Last month saw what could be one of the most significant events of the year, when EASDAQ finally launched its dual trading facility on January 19.
The plans for dual trading were announced in June last year when EASDAQ chairman Stanislas Yassukovich said: “This marks a major step forward for EASDAQ. We intend to become the leading trading platform in Europe for international growth and technology stocks.” It has taken some time, however, for the plans to come to fruition.
Nevertheless, last month saw the first shots fired in the upcoming war for supremacy in the European growth stocks markets. Many market-makers believe that if EASDAQ can get this part of its strategy right there is no reason why it should not be able to realise its chairman’s dream of pan-European trading. “EASDAQ is unfettered by national interests or geography, and we can therefore create a truly pan-European trading environment for international trading houses, on-line brokers and institutional and retail investors based on the latest technology,” he said last June. “Market participants want ease of use, efficient execution and settlement at low cost. These factors will drive liquidity.”
Looking back over last year, EASDAQ was affected like almost every other market by liquidity problems during the summer. The third quarter of the year saw the EASI lose virtually all the gains of the first six months. But the last quarter saw a strong recovery, shadowing other indices to finish at an all-time high of 1,495.96, an increase of 87% over the year. The year-end return outperformed both the NASDAQ Composite and the Neuer Markt, with the Dow Jones Industrial Average out of sight.
Justin Wright, a senior NASDAQ trader at Herzog Heine Geduld International in London, says that although EASDAQ includes companies which are listed in the US, there is no doubt that domestic trading is helping to drive the index upwards. Although it has outperformed most markets, it does tend to mirror what is happening worldwide. “In November, as growth stocks began to drive the US market, people realised that some stocks on EASDAQ were undervalued, and this led to a very hectic close to the year.”
The market capitalisation at the end of 1999 of E42.9bn was up from E13.1bn at the end of the previous year, a staggering 227% increase. The number of shares traded climbed 61% to 316m compared with 196m in 1998 and turnover increased 14% to E4.4bn in 1999. Significantly, December saw almost E1bn in turnover with an average transaction size of E44,152. Confirming that it is behaving as a mature market, a small correction at the beginning of trading after the year-end was followed by a period of consolidation.
Typically for this kind of market, software, electronics, IT, biotech and telecoms are the sectors that make up three quarters of the stocks listed, from 12 countries of incorporation. The latter are dominated by the UK, Belgium, the US, France and Austria.
As if EASDAQ needed a further boost, it received one in October of last year when it announced an extension of its private placement round, raising a further E3.2m from existing and new shareholders. This followed on the back of July’s news that a capital increase of E22.8m had been raised against a target of E12m. New shareholders included Knight/Trimark, Morgan Stanley Dean Witter and Goldman Sachs.
The introduction of dual trading, however, is perhaps the most significant development in the short history of the market, especially in the light of NASDAQ’s intention to enter the European fray. Under the system, market-makers can seek admission for a company’s securities to be dual-traded on EASDAQ, without the consent of the company, provided the company meets the requirement of the markets on which it is listed, it releases price-sensitive information on its home market in a manner that can be automatically transferred to EASDAQ, and no capital is raised at the time of admission.
Last month’s launch saw 10 significant companies arrive on EASDAQ. These were Microsoft, MCI Worldcom, Cisco Systems, Dell Computer, Intel, Yahoo!, Oracle, Amgen, Sun Microsystems and Amazon.com. The trading of these stocks will take place alongside traditional EASDAQ IPOs and secondary offerings, within a fully regulated market environment.
“These 10 stocks are just the beginning,” comments EASDAQ CEO Steffen Schubert. “EASDAQ will open its pan-European platform to an expanding list of international securities, allowing investors to use our unique infrastructure to trade stocks from markets across Europe, the US and Israel.”
The new facility is a further step in EASDAQ’s strategy to become the leading market for trading international securities in the European time zone. “Europe needs an integrated market for growth stocks now, to help drive economic growth and competitiveness. We cannot wait years for the national interests of domestic markets to be ironed out,” says Yassukovich.
Wright believes that dual trading should have a major influence, not only on the liquidity of EASDAQ, but on the future prospects of the market. “It is difficult to predict who will come out on top among the organisations aiming to dominate the European time zone. That is why many of EASDAQ’s investors are also involved in other providers, such as NASDAQ, which in turn is involved in cross-ownership. But if EASDAQ can get this latest facility right, given the head start they have there is no reason why they should not be the winners.”