This method of sharing risk and reward became widely adopted and as a result, the Amsterdam Exchanges NV was instrumental in forming many of today's Dutch trading companies. A large element of Dutch companies reflect this international background. Many of the larger companies such as Unilever, Philips and Shell became international stocks rather than just Dutch securities.
Outside the equity markets, the Dutch Government, like all its government counterparts around the world, funded a great deal of Holland's economic growth since the war by issuing Dutch Government Treasury Bonds, though the Dutch Government only issued bonds denominated in guilders. The 1980s brought dramatic changes in the trading of international securities on a worldwide basis and the demands of international investors created opportunities and challenges for the operating systems of the Amsterdam Exchanges NV. The Amsterdam hoekman or jobber became unable to satisfy international demands in dealing in large volumes of Government Bonds or in the equities of Amsterdam listed companies. Changes in the stock exchange system in London and elsewhere in Europe resulted in more and more trading in Dutch securities being transacted by dealing systems outside Holland. The Amsterdam Exchanges NV had to upgrade its systems in order to keep control of trading in the securities of Dutch companies, and of Dutch Government Bonds, and is again competing with other world exchanges. It is certain that 1994 will go down in the annals of the Amsterdam Exchanges NV as a particularly outstanding year.
During 1994:
(i) the most fundamental overhaul of the Amsterdam Exchanges NV trading system was achieved without a hitch;
(ii) the biggest Dutch stockmarket introduction was a success with the bourse launch of telecoms group Koninklijke PTT Nederland (KPN);
(iii) the market capitalization of the stock exchange increased by a further 9% to NFL 491 billion, ($280 bn) partly due to an issue volume of no less than NLG40 billion ($23 bn); and
(iv) a new turnover record of NLG 1,160 billion ($663bn) was achieved over and above the previous record year, due particularly this time to a welcome increase in share turnover of 25% to NLG 311.2 billion ($178bn).
Equities
In September 1994 a new equity trading system was introduced called Trading System Amsterdam (TSA). It comprises:
(i) A retail segment, organised as a central market for transactions below the wholesale limit, and managed by a single hoekman who is obliged to quote fixed bid and offer prices to banks and brokers.
(ii) A wholesale segment, in which the banks and brokers can:
(a) trade directly with one another on-screen using the Automatic Interprofessional Dealing System Amsterdam (AIDA); and
(b) announce their bid and offer prices, nationally and internationally, via the [QQ] Amsterdam advertisement screen called ASSET.
The hoekman, has access to both segments and forms the links between them.
ASSET: Amsterdam's Window to the World.
Like SEAQ International, ASSET is a screen-based system set up to display Amsterdam prices to the professional international investors. This system is the window to Amsterdam, allowing banks and brokers to advertise their quotes for specific stocks to potential wholesale buyers and sellers. For wholesale transactions, AIDA is the bourse's computerised dealing system, similar to the IBIS system of Frankfurt. AIDA is order driven, based on the most up-to-date interactive technology.
Theoretically all shares can trade through AIDA, but most likely it is the more active Dutch stocks that will predominate. Jobbers, stockbrokers and clearing members in Amsterdam qualifying for AIDA enter their limited wholesale order anonymously and hit (sell) against an AIDA purchase limit or lift (buy) against an AIDA selling limit any order entered. The wholesale limit is determined separately for each active stock on the basis of market liquidity.
The wholesale limit sets:
(i) the minimum order size the jobbers will quote;
(ii) the minimum order size for which banks and brokers can quote on ASSET; and
(iii) the size limit below which orders must pass through the central market.
The banks and brokers are obliged to enter orders below the wholesale limit in the central market limit book, which is managed by the hoekman. Orders from the banks and brokers - in some cases their own accounts but usually on behalf of investors - may be at best or at a limit. The banks and brokers can enter these orders electronically directly in the order book, or place them with the jobber as a discretionary order. This allows investors to choose between immediate execution, generally at the price as quoted by the hoekman, or wait for a time in hope of obtaining a better price.
The time at which the order is entered in the limit book is decisive. Exchange members are prohibited from in-house matching, nor can they act as a principal trader on their own account, or trade with one another outside the limit book.
For the execution of 'at best' orders, the best possible price is sought automatically, because the hoekman always has the option of entering a better price within 15 seconds. If the hoekman chooses not to do so, the order is executed at the best price available at that time. Giving the hoekman this option to intervene will increase competition within the system and benefit the private investor.
During the initial introduction stages of the TSA, some 50% of the volume of trade in the most active stocks was conducted via the limit book. During nearly 50% of the trading time the best available price in these stocks was based on the hoekman's bid and/or ask price, while in some 35% of cases the hoekman made use of his option to better the price at which the order could be executed.
Interprofessional trading between members above the wholesale threshold using AIDA, the fully-automated system, was more intense than had been expected. It averaged around 120 transactions a day over the first three months, or some 35% of the total volume of trading between members. Some 45% of this volume pertained to "direct deals" (ie. not using AIDA) while the remaining 20% of wholesale volume was conducted via the limit book. In more general terms, the active role played by the hoekman firms in the wholesale segment was striking. Significantly the spread of best available prices for most ASSET stocks, on which the market makers' quotes to clients are based, was smaller than that on the rival SEAQ International as operation began. However, not all ASSET market makers were initially making maximum use of ASSET, even though they had a very positive reaction to the new system.
Government Bonds
A division between wholesale and retail trading in Government bonds became operational in the course of 1993; and the introduction of an inter dealer broker for wholesale transactions formed the basis of the new Amsterdam Treasury Bond Market that exists today. This system operates internationally and Amsterdam Exchanges NV members, with a growing number of foreign firms (admitted as special Corporate Members) can enter orders in the ATM, making it a truly international order-driven market. The pivot in the ATM is the Inter Dealer Broker (IDB), who by regulation may not take up positions. The IDB is a neutral middleman acting as counterparty when a transaction on is effected: he buys from the seller, at the same time as selling to the buyer. Usually settlement will take place through the international clearing organisations Cedel and Euroclear or through the Amsterdam central securities clearing corporation Effectenclearing B.V. or Kas-Associatie N.V. Direct dealing (trading outside any exchange system) among stockbroking firms is only permitted for equal to or above the wholesale limit. Since the launch of the ATM system in 1993 which introduced an Inter-Dealer Broker for dealing between banks and brokers for trading Dutch Government bonds, Amsterdam's share of combined Amsterdam/London trading in Dutch Government bonds had steadily climbed.
Trading record
At the end of 1994, the Amsterdam bourse had 126 members. The equity turnover for 1994 was NLG 311.2 billion (US$178bn) and the bond turnover NLG 848.2 billion (US$485bn). The total capitalization of the equity markets rose 9% to NLG 491 billion (US$280.6 bn) helped by the issue of NLG 40 billion (US$23bn) on new shares. The most important issue was the flotation of the telecommunications group KPN, the first tranche of which raised NLG 6.9 billion (US$4.3bn). The issue volume on the share market in 1994 was NLG 40 billion US$23 bn), a significant advance on the NLG 26.2 billion (US$15bn) in 1993. 1994 saw the admission of 21 new institutions (compared to 14 in 1994). As in previous years, the investment companies accounted for a considerable proportion of the share issues (16). The issue volume on the bond market was down from NLG 70.1 billion (US$40.1bn) to NLG 62.8 billion (US$35.9bn), of which NLG 36.1 billion (US$20.6bn) (1993: NLG 45.2 billion (US$25.8bn)) related to government bonds. The volume of Eurocurrency loans fell from NLG 24.1 billion (US$13.8bn) to NLG 23.9 billion (US$13.7bn), of which NLG 15.6 billion (US$8.9bn) (1993: NLG 16.9 (US$9.7bn)) billion was raised by domestic borrowers. Issues of mortgage bonds, bank bonds and savings bonds, which are not included in the above figures, rose from NLG 3.4 billion (US$1.9bn) to NLG 3.6 billion (US$2.0bn). The number of shares quoted on the Amsterdam Exchanges NV rose from 660 to 667 while the number of bonds fell from 904 to 903. Rising share prices lifted the aggregate market capitalization of local companies to around NLG 491 billion (US$280.6bn) as at year-end 1994 compared with NLG 449 billion (US$256.6bn) the previous year, with KPN accounting for NLG 27 billion (US$15.4bn) of the NLG 42 billion (US$24bn) increase.
More Active Stocks
There was only one star performer in 1994 among the 20 more actively traded companies, and this was Hoogovens. The steel group added around 60% in value, mainly on the back of interest from UK and North American investors. Other big winners were DSM (29%), Philips Electronics (+28%), Heineken (+21.5%), Ahold (+14.5%) and Oc -Van der Grinten (+14%). It was generally not a year in which whole sectors did particularly well or badly. The watchword was 'stock-picking'. A careful evaluation of individual companies.
International
The following table shows the percentage change in share indices during the past twelve months. Amongst the most important European exchanges the Amsterdam Exchanges NV performed best with a marginally rising Amsterdam EOE-index.
End 93 End 94 % change relative to year-end 1993 Amsterdam AEX 414.27 414.47 + 0.10 New York DJI 3754.09 3834.44 + 2.10 London FTSE100 3428.60 3056.60 -10.90 Frankfurt DAX30 2267.98 2077.03 - 8.44 Paris CAC40 2290.56 1894.15 -17.30
For further information on the Amsterdam Exchanges NV please contact Joost Maas on +31 20.5234567.
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