Magazine article American Banker

Merrill Creating New System to Handle European Stocks

Magazine article American Banker

Merrill Creating New System to Handle European Stocks

Article excerpt

By STEVEN MARJANOVIC Merrill Lynch & Co. is poised to take advantage of an expected surge in European stock trading.

The investment banking and brokerage giant has spent tens of millions of dollars since 1996 building a new transaction and settlement system to support its European equities business, expected to mushroom after Jan. 4.

That is when the new common currency, the euro, begins the first phase of its three-year introduction as legal tender for 11 European countries, as decreed by the Maastricht treaty of 1992.

It is "a key date where volumes and liquidity will increase," said Jean- Marc Bouhelier, first vice president and head of global equity technology at Merrill Lynch.

It also marks the beginning of "the greatest single opportunity that anyone is going to see for years," said Paul Cantwell, a London-based partner with Andersen Consulting who worked with Merrill Lynch on the systems preparation.

The euro countries must hold their debt rates below 3% of gross domestic product, under the treaty guidelines. As a result, state-run pension systems in Europe are rapidly becoming privatized.

"When they do that, they start holding equities, and then you build up a demand for equities," Mr. Cantwell said.

Historically, European companies have issued equity as a last resort, preferring to borrow from banks, Mr. Cantwell explained.

The result of these changes "will create a market that is in many senses as big, if not bigger, than the U.S," Mr. Cantwell said. …

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