Endorsement comes after Berlin signals readiness to allow more centralised markets supervision
Ideally located in Germany, subject to German law and regulation, German taxes, and German national security interests, right?
Probably yes, though to be fair European legislation has changed so much already that quite a few areas of the law have little national legislation left.
Having a unified financial market makes sense, but having multiple stock exchanges is also a good idea. The US has New York and NASDAQ. Currently the EU has Euronext, DAX and NASDAQ Nordic and Baltic.
And Paris, and Vienna and Budapest and … (link)
Maybe some consolidation wouldn’t be a bad idea, but given how the markets are at the moment I would expect a significant crash is needed before anyone would give up their exchange.
There are already some large players and it is pretty likely that they just buy out smaller exchanges and then integrate them into a larger multinational one. Euronext is already quite far along in that process.
um, you REALLY might want to have 4, not 1, for redundancy, given how Russia’s going to be waging WAR against the EU as soon as Trump guts NATO, you know?
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But then how will he manipulate the market like Trump does.
He is not the smartest, but this is one of his dumber ideas.
Why? Most stock exchanges are managed by Euronext anyways and having a single center of exchange improves liquidity and availability of assets
I get your point, but market fragmentation must not necessarily translate into a worsening of liquidity compared to having one consolidated order book. We have the technological means where investors can gain access to multiple trading platforms simultaneously at low cost, including low search costs for investors (to identify the lowest possible price to execute a particular order).
Maybe more importantly, many long-term investors would argue that there can also be too much liquidity. Among my favorite citations regarding this has been for years Warren Buffet’s Berkshire Hathaway shareholder letter of 1983:
One of the ironies of the stock market is the emphasis on activity. Brokers, using terms such as “marketability” and “liquidity”, sing the praises of companies with high share turnover (those who cannot fill your pocket will confidently fill your ear). But investors should understand that what is good for the croupier is not good for the customer. A hyperactive stock market is the pickpocket of enterprise.
Former U.S. Fed chief Paul Volcker also made similar remarks about “too much liquidity” regarding the bond market if I remember that correctly.
There is also a more recent study investigating this issue. In, “Is too much liquidity harmful to economic growth?”, the authors conclude:
… there exists a threshold, above which the marginal effect of financial liquidity on economic growth changes from positive to negative. In particular, the turning points for which domestic credit to private sector and stock market turnover start having negative effects on growth are 104% GDP and 107% respectively. Moreover, although the thresholds in middle- and low-income countries are higher than those in high-income countries, the growth-enhancing effect of financial liquidity is stronger in high-income countries.
Having said that, we must also consider the different dimensions of liquidity. Resilience is a strong point (measured by price volatiliy, the Amihud ratio) or the immediacy (e.g., the number of market makers, possibly related to the number of market participants), and many other metrics.
So I am not sure whether a consolidation of stock markets is a good thing, especially not for the long-term investor.
[Edit typo.]
And helps concentrating the wealth even more. Exactly what Europe does NOT need.
I agree that concentrating wealth sucks but won’t be a unified stock exchange to make things worse
How would stock market consolidation concentrate wealth?
By making trades and therefore speculation even faster.
What we seriously need is a way to slow the markets down, like a tax on trading. Why is there a 7% tax on groceries, but none at all on buying shares?
I have no expertise and opinion about that.
I just know from extrapolating, that if Merz wants it, it is probably a bad idea for everyone ¯\_(ツ)_/¯
Kann der spast auch mal die fresse halten
Original article: https://www.ft.com/content/040f4829-e2b2-4324-9162-436739a04842
That’s a great idea. Maybe that exchange could then set the prices for the shares daily so that everybody can profit from fair prices. We should also create a European center of competence for strategic investments. That center could calculate the best opportunities for companies and help them make the best investment decisions and help them allocating their work force.
This is madness. If we believe in markets then we should have competing exchanges.
There’s an argument for competition and an argument for streamlining the purpose of exchanges, to make easy exchange possible. A trans European exchange linked with the individual exchanges wouldn’t be a bad idea. But most of the benefits are already present in trading platforms that are seperate, already, as digital cooperation has increased.
