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AEX: the filling in the sandwich?

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The major talking point in Amsterdam over the past few weeks has been the likely effect of the merger with Brussels and Paris announced last month.
But meanwhile, the tech revolution has sparked a host of tulip analogies, and Amsterdam may well be knee- deep in them.
Raymond Salet, spokesman at the Amsterdam Exchange (AEX), confirmed that the timetable set out at the London press conference in March is being adhered to. “We have formed, together with Paris and Brussels, a steering committee and several working groups and have also hired a consultant agency Bain & Co who will make a business plan and a description of the new organisation.” He went on to confirm that despite the merger, and hints at talks with the London stock exchange and Liffe, that AEX remained committed to the European Alliance.
Salet is confident that there will be minimum disruption for members both in terms of the internal reorganisation and technical changes. At market-makers Van der Moolen in Amsterdam, Casper Rondeltop agrees. “The individual stocks will be listed on each exchange so far as I understand, and so I do not think there will be a slowdown of interest prior to the completion of the merger,” he says.
Rondeltop does, however, have his doubts about the efficacy of the merger, in particular from the Dutch viewpoint. “I think from the Belgian standpoint it makes perfect sense. The Brussels exchange has had a difficult time recently, and has performed very poorly of late. Due to other mergers across Europe and increased competition from other exchanges, they had few stocks left, and so for them this merger is good news. On the other hand AEX is not in that position and we will have to wait to see the business plan to decide whether it is such a good idea for Amsterdam.”
Although the London stock exchange and Liffe have been approached to join the merger, there have not been many encouraging noises made from those quarters. Rondeltop believes it will be hard to attract a big player to the new exchange. “In Holland we have a saying, ‘Three little mice don’t make an elephant’. It is going to be difficult if they cannot get London or Frankfurt on board, and that is not going to be easy as they have already chosen the technology for the trading platform. At the press conference they said that whoever joins must adopt that platform, and I doubt that one of the bigger guys will do that.”
Certainly of the three exchanges involved in the merger, Amsterdam has been the one to perform well over the past six months, even if progress has been a little volatile. “The last six months has been very good with the index climbing from the low six hundreds to peak at around 685,” says Rondeltop.
“But it has been pretty volatile. This has been as a result of more tech stocks joining the index, and we have seen the AEX moving parallel to other European exchanges. The only other sector to outperform was probably telecoms.”
This volatility is making predictions difficult. While investors are moving out of tech stocks and back to more traditional sectors, Rondeltop fears this may simply make tech stocks more attractive again and result in a turnaround for the sector.
The other major impact of private investor interest in dot.coms has been something of a meltdown in derivatives. “The derivatives market has been a bit slow here in the Netherlands as private investors look to new tech IPOs rather than investing their money in options.”
Arjan Zwaan at Amsterdam-based market-makers IMC confirms the derivatives market has slowed down a little, being as much as 10% down on the year, but says volumes remain substantial. “Interest in index options have decreased a little bit, but that is because premiums have gone up, meaning private investors have to have substantial sums available to be active in this market.” He confirms that the re-launch of the Euro Top 100 has not been a success, and has suffered in comparison with Eurex’ Euro STOXX which has been far more liquid. “Our main concern remains volumes and we just hope that we see present levels at least maintained, and hopefully increasing slightly.”
He believes, however, that the merger is adding to the uncertainty in the market. “The press conference in London, which itself was a strange choice of venue, did little to dampen speculation. Although it was claimed that they were talking to the London stock exchange and Liffe, we read now that London is talking to Frankfurt again. This only adds to uncertainty, and makes it difficult to draw any conclusions from the developments,” says Zwaan.
The theme of the market’s volatility is picked up by Jen Dobber at another Amsterdam market maker Optiver. “There is a lot of activity in the big caps, such as Royal Dutch/Shell, Unilever and Ing, but in small and mid caps not a lot is happening. The gap is closing a bit between them but it is still pretty wide.” He remains optimistic about the next few months, and believes that the merger represents the best scenario for Amsterdam. “We are going to be part of a bigger international network, instead of a “possible” larger network, the Alliance. I do not see how these two projects can work together, despite the assurances from the AEX that they remain committed to the Alliance. When the business plan is published we will be looking at it closely to see how these views are reconciled,” he says.
Nonetheless, Dobber believes that the merger will attract international investors to Amsterdam and spur interest in its products. “We will also see the development of genuine electronic trading which will obviously be a good thing.”
The problem for AEX seems to be that it is the filling in the sandwich which is the projected merger. Paris is happy to expand its influence at low cost, Brussels is delighted to have a leg up; but where exactly does that leave Amsterdam? Both market makers and investors will be looking closely at the business plan, and hoping that this spring’s bulbs grow to fruition.

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