It's what's on screen that counts
The Irish Stock Exchange sees no threat to its continued existence, despite the predicted demise of smaller exchanges in Europe in the wake of the common currency. What is to be its saviour is technology, according to the exchange's chief executive Tom Healey, in Dublin. Talk about centralisation of activity into one place, whether it is London or Frankfurt, is a bit dated and naive," he argues. "It is the development of the electronic market and the concentration of this on to the screen in front of the dealer, which matters. They do not care where the market comes from. So provided the smaller exchanges, such as Dublin, are pretty nimble and in touch with the market, there is no threat."
What Dublin needs is the ability to network electronically, so as to deliver the market the leading Irish stocks on the same basis as the stocks from elsewhere to the screen the dealer is using. "We believe the market will be concentrated electronically rather than physically centralised," he argues.
Local stock exchanges will be required as the on the spot regulatory authority in each country. "This is not just a defensive stance," says Healey. "We think that exchanges have a positive role to play in bringing about the delivery of the market in a harmonised way. So we welcome the discussions by exchanges as an attempt to harmonise standards in the markets." This is more important in his view than having a harmonised electronic platform. But it is up them to decide correctly where the new market structures are going and make sure that their market participants will come with them. In the first year of the euro, Healey believes it is inevitable that there will be significant movement in the bluechip companies in the Euro-zone, of which there are only a few companies of that stature on the Irish market. "The next layer of companies, those not in the bluechip indices, cannot be ignored after the first year." This is particularly as investors will be building up sectorally based portfolios in the euro-zone, he says. The stock exchange is sanguine on the balance of trade question, as to the extent that outflows by Irish investors rebalancing their portfolios will be offset by inflows by euro-zone and other investors. "It has been a marked feature of the Irish market that is that while the domestic institutions have been moving out strongly, they have been replaced by other players." Judging by recent market activity, the demand for Irish equities seems to be bigger than the supply, he says."