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Chapter 19. STOCK MARKETS AROUND THE WORLD. Multiple listings on national markets. e.g. Deutsche B ö rse in 1999: 8:1 foreign:German advantages Diversify, good local `citizen’/publicise guard v. takeover if lower disclosure laws, many customers disadvantages

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chapter 19

Chapter 19

STOCK MARKETS AROUND THE WORLD

multiple listings on national markets
Multiple listings on national markets
  • e.g. Deutsche Börse in 1999: 8:1 foreign:German
  • advantages
    • Diversify, good local `citizen’/publicise
    • guard v. takeover
    • if lower disclosure laws, many customers
  • disadvantages
    • Multiple listing costs (US delisting after Sarbanes-Oxley)
  • arbitrage opportunities (`twins’, inc. Royal Dutch/Shell, 60/40)
  • (Fig. from Bedi and Tennant, Reserve Bank of Australia Bulletin, Oct 2002)
trading costs
Trading costs

Salomon Smith Barney

Broad Market Index

global diversification
Global Diversification
  • when London sneezes, who catches a cold?
  • what variables influence ‘integration’?
london stock exchange lse
London Stock Exchange (LSE)
  • one of world’s 3 largest exchanges
  • largest international equity: more international companies listed, volume traded
  • 1986 ‘Big Bang’: liberalisation; trading floors  OTC…
  • FTSE 100: Stock Exchange Trading Systems: automatically matches orders
  • otherwise: competing market makers display on Stock Exchange Automated Quotations board
deutsche b rse
Deutsche Börse
  • aka Frankfurt Stock Exchange (FWB)
    • world’s 4th largest stock exchange
    • technically, 8 independent exchanges
    • equity trading concentrated in Frankfurt (floor + electronic trading)
  • Market Segments/listing categories
    • first / official trading (strictest requirements)
    • second / regulated market
    • third / regulated unofficial (largest, mostly foreign)
    • Neuer Markt: smaller, growth
  • still has minimum brokers’ fees: pre-Big Bang
tokyo stock exchange tse
Tokyo Stock Exchange (TSE)
  • first section
  • second section
  • ‘Mothers’ for start ups
  • 1998 - financial big bang (Kinyu biggo ban)
    • desire to be competitive
    • and asset bubble collapse (creative destruction?)
  • some other regional markets in Japan
recent european stock market reorganizations
Recent European Stock Market Reorganizations
  • Takeover/merger talks
    • LSE + Deutsche Börse = iX (or doesn’t)
    • Euronext = Paris + Brussels + Amsterdam + LIFFE + Lisbon (single trading environment)
  • European NASDAQ style start-ups:
    • EASDAQ (NASDAQ Europe takes over)
    • Neuer Markt, Nouveau Marche…
  • does consolidating to build liquidity cost competition between exchanges?
  • Computers convert call (batched) markets to auctions
ownership and control of national stock exchanges
Ownership and Control of National Stock Exchanges
  • privately owned, self-regulated; gov’t monitors
    • Canada, Japan, USA (competition); Hong Kong, UK (monopolies); Australia
    • Japan: government approves securities
  • public, quasi-public institutions
    • France, Spain, Italy, Belgium
  • majority of trading done through banks
    • Switzerland, Austria
dealers in major markets
Dealers in Major Markets
  • single specialist System
    • NYSE, AMEX, Montreal, Toronto; Amsterdam’s hoekman not for large trades
  • competitive dealer system
    • e.g. LSE
      • any established firm can deal securities
      • > 10 dealers for actively traded shares
      • full size of block trades hidden by SEAQ system (large institutional traders avoid Toronto, Paris, which disclose more)
stock market indexes
TSE (first section)

Tokyo Stock Price Index (TOPIX): all

Nikkei 225 Stock Average

UK

FTSE 100 (“Footsie”)

France

CAC 40

Germany

Deutscher Aktienindex (DAX): 30 most active of first segment

Others

Hang Seng Index (Hong Kong)

Morgan Stanley EAFE Index

Stock Market Indexes