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The Prospects for Nasdaq's European Invasion It'll be a battle royal among competing exchanges -- but that's all to the good of Corporate Europe Nasdaq's Nov. 5 announcement that it plans to create a pan-European stock exchange by the end of next year dramatically raises the stakes in the battle for Europe's bourses. The move into Europe follows the creation of Nasdaq-Japan in June and is part of the exchange's vision of a global, Internet-accessible trading system. "We expect Nasdaq-Europe to become the IPO market of choice in Europe and an important contributor to job creation and economic growth for the region," says Nasdaq Chairman and CEO Frank Zarb. By using next-generation technology to underpin its new trading system, Nasdaq foresees a time in the near future where global markets move to 24-hour seamless trading. Still, Zarb believes Nasdaq-Europe will be able to undercut the trading costs of other local exchanges through improved technological efficiency. If successful, both Nasdaq and Europe stand to gain. The creation of a more liquid, transparent market would be a serious milestone in the development of Europe's nascent equity culture. With the Internet revolution just beginning in Europe, there's a huge number of new high-growth companies looking for places to list. European companies, long starved for capital, will have a new source of financing. And European investors will have potentially greater access to high-growth IPOs as well as European, Asian, and American blue chips. FLUID SITUATION. But the battle is far from over. European exchanges have struggled to form a unified market for months, and they're not likely to surrender their home ground easily. Nasdaq's launch is still a year away. In the meantime, the situation is fluid, since no one exchange today dominates Europe. Who emerges triumphant will depend upon the trading costs, liquidity, and visibility offered by each of the exchanges. Europe's exchanges could strike back with an announcement of their own. And an even more serious challenge could come from alternative exchanges such as Instinet. If these exchanges can generate serious volume in the coming year, Nasdaq may not emerge the early leader in Europe (see BW Online, 10/29/99, "Germany's Neuer Markt May Be the Exchange to Beat in Europe"). At least publicly, Nasdaq is quick to stress its desire to work with, not against, Europe's "venerable institutions." As a result, Zarb says the exchange is talking to a broad number of financial institutions and firms, including rival European exchanges, about potential partnership opportunities. Nasdaq's 28-year track record in the U.S. and its marketing muscle, have already helped it attract big-name partners such as Japan's Internet powerhouse Softbank, and the venture-capital arms of France's Vivendi and Rupert Murdoch's News Corp.'s ePartners. In addition to putting up an undisclosed amount of equity in the Nasdaq-Europe joint venture, both Murdoch and Vivendi Chairman Jean-Marie Messier say they want to be the leading issuers of IPOs on the exchange. "It's high time other capital markets around the world have access to the kind of capital found in the U.S.," says Murdoch. Creating a more competitive European market is a step in the right direction. By Kerry Capell in London EDITED BY DOUGLAS HARBRECHT _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ |
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