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has already tucked Euronext (the pan-European bourse which encompasses Paris, Amsterdam, Lisbon and Brussels) under his formidable belt. Now he wants to make that merger sweat by conquering the rest of Europe and the Far East, which he reckons can be done best from the French capital.
As head of a new global listings bureau, Kinney’s task is to halt the flow of overseas companies coming to the London Stock Exchange, wooing them instead to NYSE–Euronext’s Big Board. It won’t be easy. Apart from LSE chief Clara Furse’s recent coup in taking over the Borsa Italiana, London has outperformed the NYSE over the past two years as the venue of choice for foreign stock market floats, both in the number of IPOs and in the volume of capital raised. Last year, the LSE came second in the world after Hong Kong by raising 14 per cent of all new capital, compared with the NYSE’s 10 per cent and Euronext’s 7 per cent. Listings provide a big chunk of exchange revenues, as well as adding new liquidity, so they are crucial to success. London now has more than 650 overseas companies listed — the LSE is a particular hit with the Russians and the Chinese — while the NYSE has only 437.
Not everyone blames the US’s draconian Sarbanes–Oxley corporate governance code for the downturn. Even Thain, a fierce critic of the tough post-Enron US rulebook, accepts that a combination of ‘Sarbox’, as it’s known for short, plus competition and class-action suits, has made companies nervous about listing in the US. He has taken on his own regulators, arguing that times are grim when only one of the top 25 companies to list globally last year came to the US. Nor is it only foreign companies that have shunned US exchanges: last month a small Oregon-based fuel-cell company floated in London rather than at home, citing heavy-handed regulations.
Thain’s decision to make Kinney his ambassadress, working closely with his deputy Jean-François Theodore in Paris, shows just how serious he is about challenging London’s supremacy. She takes with her to Paris a crack team of Big Board listing experts who will market the exchange’s wares to companies in the Americas, China, India and the rest of Europe, spreading the word that Paris is the place to be.
Kinney’s message is that the new exchange offers the biggest liquidity pool in the world, access to four of the world’s biggest securities markets — NYSE, NYSE Arca, Euronext and Alternext — and a multitude of tradeable products. Working more closely with Asia is a priority and the NYSE has just been given the go-ahead for a representative office in Beijing, which controls the Shanghai and Hong Kong exchanges. Kinney explains: ‘We really are at the beginning of creating a truly global marketplace and this merger is the first step towards achieving that. Companies listing here in Paris will eventually have access to other, cross-border products. There is a growing acceptance that there will be harmonisation of regulatory regimes for exchanges and their customers.’
Early fears that the NYSE merger would export Sarbox to Europe are unfounded: ‘Quite the reverse,’ she claims. In fact, having an alternative listing venue to the US was one of the drivers of the deal: it is transatlantic mergers such as NYSE-Euronext and the more recent one between Deutsche Börse and the International Securities Exchange which are forcing the pace of change.
Only a few weeks ago the US Securities and Exchange Commission hinted that it will look at introducing a new regime of ‘mutual recognition’ with other global financial watchdogs. Kinney wants mutual recognition of registration so that listings can be harmonised, allowing cross-border investors greater transparency. Talks are already taking place between the SEC and the College of Regulators, which overseas Euronext, about further harmonisation. For the first time, the SEC is also considering allowing the trading screens of foreign stock exchanges into the US, so long as it can secure reciprocity abroad. This is quite a volte-face: the SEC has been traditionally the most protectionist regulator of all, doing its utmost to keep other exchanges out of the US game.
On future consolidation, Kinney echoes Thain’s view that a few big multi-product global exchanges will dominate, but that they will vary hugely in product diversity and geography. Project Turquoise, a group of investment banks led by Goldman Sachs which plans to spoil the monopolies of the exchanges, is dismissed as a minor irritation. ‘There will always be groups challenging the status quo. We have to stay even more focused but these challenges support the case for further consolidation to keep trading costs low.’
While London is the NYSE–Euronext’s main competitor for international listings it may yet also prove to be one of its preferred partners in the scramble for global hege-mony. LSE chief executive Clara Furse has pulled off a clever tactical move by acquiring the Borsa Italiana, adding a third to the LSE’s size and an important European bond-trading business.
But it is not the life-transforming deal that will ensure London survives as one of those big global players. Having brilliantly outwitted at least five suitors — including several overtures from Euronext — Furse still has Nasdaq holding a 22 per cent stake and snapping at her heels. NYSE–Euronext is the obvious buyer of the stock if Nasdaq becomes a seller. Kinney did not want to comment on that possibility, but it’s bound to cross her mind as she gets her feet under her new desk in the rue Cambon.
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