We have exchanged a lot of information with BSE as to how exchange operations can be efficiently organised, says Michael Peters, member of the executive board, Eurex Frankfurt AG, Deutsche Borse. In an interview with Devangi Gandhi, he says product cooperation is the second level of partnership that could evolve between BSE and Deutsche Borse.
Could you tell us about your partnership with BSE?
There are many levels of cooperation between the BSE and Deutsche Borse, the parent company of Eurex, which holds a 26% stake in the BSE. We have exchanged a lot of information as to how exchange operations can be efficiently organised, for example the recent introduction of central consolidated operation centre, to achieve operational excellence. Product cooperation is the second aspect of this relationship, where both the exchanges evaluate to what extent the domestic products/ indices of respective region can be licensed to each other. From an exchange point of view, we also welcome the opportunity of dual-listing (by Indian listed corporates) as India?s dramatic growth needs to be funded while Europe?s investment requirement is served. It could be a perfect deal to match the funding needs of India with the investing needs of an aging population of Europe.
Indian companies have listed on global platforms like Nasdaq. How do you propose to attract Indian firms to list in Germany?
The Frankfurt Stock Exchange under the umbrella of Deutsche Borse has an unique value proposition for Indian companies to list on its platform in terms of the specific industry of interest for India. Germany is known for its competencies and knowledge for specific industries like engineering, automobile and supply chain. Many Chinese companies from these industries are listed on the Frankfurt Stock Exchange. There is also flexibility for companies to process their application in english and the entire process takes about 6 to 8 weeks to go through and our admission fees are also very competitive.
What is the rationale behind Deutsche Borse AG?s proposed merger with NYSE Euronext?
It is a merger of business areas that perfectly compliment each other. For example, with a combined entity we can leverage the Eurex clearing house as well as Clearstream, Eurex?s mechanism for custody and settlements, which could bring significant cost savings. Further, our joint competencies and experiences in both the cash and derivatives market and asset classes spreading across the globe is expected to bring benefits for our customers and shareholders.
What are the changes that have been brought about by new technological advances such as high frequency trading (HFT)?
Technology is essential for operating an exchange with a clearing house especially in attracting the investors. When we look at the trend in HFT, the trading is happening on exchanges in milliseconds and it becomes a competitive advantage if an exchange can provide the underlying technology for such trades. Even on the clearing side the availability of real-time risk management, which is offered by Eurex, becomes crucial as the revised exposure of one?s risk position can be viewed real-time.
What are the challenges for European exchanges?
The financial transaction tax (FTT) is something which is being mulled by the political policymakers. While we welcome every element that could support the market safety, we are afraid the trading quantum could shift towards unregulated markets if FTT is not introduced worldwide but only in Europe. It could also have an impact on the bid/ask spreads and could have negative impact on the refinancing capabilities of the corporates and governments that issue bonds and public debt.