Recently when any overview of the Nordic exchanges has been prepared, the logical starting place is usually Sweden. This is because the OM Group has been one of the most active and high profile organisations in the world of exchanges.
Last year attention focused on the bid for the London Stock Exchange, but this year has been rather different. As for other exchanges around the world, the northern fraternity has had to make some difficult decisions in the face of unusual and harsh market conditions. As usual, OM has proved to be one of the more active and innovative companies.
In perhaps the most significant move to date the company decided it was time to introduce a new organisational structure. The first signs of this appeared in the autumn when the Jiway operation was moved to OM London Exchange. A clearer view appeared in November when it was announced that the organisation would be revamped as of 1 January 2001, and divided into four business areas with Stockholmsbörsen emerging as a separate operational entity. Anna Eriksson of OM says: “This should be a forward move, rather than consolidation, as we attempt to create an OM that reflects our future strategy, and our vision of tomorrow. This will mean concentrating our operations in one sector of OM. We also believe this will increase our competitive advantage, and enable us to take part in the consolidation process across the European exchanges which we believe is inevitable, and under way.”
The operational area will include broker services, energy market solutions, facility management services and financial markets solutions.
Eriksson says that most of OM’s investment in other exchanges, such as Helsinki where it holds 15% is purely investment. “In some it is operational, but such investments are relatively rare.”
However it is dressed up the reorganisation is aimed at yearly cost savings of SEK35m and involves 70 job losses.
Last year Oslo joined the Norex Alliance and this year, in the face of waning activity in line with other exchanges it has been decided to introduce a significant hike in the pricing structure for trading in shares and capital certificates as of the New Year. The reason given by the exchange is that since it became a public limited company earlier this summer its fees have not been in line with “similar” exchanges.
Whilst it is true that as a “not-for-profit” organisation its fees were lower, to suddenly lift them to the levels of Stockholm and Copenhagen is not likely to prove popular with traders. A spokesman for Oslo Børs, as it is now known, says “We are now a public limited company with external shareholders, and are expected to charge commercial market prices for the services offered. The changes to be introduced from the start of next year represent an adjustment towards the level of fees charged by other exchanges. The fees charged by Oslo Børs will still only represent a small proportion of the total costs incurred by investors when trading in shares and primary capital certificates.”
The search for increased revenue has been going on across the Nordic Exchanges as they took a battering over the year. Over in Helsinki Tero Viherto head of investment at Evli Fund Management Company says, “The big picture is that the market has fallen and volumes are down. Looked at that way, if you lose 50% of the transactions and 50% of the value you are left with 25% of the business. To exacerbate matters, international operators are arriving on the scene, and so work is spread thinly.”
His colleague, equity analyst Timo Makela, makes a comparison with last year. “Last year we had a tremendous number of IPOs, and the exchange was one of the best performers in the world. This year has seen exactly the opposite. Hi-tech companies have led the collapse, but Nokia has also been a problem. Obviously as a tech-driven market we have suffered, but to be fair Nokia has got through the year quite well, especially when compared with other large telecoms companies across the world.”
Despite the problems and the events of 11 September, Makela says Helsinki has shown resilience, and recovered quite well in the past few months, aided by the traditional cyclicals of forestry and metals. Along with telecoms these sectors reflect the economy, and although forestry is at a year high, Nokia’s liquidity still dominates sentiment in the market.
One aspect of the exchange’s strategy seems to have backfired. Last year the on-line trading platform for brokers was launched. Hardly anyone has taken it up however, and Makela thinks he knows why. “A lot of people felt that the exchange was entering into an area which was not really its business. That is it should be an exchange.
Many brokerage firms, that had spent their own money on developing on-line systems, were not pleased to see the exchange offering a system to those who had not invested funds,” he said.
In Denmark the exchange has seen falling volumes across the board says the analyst team at Alm Brand af 1792 in Copenhagen. Some single stocks in medicine and banking have bucked the trend, and in the wake of last year’s mergers and take-overs Danske Bank continues to do well. But as in Sweden hi-tech and telecoms stock have seriously affected the market.