Zurich bourse awaits results of merger talks

The Swiss stock exchange is awaiting the outcome of merger negotiations between its competitors in London and Frankfurt. The German bourse is keen to have the merger agreed before a shareholder meeting on May 4.

The Swiss stock exchange is nervously awaiting the outcome of merger negotiations between its competitors in London and Frankfurt. The discussions have entered a crucial phase, with the German bourse keen to have the merger agreed before shareholder meeting on May 4.

Analysts say the partnership, if it happens, will probably see blue chips traded from London with new technology stocks based in Frankfurt. The Neuer Markt has seized the imagination of German investors in a way yet to be matched by London’s AIM or techMARK.

Officials say the deal is now more likely since the exclusion of clearing and settlement from the merger. London was afraid of appearing as the junior partner if clearing and settlement had been included.

Part of Frankfurt’s strength comes from its 50 per cent holding in the settlement house, Clearstream. It also has a 50 per cent share with the Swiss Exchange in Eurex, which claims to be the world’s leading derivatives exchange. It is unclear how the merger will affect the Swiss Exchange’s involvement in Eurex.

Analysts say a merger between Frankfurt and London would further undermine Zurich’s reputation as an independent financial centre, especially as it would closely follow the merger of exchanges in Paris, Amsterdam and Brussels.

“It’s clearly strong competition,” says Herbert Fritschi of the Zürcher Kantonalbank. “I think many of our blue chips will eventually be traded on the new exchange, and that will draw volume away from Zurich. We’ll just have the small and medium caps.”

There are still some hurdles for Frankfurt and London to overcome, however, and the merger could still collapse. But analysts say the trend towards bigger trading platforms is unstoppable and that Zurich would do well to consider a merger itself:

“We should join the biggest exchange,” says Fritschi. “It would be the best thing because there is increasing specialisation around Europe. The small and medium caps will be traded at the national level and the blue chips will be traded on the bigger board.”

by Michael Hollingdale