1. Chapter 19 STOCK MARKETS AROUND THE WORLD

2. Multiple listings on national markets ze.g. Deutsche B ö rse in 1999: 8:1 foreign:German zadvantages yDiversify, good local `citizen’/publicise yguard v. takeover yif lower disclosure laws, many customers zdisadvantages yMultiple listing costs (US delisting after Sarbanes-Oxley) zarbitrage opportunities (`twins’, inc. Royal Dutch/Shell, 60/40) z(Fig. from Bedi and Tennant, Reserve Bank of Australia Bulletin, Oct 2002)

3. Trading costs PMI costsEMI costs Countrybid-askvolatilitytotalbid-askvolatilitytotal Canada161329511263 USA131225271340 Australia1361941748 Hong Kong291847432669 Japan141327321648 New Zealand5596450959 Singapore331245521769 France10818281543 Germany991820149169 Italy16824231134 Netherlands841223932 Spain62733181432 Denmark621779 988 Norway251944651479 Sweden321244561369 Switzerland871544953 UK2082870777 Austria2483234539 Belgium191534551671 Finland102131471764 Greece23 46 2571 Ireland81159610419123 Portugal181028173855 Salomon Smith Barney Broad Market Index

4. Global Diversification zwhen London sneezes, who catches a cold? zwhat variables influence ‘integration’? USAFranceUKJapanGermanySwitzerlandCanadaAustralia USA1.000.440.510.290.380.490.710.47 France1.000.540.390.610.600.440.37 UK1.000.360.430.560.500.47 Japan1.000.360.410.30 Germany1.000.670.340.30 Switzerland1.000.440.39 Canada1.000.59 Australia1.00

5. London Stock Exchange (LSE) zone of world’s 3 largest exchanges zlargest international equity: more international companies listed, volume traded z1986 ‘Big Bang’: liberalisation; trading floors  OTC… zFTSE 100: Stock Exchange Trading Systems: automatically matches orders zotherwise: competing market makers display on Stock Exchange Automated Quotations board

6. Deutsche Börse zaka Frankfurt Stock Exchange (FWB) yworld’s 4 th largest stock exchange ytechnically, 8 independent exchanges yequity trading concentrated in Frankfurt (floor + electronic trading) zMarket Segments/listing categories yfirst / official trading (strictest requirements) ysecond / regulated market ythird / regulated unofficial (largest, mostly foreign) yNeuer Markt: smaller, growth zstill has minimum brokers’ fees: pre-Big Bang

7. Tokyo Stock Exchange (TSE) zfirst section zsecond section z‘Mothers’ for start ups z1998 - financial big bang (Kinyu biggo ban) ydesire to be competitive yand asset bubble collapse (creative destruction?) zsome other regional markets in Japan

8. Recent European Stock Market Reorganizations zTakeover/merger talks yLSE + Deutsche Börse = iX (or doesn’t) yEuronext = Paris + Brussels + Amsterdam + LIFFE + Lisbon (single trading environment) zEuropean NASDAQ style start-ups: yEASDAQ (NASDAQ Europe takes over) yNeuer Markt, Nouveau Marche… zdoes consolidating to build liquidity cost competition between exchanges? zComputers convert call (batched) markets to auctions

9. Ownership and Control of National Stock Exchanges zprivately owned, self-regulated; gov’t monitors yCanada, Japan, USA (competition); Hong Kong, UK (monopolies); Australia yJapan: government approves securities zpublic, quasi-public institutions yFrance, Spain, Italy, Belgium zmajority of trading done through banks ySwitzerland, Austria

10. Dealers in Major Markets zsingle specialist System yNYSE, AMEX, Montreal, Toronto; Amsterdam’s hoekman not for large trades zcompetitive dealer system ye.g. LSE xany established firm can deal securities x> 10 dealers for actively traded shares xfull size of block trades hidden by SEAQ system (large institutional traders avoid Toronto, Paris, which disclose more)

11. Stock Market Indexes zTSE (first section) yTokyo Stock Price Index (TOPIX): all yNikkei 225 Stock Average zUK yFTSE 100 (“Footsie”) zFrance yCAC 40 z Germany yDeutscher Aktienindex (DAX): 30 most active of first segment z Others yHang Seng Index (Hong Kong) yMorgan Stanley EAFE Index