Europe: Liffe adds equity

Swedish invasion On the verge of a vote on the proposed merger between the Deutsche Borse and the London Stock Exchange (LSE), OM Gruppen, which owns the Stockholm Stock Exchange, sought a hostile takeover of the LSE. The LSE, whose members were to vote Sept. 14, had been trying to persuade share--

holders of the benefits of a Germany-London union, creating the new exchange entitled iX (or International Exchanges). The LSE had a difficult time in winning over smaller brokers due to what the brokers considered a lack of information on costs, regulations, and clearing issues. The vote was postponed in the wake of OM's bid.

An iX alliance would have the advantage of trading securities with a combined market value of $4.3 trillion compared with Stockholm's $330 billion. But OM claims that it's offer would strengthen LSE as the preferred market for initial public offerings in Europe. Further, it would pay full value to LSE shareholders and provide significant improvements in trading efficiency. Per Larsson, president and CEO of OM, says he was determined that the London market should have a better alternative to the flawed iX proposal.

Werner Seifert, DB chair-- man, at first called OM's takeover bid ridiculous but then later added that the bid might open up alternative possibilities for iX, possibly even bringing about a consolidation of European exchanges. The London and German exchanges invited OM to join their original iX merger, but OM responded that it was not interested in the iX alliance in its current form.

While OM's formal takeover bid looms on the horizon, the Swedish offer may stimulate other exchanges to launch additional takeover bids. The Frankfurt exchange says it was prepared to make a counteroffer should OM persist, and other possible bidders may include the exchanges in Paris, Brussell and Amsterdam.

Liffe adds equity In response to its strong equity growth, the London International Financial Futures and Options Exchange (Liffe) plans to expand its equity options as well as U.R and European index products. Equity products currently compose approximately 16.5% of Liffe's volume.

New initiatives include expanded access in other countries such as Germany, France, Switzerland and the Netherlands, to equity options on Life Connect, the exchange's electronic trading system. Liffe also plans to launch a mini FTSE 100 index futures contract and five-year FTSE 100 Flex options by November.

"E" is for east "E-rivatives may have held center-stage at this year's industry meeting in Burgenstock, Switzerland, but a turf skirmish in the wings offered a glimpse into an upcoming main event.

Eastern European exchanges presented credible plans for alliances in the next two years, and a Russian official even promised a resumption of dollar/ruble futures some-- time this year. However, a monied competitor from Vienna caused a stir.

Newex, for "New Europe Exchange," is a joint venture of Germany's DB and Austria's Wiener Borse. It plans to list shares of "quality" companies from Hungary, Poland, Russia and the Czech Republic - meaning those that meet western reporting standards - and sell those shares to members in Germany, Austria and the United Kingdom.

Newex board member Erich Obersteiner said the goal is to bring Western European risk capital to Eastern European businesses, and he framed the new venture as something to complement existing exchanges and infuse liquidity into the region. Warsaw Stock Exchange President Wieslaw Rozlucki, however, predicted Newex would have trouble listing enough companies and warned it could pull liquidity away from regional exchanges during a critical development stage. Budapest Stock Exchange boss Maria Dunavolgyi agreed the new player could pose a threat to the alliances, but said smaller exchanges would always have their place.

"This is an issue where there is no consensus." she said. "But it shows there's more interest in us than there used to be."

A dear alliance The Board of Trade Clearing Corp. (BOTCC) and Options Clearing Corp. (OCC) have been in negotiations discussing a possible merger. The clearinghouses hired consultant Deloitte and Touche to study the feasibility of combining their operations.

The BOTCC, which. guarantees and settles all trades at the CBOT, and the OCC, which is the central clearing organization of all U.S. options exchanges, have talked about a merger for years, according to a BOTCC spokesman. But today it will "make more sense because of the business-to-business potential," he says.

New opportunities Investors looking for opportunities in the Asian bond market will soon have access to BondsInAsia, an electronic trading system. BondsInAsia is the result of a joint venture of Bridge eMarkets, CitiGroup, Deutsche Bank and HSBC. It will allow investing in Asian securities directly through clients' PCs via the Internet and private networks. The system is expected to be operational during first quarter 2001, and it will offer fixed income securities in the Hong Kong, Singapore and G3 markets. Each company holds an equal stake in the venture and plans to offer local dealers in each market partial ownership through franchise agreements.

"Bridge eMarkets role is to deliver the technological infrastructure for the plat-- form while HSBC, Citi-- Group and Deutsche Bank have committed to [provide] liquidity, says David Rutter, president of Bridge eMarkets.