2. 1996 seems to be going to become an extremely good year for the Amsterdam Exchanges NV. Total turnover in bonds, now at Dfl.1140 bln.(US $ 670 bln.) and in equities, now at Dfl.520 bln.(US $ 305 bln.) exceed the record numbers for 1995 and expectations are that over the entire year both turnover and the number of transactions will be about 60 % higher than last year.
The main Amsterdam EOE-index has moved up by around 20% from 487 at the start of the year to 609 as of November 19. Thanks to a number of new listings and the upward trends in the markets, the total market capitalization which was the tenth largest in the world at the end of 1995, is also expected to also show a healthy increase.
As much as half of the Amsterdam turnover may be classified as cross border trading.
The volume of the European Options Exchange (which covers equity options, index options and financial futures) has also had a tremendously good year. As much as 1995 was a top year, 1996 so far almost 24 million options contracts have been traded with a top of 352.000 contracts traded during the October expiration, of which a great majority came from individual investors. This exceeds last year's record number of options contracts traded by 70%. The open interest was over 3.5 million contracts.
3. It is generally believed that at least part of the credit for all this is due to the new trading systems implemented in Amsterdam in 1993 and in 1994. The Amsterdam Treasury Market (ATM), the main international trading place for Dutch government bonds, is showing healthy growth with a still increasing number of international firms joining as special (remote) corporate members. Some twenty firms based in London, Frankfurt, Paris and Brussels have joined. Their nationalities even show a wider spectrum, as some firms hail from Switserland, Japan and the United States. The intermediary in this market, the Amsterdam InterDealer Broker, was taken over by the two main hoekmanfirms, Van der Moolen and AOT (themselves listed companies). This provides the necessary basis for BHI to strengthen its international role.
The ATM market was further strengthened by the decision of the Amsterdam Exchanges NV Council to allow non-government corporate bonds to be added to the InterDealer Broker's list of tradable securities. Together with the Amsterdam Options and Futures Exchange a decision was reached to modernize the financial futures market in government bonds with an auspicious start in the beginning of October. More than ten firms have indicated their commitment to provide marketmaking in this revived sector.
4. The Trading System Amsterdam, instituted in October '94 as one of the first hybrid systems, allowing a wide range of choice, within the same set of trading structures, for large and small investors and large and small intermediaries was subject to continuous evaluation last year. The spreads in the ASSET marketmaking system show a healthy trend compared to other places trading Dutch equities. The automated interdealer broker system AIDA halved its fees because of higher than expected transaction numbers and the hoekman, active and central in the Limit order book, play a larger than expected role in the wholesale segment, where market participants are entirely free to use or not to use their services. The Limit order book - obligatory for all trades below a certain size which varies by stock - shows excellent results in terms of small spreads and fast execution. The Trading System Amsterdam will be subject to a far reaching evaluation in the first half of 1997 with a view to possible changes in the course of 1997. As the new systems have all been instituted on existing software a major review of technology requirements is on the way.
5. Crucial to Amsterdam's international mission is the attraction of full remote membership, made more feasible by the entry into force of the ISD and relevant national legislation as of 1/1/96. So far three firms have joined and discussions are going on with fifteen to twenty others. A number of these applicants are close to signing up. Discussions are also taking place with the Stock Exchanges of Brussels and Luxembourg, reviewing the possibilities for common membership and providing wider and automatic access to the listing and trading processes of the three Exchanges. Although ISD assures a European passport for members, a number of regulatory hurdles will have to be taken for this idea to take effect.
6. In the area of clearing & settlement Amsterdam took further steps in line with the hybrid trading systems. Although the Amsterdam national clearing & settlement process, a netting based clearing system, is fully in line with G-30 prescriptions, and has been functioning securely and efficiently for decades, the decision was taken and implemented last spring to add a trade for trade settlement system to provide choice for professionals in the market. DNB - the Dutch Central Bank - takes care of the money side of this mechanism. Both the number and the size of the transactions offered in the trade for trade mechanism seem to augur well for the further development of this addition to Amsterdam's choices.
7. The Amsterdam market notes with pleasure the rapidly increasing interest of Dutch and international companies for primary listing, often on a dual listing basis with NYSE or Nasdaq. The Council has also decided to institute a New Amsterdam Market, specifically aiming at rapidly growing young companies which primarily because of a lack of track record, cannot comply with the existing listing requirements. A number of decisions have already been taken regarding these requirements and the Amsterdam hoekman (stock specialist) and marketmakers will play an extra active role to maintain appropriate markets, while at the same time the companies will have to respond to a higher level of disclosure. Arrangements have also been made to provide for lockup conditions for major shareholders. The Amsterdam initiative will, it is intended, form an integrated part of the Euro/Nouveau Marche together with the new markets in Frankfurt, Paris and Brussels.
8. As a consequence of the agreement between the Amsterdam Exchanges NV Association and the Association of listed companies, on the subject of a further limitation of anti-take over devices, a Committee on Corporate Governance has been set up, chaired by former AEGON Chief Executive Jaap Peters. The Committee with representatives from institutional and private investors and from companies, reinforced by outside senior experts, presented its report last week. It contains specific recommendations relating to the Supervisory and the Executive Boards of Dutch companies as well as of other corporations where applicable. The Committee recommends that every company in The Netherlands should consider specific ways of enhancing shareholder influence. The outcome in each company should be discussed in a general meeting of shareholders in 1998. The Committee awaits public reactions to its report before finalizing it in the first half of 1997.
9. The Dutch government has submitted to Parliament a number of proposals containing amendments to the existing insider trading legislation. These would widen the scope of the legislation and amend certain rules relating to burden of proof. In the light of these proposals the Amsterdam Exchanges NV reviewed its model code for listed companies, strengthening in a number of ways its regulatory powers. The proposals will be discussed between the Exchange and the listed companies Association shortly, after a public debate has given a positive impetus. Discussions are also going on with government departments relating to possible legislation on the subject of market manipulation. The Exchange will review its existing rules on that subject and strengthen its surveillance powers. In general a review is on the way in Amsterdam to see to it that the market retain its quality trade mark as a fair and well regulated market with ample compliance powers.
10. Although a number of important decisions still have to be taken, the Council of the Amsterdam Exchanges NV Association, owner of the Amsterdam Exchanges NV and the Council of the European Options Exchange, operator of the options and futures markets in Amsterdam, have decided to restructure their operations and establish a new organization in the form of a holding company on a commercial and member-independent basis. This company Amsterdam Exchanges (AEX), of which Mr George Moller, actually president of the EOE, will become the Chief Executive, will have an independent Supervisory Board of which Mr Kleiterp, former CEO of MeesPierson and current Chairman of the Dutch State Pension Fund, will become the Chairman.
Amsterdam Exchanges ( AEX ) will manage the Amsterdam Exchanges NV, the European Options Exchange, the Financial Futures Market and the Central Securities Depository. Within the latter organization, the Clearing organizations of the existing exchanges and Necigef will form an integrated entity. Other AEX operating companies are Beursdata (price publication and information systems) and the Computer Organization. The AEX will legally be the marketholder and in that capacity will remain responsible for establishing rules, governing the primary market, the secondary market and the clearing & settlement process. It will continue existing arrangements to protect private investors. Intermediaries established with approval by the Securities Board of the Netherlands (STE) and foreign intermediaries with a European passport will be able to trade on each and all of these markets via a permit system. Under the permit system the intermediaries are subject to AEX rules relating to their business conduct. The supervision of trading and the compliance with rulemaking will be assured at holding company level.
Shares in the AEX will be held by all existing Members and by listed companies and institutional investors. New permit holders will also be eligible to purchase shares.
For more information please contact:
Thom Hoedemakers Amsterdam Exchanges NV Tel: +31 20 523 4014 Lex van Drooge Amsterdam Options Exchange Tel: +31 20 550 4540 Paddy Manning St James Corporate Communications Tel: 0171 436 4101 The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.