At the conclusion of the 1997 annual meeting, chaired by Snr Antonio Zoido of Madrid, the committee of the European Federation of Stock Exchanges announced its views on the impact on capital market practises of the transition to the Euro and makes recommendations aimed primarily at those markets that expect their currency to join the Euro in the first wave.

Amsterdam Exchanges in its capacity as host City of the European Council in June has hosted this working party with fellow exchanges to consider these topics and their relevance to all European capital markets.

The Federation of European Stock Exchanges has been seriously considering the implications of the Euro for the exchanges and settlement systems since the autumn of 1995. This week it publishes its report 'Transition to the ELTRO', detailing the views of the Stock Exchanges of the countries which expect to be in the first wave of joining the EMU.

The main conclusions are:

  • Trading and settlement to be in Euros from January 1999 in one single switch, intermediaries to provide conversion where necessary.
  • Reconunendation to legislators to allow no par-value securities.
  • Recommendation to listed companies not to change their existing nominal par values.
  • No redenomination for outstanding corporate bonds except where specifically provided for in the terms of the issue.
  • Redenomination of government debt.
  • New issues between now and 1999 should ideally contain specific provision for redenomination.
  • In view of the urgent needs by investors, intertnediaries and companies listed on stock exchanges to consider the impact of the Euro the FESE has met in Amsterdam to adopt harmonised market practices that should come into effect in January 1999.

The decisions by the Federation are the unanimous conclusions of Chairman or the Chief Executives of the Stock Exchanges. For the FESE-members it is a significant message to the European Council Meeting and the financial markets. The Federation will endeavour to present its views widely with the aim of their early adoption on as wide a basis as possible.


The meeting discussed a number of other issues including:

  • ownership and corporate governance of exchanges themselves;
  • the development of markets for small cap high growth companies;
  • relations with emerging markets in Europe.

Assembly welcomed the Iceland Stock Exchange as member.

The main policies to be adopted can be summarised as:

  • The Stock Exchange trading markets in equities and bonds will switch to quoting and trading in Euro on 4 January 1999.
  • Settlement between banks, brokers and clearing houses will be in Euros as from that date. Investors will be flee to decide whether they wish to deal with their own intermediary bankers or stockbrokers - in Euros, or to continue through the transitional period to use national currencies. The intermediary will do the necessary conversion.
  • The change to the Euro has no great effect on equity securities. Shares being essentially a 'piece' of the company, a share will remain unaffected by the change of the currency. Only its value will be expressed in the new form, i.e. in Euros. Trades will continue to be by numbers of shares.
  • It is not essential for a company to do anything to restate the nominal value of its shares. A nominal value in national currency will convert into an amount - almost certainly an unround amount, in Euro and cents - but this does not in any way affect the real value of the share, and there is no pressing need to change to a round nominal value.
  • The opportunity presents itself to move shares on to a no-value basis, and the Federation recommends that national authorities in member states give favourable consideration to making changes to law to allow no par value (NPV) shares. European company legislation already permits NPV shares.
  • Government debt markets would maximise liquidity if all existing debt were redenominated in Euro at the start of stage 3 of Euro in 1999. Company debt securities do not have to be redenominated, but if they are to be redenominated, the Federation recommends that the nominal value of each holding be expressed in Euros and cents (i.e. it should be expressed in Euros to the nearest cent) and the minimum deliverable and tradeable quantity should be set at one cent.
  • The Federation recommends that national legislators should seek to enable the redenomination of securities to be achieved without adverse fiscal or legal consequences. The opportunity should be taken with new debt issues to issue them in a dematerialised form, and to remove the need for physical share certificates.

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.

For further information, please contact:

Lex van Drooge: Amsterdam Exchanges NV, Tel: + 31 20 550 45 40

Paddy Manning: St James Corporate Communications, Tel: + 44 171 436 4101

or enter a text search 'Amsterdam Exchanges NV' and 'Business Monitor'.