zur Organisationsverfassung der Europäischen Aktiengesellschaft”, Die Aktiengesellschaft (2001) 279–288.Google Scholar
17 It was understood that the process of harmonisation towards a European securities market should continue. The Action Plan of the Commission was endorsed by the Lisbon European Council in March 2000 and the year 2005 was set for its completion. The Commission has published progress reports which are available on the website of DG XV. The fourth report was published in June 2001, COM (2001) 286.
18 See the Final Report of the Committee of Wise Men on the Regulation of European Securities Markets of 15 February 2002.
19 The new procedure has four levels:
Level 1: Framework principles to be decided by normal EU legislative procedures (i.e., proposal for directives/regulations proposed by the Commission to the Council of Ministers/European Parliament for co-decision);
Level 2: Establishment of two committees, an EU Securities Committee and an EU Securities Regulators Committee (in a format similar to that of FESCO) to assist the European Commission in determining how to implement the details of the Level 1 framework;
Level 3: Enhanced co-operation and networking among EU securities regulators to ensure consistent and equivalent implementation of Level 1 and 2 legislation (common implementing standards);
Level 4: Strengthened enforcement, notably with more vigorous action by the European Commission to enforce Community law, underpinned by enhanced cooperation between the Member States, their regulators, and the private sector.
20 See Gérard, Hertig, “Regulatory Competition in EU Financial Services”, in: Esty, Daniel C. & Damien, Geradin (eds.), Regulatory Competition and Economic Integration (Oxford University Press 2001) pp. 218–240Google Scholar. It is especially the American literature which has analysed this problem. See, in general, Roberta, Romano, “Empowering Investors: A Market Approach to Securities Regulation”, 107 Yale Law Journal (1998) 2359Google Scholar; Steven, Huddard, Hughes, John S. and Markus, Brunnermeier, “Disclosure requirements and stock exchange listing choice in an international context”, 26 Journal of Accounting and Economics (1999) 237Google Scholar; Davis, Charny, “Competition among Jurisdictions in Formulating Corporate Law Rules: An American Perspective on the ‘Race to the Bottom’ in the European Communities”, 32 Harvard International Law Journal (1991) 423Google Scholar; Fox, Merritt B., “Securities Disclosure in a Globalizing Market: Who Should Regulate Whom”, 95 Michigan Law Review (1995) 2498CrossRefGoogle Scholar; and Licht, Amir N., “Managerial Opportunism and Foreign Listing: some direct evidence”, 22 University of Pennesylvania Journal of International Economic Law (2001) 325–347Google Scholar. The USA has a federal body – SEC – which issues stock exchange regulation and, therefore, today there is only a limited possibility of regulatory competition. It has been considered whether the EU should have a similar central regulation body, but so far most scholars reject this idea, cf. the discussion in Scott-Quinn, supra n. 9, at pp. 151-154; Steil, supra n. 8, at pp. 134-136; and Ruben, Lee, “Supervising EU Capital Markets”, in: Buxbaum, Richard M., Gérard, Hertig, Alain, Hirsch and Hopt, Klaus J. (eds.), European Economic and Business Law, Legal and Economic Analyses on Integration and Harmonization (de Gruyter 1996) 187–204.Google Scholar
21 Cf. Nis Jul, Clausen, “Securities markets co-operation: a new regulatory standard in the next millenium”, 21 The Company Lawyer (2000) 43.Google Scholar
22 See further Nis Jul, Clausen, Michael, Møller, Claus, Parum and Karsten Engsig, Sørensen, “Capital Markets and Stock Exchanges in the Baltic Sea Region – Consequences of stock market concentration in Europe for the Baltic Sea Region – How to ensure an efficient and adequate capital allocation as a driver of transition in an enlarged Europe” (www.bdforum.org2000) p. 4 and pp. 9–14Google Scholar. See also Elroy, Dimson, Paul, Marsh and Mike, Staunton, Triumph of the Optimists – 101 years of global investment returns (Princeton University Press 2002) p. 12Google Scholar, showing almost similar figures for the world stock markets at the beginning of 2000.
23 For an account of some of the legal issues involved in the (intended) establishment of iX, see Siegfried, Kümpel and Horst, Hammen, “Zur Genehmigungsfähigkeit eines geplanten Börsenberbundes”, WM (2000) Sonderbeilag 3 zu Heft 40, pp. 3–23Google Scholar; Schneider, Uwe H. and Ulrich, Burgard, “Börsenrechtliche Bewertung einer Einbeziehung der Trägergesellschaft derFrankfurter Werpapierbörse in einen multinationalen Börsenkonzem und dieVerlagerung des Handels in Standardwerten an eine andere Börse”, WM (2000) Sonderbeilag 3 zu Heft 40, pp. 25–45Google Scholar
24 After several bids the OM Group eventually gave up its attempt to gain control of the London Stock Exchange.
25 For a detailed account of the structure of Euronext, see Sandrine, Hirsch and Vanessa, Marquette, “Euronext leads the way for European exchange mergers”, International Financial Law Review (2000) 18Google Scholar; Beckers, Stan H. A. J., Rijckmans, Lucas J. L., Stam, Yvonne T. M. & Storm, Steven E., “Euronext: a Dutch Perspective”, Journal of International Banking and Financial Law (2001) 323.Google Scholar
26 For a further description of the different planned elements of Euronext, see Daan Lunsigh, Scheurleer, “The Netherlands: Settlement and custody of Euronext trades by Euroclear”, International Financial Law Review (2000) 53.Google Scholar
27 In 1999, the Nordic Council published a report which discussed the possibilities for cooperation between the Nordic stock exchanges and the exchanges in Estonia, Latvia, and Lithuania. See TemaNord 1999:576, supra n. 11. For a broader and more critical analysis of a possible co-operation between the stock exchanges in the Baltic Sea Region, see Clausen, Møller, Parum and Sørensen, supra n. 22. In May 2000, the stock exchanges in Estonia, Latvia and Lithuania signed letters of intent to join Norex. The stock exchange in Helsinki (HEX), however, remained outside the co-operation. In May 2001, HEX managed to gain control over the stock exchange in Estonia, and consequently the latter exchange was no longer interested in participating in Norex. Since the stock exchange in Estonia is the largest and most attractive of the three exchanges in the Baltic Sea states, Norex has given up its attempt to include the stock exchanges in Latvia and Lithuania in the alliance.
28 A reference to the standard at the London Stock Exchange is expressly found in connection with the latest revision of the rules on listing and disclosure issued by the Copenhagen Stock Exchange in November 2001.
29 Some stock exchanges may choose a strategy of opposing international competition by relying on their own national strength. The success of such a strategy depends, first of all, on the market strength of the stock exchange and its competitiveness. However, it must be emphasised that after the enactment of the Investment Services Directive there are no effective legal instruments to protect a national stock exchange from being exposed to international competition. For further discussion, see Scott, Hal S., “Regulation of the relationship between European Union Stock Exchanges: Lessons from the United States”Google Scholar, in: Ferrarini, supra n. 9, at p. 292; Steil, in: TemaNord 1999:576, supra n. 11, p. 24; Steil, supra n. 8, p. 129.
30 Cf., e.g., the Danish Governmental Report on the Stock Exchange Reform II, 1995/96 Betœnkning nr. 1290/1995 Børsreform II, vol. 2, p. 28.
31 Deutsche Börse (1993), Amsterdam (1995), Helsinki (1995), Copenhagen (1996), Iceland (1999), and Oslo (2000). Cf., on this development, Marco, Onado, “Competition among Exchanges or Financial Systems?”Google Scholar, in: Ferrarini, supra n. 9, at p. 238; Guido, Ferrarini, “Stock Exchange Governance in the European Union”, in: Morten, Balling, Elizabeth, Hennessy and Richard, O'Brien (eds.), Corporate Governance, Financial Markets and Global Convergence (Kluwer Academic Publishers 1998) 139.Google Scholar
32 Cf. Steil, supra n. 8, pp. 42-43.
33 Recently the Commission has been evaluating whether Eurex, an electronic exchange for financial derivatives set up by Deutsche Börse and SWX Swiss Exchange violated Art. 81 of the EC Treaty. See the notice published in OJ [2000] C 231/2. According to a press release dated 3 January 2001 (IP/02/4) the Commission has approved the alliance by way of a negative clearance comfort letter. Competition law issues were also raised in the planned iX alliance. See further Kümpel and Hammen, supra n. 23, at pp. 18-19.
34 See also Peter, Nobel, “Börsenallianzen und –fusionen”, in: Festschrift für Marcus Lutter zum 70. Geburtstag (Köln 2000) 1485, at p. 1509.Google Scholar
35 Cf. Steil, supra n. 8, p. 63.
36 When the Copenhagen Stock Exchange was turned into a public limited company in 1996, all the shareholders (being the existing members and listed companies of the stock exchange) signed a shareholders' agreement which, among other things, contained mutual pre-emption rights. This agreement was in force until the end of 2001, and therefore, during this period the stock exchange could not be taken over. It is most likely that this agreement was entered into in order to prevent the Swedish OM from buying shares in the Copenhagen Stock Exchange with a view of merging the stock exchanges in Stockholm and Copenhagen.
37 It should be noted that, within Norex, the participating stock exchanges apply different procedures for the disclosure of information from companies. While the Copenhagen, Oslo, and Iceland Stock Exchanges require disclosure through the information system of the exchanges, the disclosure obligation of the Stockholm Stock Exchange is satisfied by disclosure through the daily press. So far, these differences have not been considered a problem in relation to the cooperation.
38 Cf. Ruben, Lee, What is an Exchange? The Automation, Management, and Regulation of Financial Markets (Oxford University Press 1998) 61.Google Scholar
39 Cf. Steil, in: TemaNord 1999:576, supra n. 11, p. 26, with respect to Norex, but at the same time pointing out that a similar effect could be achieved by other kinds of cross-border alliances.
40 Cf. Lee, supra n. 38, at p. 71. There are also some more recent examples of alliances based on cross-border listings. See further Peter Nobel, supra n. 35, at pp. 1507-1509.
41 For further discussion, see Nis Jul, Clausen and Karsten Engsig, Sørensen, “The Regulation of Takeover Bids in Europe: The Impact of the Proposed 13th EC Company Law Directive on the Present Regulation in the EU Member States”, 1 International and Comparative Corporate Law Journal (1999) 169, at pp. 211–217Google Scholar; Jan, von Hein, “Grundfragen des europäischen Übernahmekollisionsrechts”, Die Aktiengesellschaft (2001) 213–232.Google Scholar
42 Cf. Steil, supra n. 11, p. 28.
43 Cf. Directive 98/26/EEC, OJ [1998] L 166/45.
44 A further attempt to harmonise this area has recently been undertaken by the Governing Council of the European Central Bank and the Committee of European Securities Regulators, that agreed to conduct a joint study intended to lead to the establishment of standards and recommendations for securities settlement systems. See press release dated 25 October 2001 (01-021b).
45 Cf. Steil, supra n. 11, p. 29. See also Licht, Amir N., “Stock Market Integration in Europe, CAER” (Discussion Papers, January 1998, on file with the authors) p. 61.Google Scholar
46 See Steil, supra n. 11, p. 29, discussing S4 and possible reasons for it failure.
47 Cf. Rüdiger, von Rosen, “Europas Börsen im Binnenmarkt”, EuZW (1993) Heft 1 at p. 26.Google Scholar
48 Cf. Licht, supra n. 46, at p. 52, mentioning that the problem primarily concerns internationally oriented stock exchanges such as EASDAQ.
49 Contrary to this, in the United States an extensive convergence of rules has been achieved through the common regulatory body, SEC, which issues or approves most of the regulation relevant to the securities markets. On the American development and the possible lessons for the EU, see Scott, supra n. 29, at p. 283.
50 Such a solution is advocated by Benn, Steil, Competition, Integration and Regulation in EC Capital Markets (Royal Institute of International Affairs 1994) at p. 225.Google Scholar
51 Cf. IOSCO Resolution Concerning the Use of IASC Standards for the Purpose of Facilitating Multinational Securities Offerings and Cross-border Listings (May 2000).
52 See the proposed regulation, COM (2001) 80.
53 See Schneider, Uwe H., “Internationales Kapitalmarktrecht”, Die Aktiengesellschaft (2001) 269–278, at p. 270.Google Scholar
54 Cf. the report of the Technical Committee of IOSCO, “Supervisory Framework for Markets” (May 1999) p. 12.
55 Cf. Carlo, Biancheri, “Cooperation among Supervisory Authorities under the ISD”Google Scholar, in: Ferrarini, supra n. 9, at p. 363; Gérard, Hertig, “Regulatory Competition for EU Financial Services”, in: Esty, Daniel C. and Damien, Geradin (eds.), Regulatory Competition and Economic Integration (Oxford University Press 2001) 218–240, at p. 238.Google Scholar
56 See Avgerinos, Yannis V., “Towards a Pan-European Securities Market for SMEs: the Easdaq and Euro. NM Models”, European Business Law Review (2000) 8, at p. 20.Google Scholar
57 On these agreements, see Susanne, Bergsträsser, “Cooperation between Supervisors”Google Scholar, in: Ferrarini, supra n. 9, at p. 376.
58 For a review of IOSCO's different initiatives, see Annette, Althaus, “Principles of Cross-Border Supervision: The Swiss Approach to Enhanced Co-operation in International Financial Services Supervision”, 1 International and Comparative Corporate Law Journal (1999) 125–168.Google Scholar
59 See COM (99) 232, pp. 11-12.
60 Cf. von Rosen, supra n. 47, at p. 27.
61 Some of the problems involved in supervision were considered in the planned iX allience, see Kümpel and Hammen, supra n. 23, at pp. 8-10.
62 Cf. International Market Insight Reports (New York, 3 May 2000).
63 See Beckers, Rijckmans, Stam and Storm, supra n. 25, at p. 327.
64 For an analysis of the problem, see the Commission in COM (95) 498 and Ailsa, Röell, “Competition between European Exchanges: Recent Developments”Google Scholar, in: Ferrarini, supra n. 9, at p. 220.
65 See further Licht, supra n. 46, at p. 52; Avgerinos, supra n. 55, at pp. 14; Santiago Hierro, Anibarro, “The European New Markets For High-Growth Companies”, 2 European Business Organization Law Review (2001) 365, at pp. 398–400.Google Scholar
66 See further Licht, supra n. 46, at pp. 48-52.
67 The importance of local and regional knowledge with respect to markets for growth companies are emphasized by Steil, in: TemaNord 1999:576, supra n. 11, at p. 24.
68 Cf. Röell, supra n. 64, at p. 220.
69 Cf. Röell, ibid., at p. 221. By the beginning of 2001, Deutsche Borse extended its regulation on market transparency to Neuer Markt, referring to the need for equal protection of investors.
70 See the bulletin regarding investor protection in the New Economy, released by the IOSCO Technical Committee, May 2000. For a discussion of the need for special regulation for high-growth companies, see Hierro Anibarro, supra n. 64, at pp. 390-393; Stephen, Copp and Bill, Maughan, “Innovative high growth companies: the case against special rules”, 22 The Company Lawyer (2001) 234–243.Google Scholar
71 Cf. Steil, supra n. 8, at p. 60; Onando, supra n. 31, at p. 230.
