OM Group, the Swedish technology company that owns the Stockholm exchange, has been busy over the past few months on a number of fronts. While its bid for the London Stock Exchange grabbed most of the headlines, events closer to home may prove more relevant in the long run.
The LSE bid came to an end, at least for 12 months, in November. Despite offering a 30% premium over the LSE share price, the bidders did not receive the “rush of acceptances” predicted in the final week of the bid. Rather they won over only 6.7% of the shareholders. Per Larsson, the dynamic OM chief executive, expressed his disappointment, but claimed that OM had won the rational argument. “It shows LSE shareholders need more time to decide the future,” he said.
Despite not ruling out a further bid in a year’s time, Larsson accepts that the LSE will probably have moved on by then. Instead, the group is likely to concentrate on its core business, providing technology for exchanges and developing other projects such as Jiway, a cross-border stock exchange, and Norex, the alliance of northern European exchanges.
On October 17, 2000 the board of the Oslo Stock Exchange approved the agreements on full membership with the Norex Alliance. The alliance, whose other members are the Copenhagen Stock Exchange, Iceland Stock Exchange and OM Stockholm Exchange, aims to create a liquid and cost-effective marketplace for trading in Nordic securities. It consists of independent exchanges sharing the same trading system and a common regulatory framework. With the Oslo Stock Exchange, almost 80% of Nordic equity trading will be accessible via the Norex Alliance’s system.
This is a timely move by the Oslo board, in a year that has seen the general index of the exchange rise modestly, indicating that a lack of liquidity may have been a problem. This is in stark contrast to the situation in Denmark. Last month the Copenhagen exchange announced new all-time highs on the equity market. With turnover of DKK85bn (E11.4bn), the value of average daily trading amounted to just under DKK4bn and the KFX index reached new highs.
This resulted in an average daily trading volume of DKK 3.9bn, a 3% more than in the previous record month of September. The value of total equity trading in October amounted to a record DKK85.3bn, slightly higher than the previous record of DKK 85.1bn set in March at the height of the high-tech boom.
KFX shares posted turnover of DKK66.0bn, accounting for 77% of the total turnover. GN Great Nordic was the most actively traded share with a turnover of DKK10.2 bn. Then followed Novo Nordisk with DKK 8.9 billion, and TeleDanmark, with a trading volume of DKK 8.0bn.
The KFX high of 354.08 announced at the end of October was the 37th all-time high of an extraordinary year. The rise over the month amounted to 1.5% and, compared with the end of October 1999, the index had risen by 53%.
Meanwhile, the KFMX index, comprising small and medium-sized companies, and the KVX Index, covering growth and tech stocks, both reached all-time highs on October 6, closing at 1,305.17 and 1,038.6 respectively.
There were some startling performances, notably RealDanmark, which rose by 98.3% compared with the end of September, primarily as a result of the announcement of the merger with Danske Bank, which rose by 19.3%. NKT Holding, Group 4 Falck and Tele Danmark fell the most over the month, by 18%, 13% and 10% respectively.
Renewed activity in the financials sector means that Jyske Bank will re-enter the KFX index. Another significant change will see i-Data International replace Navision, which will join the KVX Index on December 18.
Unsurprisingly, this frantic activity has had an effect on the bond market. Trading in Copenhagen amounted to DKK506.2bn in market value, corresponding to an average daily trading value of DKK23bn, 12% lower than in September. Nevertheless, compared with October 1999, this still represents an increase in volumes of 12%. At the end of October 2000, the volume of bonds in circulation amounted to DKK1,913bn in market value, which was almost the same as in September. In nominal terms the figure was DKK1,980 bn.
While the creation of Norex reflects consolidation activity elsewhere in Europe, and should lead to increasing trade volumes and liquidity, the exchange that is set to produce the most improved results for this year is still stubbornly working outside the alliance.
Despite being assiduously courted by Norex, the Helsinki Exchange still prefers to plough a lonely furrow. There are any number of reasons for this, but perhaps the most significant is the role of the euro. This is certainly the view of the independent Finnish Foundation for Share Promotion, which finances its activities with the rent it receives for the stock exchange building in Helsinki. It was created in 1985, with a remit of promoting share ownership and the effective functioning of the stock market.
Nina Tallberg, vice-president of the foundation, says: “Norex tends to portray the situation as the exclusion of the Finnish exchange, but in fact the exchange has been courted by them for some time. We believe that Finnish interests would be best served by an alliance with Frankfurt, however, as we are part of the Euro-zone and Stockholm and Copenhagen are not.”
As a sign of their desire to embrace a wider pan-European view of the future, the board of directors of Helsinki Exchanges Group Ltd OY announced at the beginning of November the adoption of the euro within the exchanges.
Perhaps more significantly, at the same extraordinary general meeting the shareholders resolved to change the group from a private limited company to a public limited company. Because of the proposed change of the company form, the EGM of shareholders resolved to change the name of the company to Helsinki Exchanges Group Oyj. Option rights were also tackled at this meeting, and the personnel of Helsinki Exchanges Group will benefit from these, as will those of its wholly owned subsidiaries.
The EGM took place just a day after the launch of an online trading platform for brokers, through HEX’s electronic distribution arm eHEX. Finnish brokerage Conventum Pankkiiriliike was the first to adopt the platform. This represented another step towards making Helsinki an attractive partner for major European exchanges.
The eHEX Broker Platform allows brokers to outsource the development and maintenance of their online trading platforms. It will be fully integrated with the broker’s internet pages and thus the layout and the links to the broker’s other internet services will be customised so that the eHEX platform fully supports the broker’s brand. It includes access to the HEX equities market as well as the Eurex derivatives market from the beginning of 2001. New versions, with additional services, will be launched regularly.
The platform uses the eHEXpay transaction payment service, through which the user can select several trades and settle them with a single payment. The payment transaction is automatic. Its speed, however, depends on external constraints, such as the broker’s back office system and the service provided by banks. EHEXpay is integrated with the web payment systems of several Finnish banks – Merita-Nordbanken, OKO and Leonia.
All this activity has taken place against the backdrop of an extraordinary year. Back in June, after just five months trading in 2000, the Helsinki exchanges announced that the All-share index had gained 10.27%. This was on the back of the announcement that the cumulative equity turnover at Helsinki Exchanges as at June 2 – E105.1bn – had exceeded the total posted during the year of 1999.
The All-share index that day rose by 10.27%, breaking the record set in 1998. It closed at 17,458.88, driven by the telecommunications and electronics sector. Five months later the 158 companies listed on the HEX, which have a capitalisation of E325bn, had produced turnover of E190bn, meaning there is a possibility that this year’s turnover could be double that of 1999. While it should be pointed out that one company, Nokia, represents a fraction over 70% of the capitalisation of the HEX, this is still an extraordinary performance.
With OM bruised by what is seen as its failed bid, rather than a successful defence by the LSE, it will be interesting to see whether it revives its overtures to Helsinki. Certainly the addition of this market would only enhance Norex. If so, it may find the Helsinki members just as difficult to persuade as their London counterparts, but for different reasons. Compared with London, the members in Finland seem to know exactly where they are heading, and exactly what they want from any future merger or alliance.
On the whole, however, the future looks bright for the Nordic exchanges, and further consolidation with European partners seems inevitable.

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