Leading exchanges merge

Huge savings will come from running just one trading system (Deutsche Boerse)

London Stock Exchange and Germany's Deutsche Boerse have confirmed they are to merge, creating the world's second largest stock market.

In a marriage of equals they will be called iX, standing for International Exchanges.

Main points

Merged exchange to be called iX

Headquarters in London

Blue chip stocks traded in London

Hi growth stocks traded in Frankfurt

German Xetra trading system to be used

Tie up planned with Nasdaq

The two exchanges desribed the agreement as a "win, win situation" for investors, issuers and intermediaries, with the end result being greater liquidity and fairer prices.

London Stock Exchange chief executive Gavin Casey, who will step down once the merger goes through, said the plan had been driven by what customers wanted and it would build on the strengths of both organisations.

Nasdaq link-up

Plans by iX to link up with the US Nasdaq exchange in a joint venture to build European growth markets were also confirmed.

Subject to market conditions and consultation, the aim is for all European equity trading ultimately to be undertaken in Euros.

iX statement

Nasdaq chief executive Frank Zarb described the agreement as the first step towards a global marketplace.

Europe has been the missing link in this scenario as Nasdaq already has agreements with markets in Japan, Hong Kong and Sinagapore.

The merger is expected to involve significant rationalisation of both businesses, but not to have a material impact on jobs as most of the savings should come from combining operating systems.

Deutsche Boerse's Xetra trading system will be adopted in London, albeit under a new brand name.

'Open concept'

The merger will create Europe's largest stock exchange by far and is expected to drive the rapid integration of share markets in the European Union.

London traders will have to learn a new system

It will dwarf the newly formed Euronext market, the recently announced merger of the Paris Bourse with the Brussels and Amsterdam stock exchanges.

Werner Seifert, current chief executive of Deutsche Boerse and prospective chief executive of iX, emphasised the "open" nature of the agreement, particularly where other exchanges were concerned.

He said memoranda of understanding had been signed with the Milan and Madrid bourses ahead of the next wave of consolidation.

The terms of the deal include:

• Frankfurt's Werner Seifert will be chief executive
• London's Don Cruickshank will chairman
• Blue chip stocks will be traded in London
• High-tech stocks will be traded in Frankfurt
• The German Xetra electronic trading system will replace London's Sets system.
• Regulation will not change for domestic stocks
• The merger is expected to be completed by autumn 2000

Euro issue

The exchanges said stocks would initially be traded in their home currencies, with a view to moving eventually to an entirely euro-based exchange.

Gavin Casey said it would make sense for all companies on the iX exchange to list in euros in the future.

However, any change in listing would be up to the companies involved and iX would consult extensively with them.

Quoting UK stocks in euros as well as pounds would make them more appealing to European investors.

However, such a move would put pressure on the UK Government to clarify its position on the single currency.