Europe can attract more stock trading with fewer, better markets

{"text":[[{"start":3.84,"text":"Europe’s stock markets have a problem. Shares in the region’s companies change hands about half as much as comparable US groups. Fewer buyers and sellers mean slower trades, fewer traders judging what something is worth, and less competition for market makers to offer the best price, widening the gap between bids and asks. That makes investors less keen to participate, and companies less likely to list in Europe in the first place. There is, thankfully, a way to make things run better."}],[{"start":32.2,"text":"A good start is to have fewer exchanges: European companies can list on 35 bourses and can be traded on more than 40. Professional traders can access them all via one screen, but fragmentation still brings costs and complexity. There is a strong case for merging European stock exchanges, an idea raised again this week by Euronext chief Stéphane Boujnah, who said he would be open to a “big bang” deal with rival Deutsche Börse."}],[{"start":57.92,"text":"Merging two bourses — say, Paris and Amsterdam — doesn’t create liquidity on day one. It simply lumps together all the trading that was already happening before. But it does broaden the horizons of analysts and investors used to focusing on their home market. That, in turn, could encourage more investment, more listings and so on. There is plenty of scope for that: US households invest more than 2.5 times as much of their wealth in the stock market as Europe’s."}],[{"start":83.92,"text":"Second, bigger exchanges can invest in better technology, which would help them to compete more effectively with alternative trading venues such as Cboe Europe, or even private trades between banks and their clients. In Europe, these alternatives, which can offer lower fees and spreads and facilitate easier big block trades, now account for 70 per cent of all stock trading. In the US, they account for 45 per cent, Oliver Wyman estimates."}],[{"start":null,"text":"

"}],[{"start":109.2,"text":"Third, a bigger European exchange could better woo US investors seeking to diversify from the tech-centricity of their own markets. The so-called Magnificent 7 now make up about a third of the S&P 500 index. Combine two or more local bourses and a US investor would only need to acquaint themselves with one new set of trading rules and conventions to get access to lots of companies."}],[{"start":131,"text":"For this to work, stock trading needs to be truly seamless across the merged bourses. That means mashing together not just the trading, but also the clearing and settlement systems that ensure that stocks and money actually change hands. Currently, there are almost as many as there are trading venues, and a German investor pays more for clearing when they buy an Italian stock than a domestic one. European post-trade costs can be up to twice as high as in the US, think-tank New Financial finds."}],[{"start":159.9,"text":"The loftier dream of “capital markets union” — where European companies and investors enjoy a single bloc-wide standard for issuing and trading securities — remains a pipe dream for now. Europe will remain a hodgepodge of national trading rules, tax regimes, opening hours and languages, of course. But even a handful of mergers would give the continent a better chance of building liquidity. Fewer is definitely more."}],[{"start":187.38,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1789708768_4881.mp3"}