Stock Exchange Integration around the World

Transcription

1 Stock Exchange Integration around the World YICGG nd Edition Global Governance: Growth and Innovation 2020 August 20th, Roma

2 Some Detail on the Recent Past In the recent past the integration within stock exchanges happened in USA as well as in Europe: In Europe: Euronext group(exchanges: Parigi, Amsterdam, Bruxelles, Lisbona,and Liffe) Omx (Stoccolma, Helsinki, Vilnius e Tallin) Failed aggregation within Euronext, Deutsche Borse, Borsa italiana. At the same time in United States: Nyse bought Archipelago Nasdaq englobed Instinet Atlantic Bridge was built with the deals between Euronext and Nyse, Nasdaq and Omx, plus Nasdaq on LSE.

3 The Global Context If we look at the US stock exchange market we can easly conclude that it is hard that two exchanges (i.e. Nyse e Nasdaq) with the same caracteristics can coexist. The presence of economies of scale and scope from the supply side and networking from the demand side lead to a monopolistic equilibrium where winner takes most. In Europe, nevertheless the Euro area, the harmonization path is not taking-off. The monopoly power, at national level, is still higher whist the competitive pressure (in the Area) is low. Rarely in the national exchange, stocks listed in other market are traded (the dual listing phenomena is marginal)

4 Vertical and Horizontal Integration The two side of integration in the stock exchanges are: vertical integration and horizontal integration. These two sides are important for the following reasons: Horizontal: Networking effect that is generated in the Trading and in the Post-trading (i.e. clearing, settlement and custody) Vertical No mark-up in each step Higher technical efficiency within one step and another To limit the competition in the Trading and Posttrading services

5 Vertical and Horizontal Integration Horizontal Networking positive externality High volumes lead to high liquidity High concentrated trade activity affects price efficiency Low transaction costs Limits on market contestability The US experience shows that it is possible to have more than one market facing each other that generates a liquidity pool using: i) technology, and ii) arbitrage Vertical To limit competition of other intermediaries in the Trading (monopoly power in the cost of trading fee and barriers from the trading to the post-trading) To limit the competition of other intermediaries in the Post-trading (the clearing and settlement must be perfectionated in the same ownership structure)

6 Evidence from the Data Three Empirical Cases: 1. NYSE-Euronext; 2. NASDAQ-OMX; 3. Tentative of LSE on NASDAQ.

7 Numbers are Numbers June 2007 Before After Exchange Market capitalizzation (billion US$) Exchange Market capitalizzation (billion US$) NYSE 16,604 NYSE- EURONEXT 20,844 TOKIO 4,681 NASDAQ-OMX 5,472 EURONEXT 4,240 LSE-BORSA ITALIANA 5,137 NASDAQ 4,182 TOKYO 4,681 LSE 4,037 HONK KONG 2,028 HONK KONG 2,028 TSX 1,981 TSX 1,981 BORSA TEDESCA 1,956 BORSA TEDESCA 1,956 SHANGHAI 1,693 SHANGHAI 1,693 MADRID 1,520 MADRID 1,520 AUSTRALIAN SE 1,355 Source: World Federation of Exchanges, Focus n.173 (July 2007)

8 .From a Different Point. June 2007 Before After Exchange # OF COMPANIES (FOREIGN) Exchange # OF COMPANIES BOMBAY 4,842(0) BOMBAY 4,842 TSX 3,896(59) NASDAQ-OMX 3,936 MADRID 3,447(39) TSX 3,896 LSE 3,273(670) LSE-BORSA ITALIANA 3,569 NASDAQ 3,104(313) NYSE- EURONEXT 3,487 TOKYO 2,425(26) MADRID 3,447 NYSE 2,290(443) TOKYO 2,425 AUSTRALIAN SE 1,896(82) AUSTRALIAN SE 1,896 KOREA EXCHANGE 1,706(0) KOREA EXCHANGE 1,706 INDIA MATIONAL SE 1,264(0) INDIA MATIONAL SE 1,264 Source: World Federation of Exchanges, Focus n.173 (July 2007)

9 Also from this point!!!!!! June 2007 Before After Exchange # of Share traded (X 1000) Exchange # of Share traded (X 1000) NYSE 930,682 NYSE-EURONEXT 1.002,017 SHANGHAI 812,381 SHANGHAI 812,381 NASDAQ 761,065 NASDAQ-OMX 783,676 SHENZHEN 430,086 SHENZHEN 430,086 INDIA NATIONAL SE 434,045 INDIA NATIONAL SE KOREA EXCHANGE 263,807 KOREA EXCHANGE 263,807 BOMBAY SE 194,092 BOMBAY SE 2,425 TAIWAN 91,345 LSE-BORSA ITALIANA 107,591 BORSA TEDESCA 71,825 TAIWAN 91,345 EURONEXT 71,335 BORSA TEDESCA 71,825 Source: World Federation of Exchanges, Focus n.173 (July 2007)

10 NYSE-Euronext Source: Nagni (2007)

11 NASDAQ-OMX Source: Nagni (2007)

12 Pt P t 1 Rocco Ciciretti Correlation Analysis Stock Return = ln P Pt t 1 cov t[ X, Y ] [ X ] [ Y ] Correlation = = 2 var var σ xy σxσy with t = 60,30,15,7,5,3 days

13 NYSE-Euronext around 20/12/2006

14 NASDAQ-OMX around 27/02/2008

15 LSE-NASDAQ around

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