The Euroequity Market
The Euroequity Market
Another significant event in the past decade is the creation of the Euroequity market. The Euroequity market is the market for shares sold outside of the national boundaries of the issuing company. Prior to 1980 few companies thought of offering stock outside of the national boundaries of the headquarters. Since then, hundreds of companies from all over the world have issued stock simultaneously in two or more countries.
Table 9.2 shows global stock markets in a slightly different light than Table 9.1. In Table 9.2, stock markets are ranked by equity turnover of foreign stocks. Thus the London Stock Exchange is ranked first in equity turnover of foreign stocks, even though it is ranked only third in terms of total turnover as well as the market value listed in Table 9.1.
In the list of 300 stocks traded most actively in the Euroequity market, Japanese and U.S. stocks dominate the list with 68 and 44 entries, even though they are not among the top 50 as mentioned above. Companies of 22 different countries are listed in Euroequity markets, with Japan and the United States followed by the United Kingdom (26), France (25), Canada (23), the Netherlands (19), Germany (15), and Sweden (13).18
In some cases, such as with Yamanouchi Pharmaceutical of Japan, firms list on only one foreign exchange and nowhere else. Yamanouchi lists in London. In other cases, firms list on many different exchanges. Deutsche Bank of Germany lists its stock on eight different exchanges, including London, Tokyo, Paris, Brussels, and different exchanges in Germany.19
The most popular way to get international listings is to issue an American Depository Receipt (ADR) in the United States or be included in the SEAQ International system. An ADR is a negotiable certificate issued by a U.S. bank in the United States to represent the underlying shares of stock of a foreign corporation, which are held in trust at a custodian bank in the foreign country. ADRs are traded like a share of stock, with the ADR representing some multiple of the share of the underlying stock. The issuance of an ADR allows U.S. investors to invest in a foreign company without the foreign company having to go to the trouble of listing in the United States and being subject to all of the rules and regulations of the Securities and Exchange Commission.20 SEAQ International is London's screen-based on-line quotation system and is the leader in the trading of international equities. It currently has no direct competitors, although there are some systems that are trying to come on line as serious competition.21
It is interesting to note in Table 9.2 how different the stock exchanges are in terms of international participation. Nearly 30 percent of total equity turnover in London involves foreign equities, whereas less than 1 percent of the total equity turnover in Tokyo does. London trades twice as many foreign equities as does the New York Stock Exchange, seven times more than Tokyo, and 8V2 times more than all eight German exchanges combined.22 London's geographical location, the existence of the large financial infrastructure, the availability of SEAQ International, and more liberal disclosure standards make London an ideal place for the center of the Euroequity market.
The top five foreign issuers of securities on the New York Stock Exchange in 1989 were Royal Dutch Shell, Schlumberger, SmithKline Beecham, Alcan Aluminum, and British Petroleum. Five of the top ten listers used ADRs rather than direct securities. The top five listers on SEAQ International were Deutsche Bank, Siemens, Royal Dutch Shell, Mannesmann, and Volkswagen. The Germans are heavily represented in the top securities listed on SEAQ International.23
In spite of the growth of Euroequities, most trades take place in the domestic markets. The New York Stock Exchange is allowing after-hours trading and hopes to have 24-hour trading in place by the year 2000. In 1979 the NYSE market share of reported U.S. trading in listed stocks was close to 90
percent, but its share had dropped below 70 percent in 1990. The move to 24-hour trading is an attempt to regain market share. However, some experts feel that they want to trade the security of a company when that company's home market is open so that they can see what is driving the price of the stock.24 It will be interesting to watch the development of a 24-hour market as the decade progresses.
Another significant event in the past decade is the creation of the Euroequity market. The Euroequity market is the market for shares sold outside of the national boundaries of the issuing company. Prior to 1980 few companies thought of offering stock outside of the national boundaries of the headquarters. Since then, hundreds of companies from all over the world have issued stock simultaneously in two or more countries.
Table 9.2 shows global stock markets in a slightly different light than Table 9.1. In Table 9.2, stock markets are ranked by equity turnover of foreign stocks. Thus the London Stock Exchange is ranked first in equity turnover of foreign stocks, even though it is ranked only third in terms of total turnover as well as the market value listed in Table 9.1.
In the list of 300 stocks traded most actively in the Euroequity market, Japanese and U.S. stocks dominate the list with 68 and 44 entries, even though they are not among the top 50 as mentioned above. Companies of 22 different countries are listed in Euroequity markets, with Japan and the United States followed by the United Kingdom (26), France (25), Canada (23), the Netherlands (19), Germany (15), and Sweden (13).18
In some cases, such as with Yamanouchi Pharmaceutical of Japan, firms list on only one foreign exchange and nowhere else. Yamanouchi lists in London. In other cases, firms list on many different exchanges. Deutsche Bank of Germany lists its stock on eight different exchanges, including London, Tokyo, Paris, Brussels, and different exchanges in Germany.19
The most popular way to get international listings is to issue an American Depository Receipt (ADR) in the United States or be included in the SEAQ International system. An ADR is a negotiable certificate issued by a U.S. bank in the United States to represent the underlying shares of stock of a foreign corporation, which are held in trust at a custodian bank in the foreign country. ADRs are traded like a share of stock, with the ADR representing some multiple of the share of the underlying stock. The issuance of an ADR allows U.S. investors to invest in a foreign company without the foreign company having to go to the trouble of listing in the United States and being subject to all of the rules and regulations of the Securities and Exchange Commission.20 SEAQ International is London's screen-based on-line quotation system and is the leader in the trading of international equities. It currently has no direct competitors, although there are some systems that are trying to come on line as serious competition.21
It is interesting to note in Table 9.2 how different the stock exchanges are in terms of international participation. Nearly 30 percent of total equity turnover in London involves foreign equities, whereas less than 1 percent of the total equity turnover in Tokyo does. London trades twice as many foreign equities as does the New York Stock Exchange, seven times more than Tokyo, and 8V2 times more than all eight German exchanges combined.22 London's geographical location, the existence of the large financial infrastructure, the availability of SEAQ International, and more liberal disclosure standards make London an ideal place for the center of the Euroequity market.
The top five foreign issuers of securities on the New York Stock Exchange in 1989 were Royal Dutch Shell, Schlumberger, SmithKline Beecham, Alcan Aluminum, and British Petroleum. Five of the top ten listers used ADRs rather than direct securities. The top five listers on SEAQ International were Deutsche Bank, Siemens, Royal Dutch Shell, Mannesmann, and Volkswagen. The Germans are heavily represented in the top securities listed on SEAQ International.23
In spite of the growth of Euroequities, most trades take place in the domestic markets. The New York Stock Exchange is allowing after-hours trading and hopes to have 24-hour trading in place by the year 2000. In 1979 the NYSE market share of reported U.S. trading in listed stocks was close to 90
percent, but its share had dropped below 70 percent in 1990. The move to 24-hour trading is an attempt to regain market share. However, some experts feel that they want to trade the security of a company when that company's home market is open so that they can see what is driving the price of the stock.24 It will be interesting to watch the development of a 24-hour market as the decade progresses.
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