Speech by the Chairman of the Stock Exchange Association, Boudewijn Baron van Ittersum on the occasion of the Stock Exchange's New Year Reception for members and guests
1995: Breakthrough to a new set of relations
At the beginning of a new year it is customary first to look back over the events which characterized the year gone by. Well now, I would like to characterize the 1995 bourse year as one of a breakthrough in the creation of a new set up. Amsterdam forged ahead on a number of fronts. I am referring here not only to the many records which were broken but also to the planned fundamental restructuring of the stock exchange organisation and the changes currently taking place in capital market structures. I would like first, if I may, to review 1995 in terms of these three aspects before outlining several priorities which should emerge there from in the near future.
Excellent year for investors
While the 1994 stock exchange year was seen as disappointing due to the U.S. interest rate shock and the stagnation of the share index, 1995 was an excellent year by any standards. The figures speak for themselves. While the AEX index closed 1994 at 415 points against long- term interest rates of 7.8 percent, 1995 ended with the AEX 17 percent higher at 485 points and long-term interest rates of just over six percent. Moderate economic growth and inflation, combined with an unexpectedly persistent fall in interest rates, created a favourable investment climate for both shares and bonds. Fluctuations in share prices during the year were mainly due to the seesawing dollar, which started the year at 1.74 guilders and sparked investor jitters with its plunge to an historic low of 1.52 guilders in March and 1.55 guilders in October. Nevertheless Wall Street put its best foot forward with a 33.5 percent rise in the Dow Jones index to a record high of over 5,000 points.
Record turnover levels: more balanced composition
It should come as no surprise that these market trends boosted stock exchange turnover levels to a new record total of 1,361 billion guilders (+17 percent), buoyed afresh by a stronger than average surge in share turnover (+28 percent). A noteworthy development was that turnover in Philips shares was the highest at 13 percent of total share turnover, while traditional turnover leader Royal Dutch Petroleum had to be content with second place (11 percent of total share turnover). Measured in terms of market capitalization there was a clear decline in the top three (Royal Dutch Petroleum, Unilever and ING): from 50 percent to 43 percent on a welcome further increase in total market capitalization (shares) to 571 billion guilders from 491 billion guilders (excluding investment funds). This promotes a more balanced market composition. However, given that some three quarters of Dutch market capitalization and share turnover is generated by the ten biggest stocks, our market is still too heavily dependent on its leading issues. The launch of the Mid Cap index (AMX) last October was aimed at stimulating investor interest for medium-capitalized companies. After years of outperforming the AEX, the AMX lagged slightly behind in 1995, rising 16 percent.
Strong European performance
In terms of both share prices and turnover levels, the Amsterdam Exchanges NV outperformed the majority of European bourses. The Eurotop index advanced 14 percent; while the average decline in turnover amounted to -/- 1.6 percent. Amsterdam's performance over the last five years is also something of which to be proud with a 91 percent rise in the index and a 60 percent growth in turnover. Nevertheless our market capitalization of around seven percent of the European exchanges means we would do well to remain modest as well as vigilant with regard to future developments.
Bond market growth
In terms of new issues the record volume of government recourse (no less than 52.5 billion guilders) was noteworthy. The fact that the market coped with this particularly large demand without any problems is exceptional. The Amsterdam Treasury bond Market (ATM), centred on inter-dealer broker BHI, functioned as required. In addition there was a welcome increase in Eurobond issues and mortgage-, bank and savings bonds on the bond market. The doubling of the turnover in Eurobonds is partly due to the adjustment of professional trading possibilities in this segment. The growth of the non-government bonds market is particularly encouraging in view of the expected reduction in the government's recourse to the market in the coming years.
Success of TSA
After just over a year of operation, it may be said that the new trading system for the share market (Trading System Amsterdam, TSA) more than meets the high expectations. The range of possibilities transpires to have met the wishes of the market players. The attractive spreads and enhanced transparency have succeeded in acting as a magnet for the international professional trade, a development which has also been recognised in London. As envisaged, some 50 percent of volume is conducted through the Limit Order Book, thereby guaranteeing the quality of price formation as a sound basis for the entire market. The publication of the best bid and offer price of the limit order book has contributed much to market transparency. Some 10 percent of share volumes change hands automatically through AIDA (more than 100 transactions a day), while direct dealing between members and professional transactions with foreign brokerages and clients through ASSET account for respectively 20 percent and 22 percent of volume. It is worth noting that the hoekman firms are involved in some two thirds of wholesale turnover between members.
Affiliation of "remote members"
Although the attractive figures for 1995 are indubitably due in part to the new trading system, up until now there has been only a gradual shift in Amsterdam's favour in terms of market share. This is due in part to the existing ties between professional investors and their intermediaries. A substantial part of leading Dutch issues are in foreign hands and investors are simply more active than here in the Netherlands. In order to increase our market share it is therefore important that this fragmentation of the market be overcome through the direct affiliation of foreign houses which can offer a positive contribution to the liquidity of Dutch stocks in our market. As such this link ranks high on the list of priorities for this year. This will represent a breakthrough to new relationships. In this we will be able to benefit from the favourable experiences with foreign brokerages on the Amsterdam Treasury bond Market.
Importance of the home market.....
The maintenance of the home market function is not only in the interests of trade and the investors who benefit from liquidity and transparency. The corporate sector, too, stands to benefit from the continuity of the home market in their own shares. Last year showed once more that foreign investors -- for whatever reason -- can suddenly turn against a stock such as Philips en masse, with all the resultant consequences. A well-functioning home market which is both prepared and able to take up the supply is and remains essential.
.... also for protection
The existence of a stable core of loyal investors in one's home country not only enhances the functioning of the home market but is also of key importance to companies in view of the limitations on legal anti-takeover constructions which -- it is to be expected -- will be further worked out this year. At present we are awaiting the government's response to proposals put forward by the Stock Exchange Association and the Association of Securities Issuing Institutions VEUO which -- in view of the situation which has developed in the Netherlands over the years -- are well thought-out. I would view it as a real breakthrough in existing relations if the existing legal anti-takeover constructions of a permanent nature were able to be overridden by a bona fide enterprise.
Corporate Governance
This year the debate is expected to focus further on "Corporate Governance", also a hot topic in international circles. It may broadly be described as the issue of the management of a company. In the coming months attention will focus in particular on an enlargement of shareholder involvement within the framework of the legal regime of large public companies. In concrete terms this could embrace the introduction of proxy votes to improve the functioning of the general meeting of shareholders. Another aspect requiring evaluation is the way in which many companies have statutorily limited the involvement of shareholders prior to gaining a stock exchange listing; a case in point is the position of holders of depositary receipts.
Relations between the private sector and investors must be improved
I deeply regret that -- partly as a result of the long-running debate on these issues -- the relations between listed companies and shareholders' representatives are not all they could be. Particularly in these times of rapid international expansion and economies of scale companies require the wholehearted support of their capital providers. The unmistakably more active role being taken by investors is still experienced by too many companies as a threat, while it could -- if taken seriously -- function to support an effective corporate policy. Constructive relations between companies and their shareholders are essential to the effective functioning of the national capital market. After all, a single joint interest is what it's all about: the continued profitability of our corporate sector. I hope that this year will mark a breakthrough in achieving closer relations between representatives of corporate and investor interests.
New stock exchange structure: common interest
This brings me to the most important task facing the Council of the Stock Exchange Association this year: the creation of a new bourse structure. While the Stock Exchange has as a result of national historical developments been built up and run by intermediaries, the new structure is based on the common interest of the private sector as demanders of capital, the brokers as intermediaries and the investors as capital providers in the healthy functioning of our capital market. The new structure aims to end the traditional distancing between the corporate sector and investors and the market organisation which has evolved from the existing structure. Once again this will represent a breakthrough to new relationships, which at the same time can contribute to eliminating the differences of opinion which have arisen between the corporate sector and investors with regard to anti-takeover constructions and corporate governance.
Interests of the corporate sector
The new structure assumes an active involvement of the corporate sector, due to their vested interest in a well-functioning capital market for their financing. I have already referred to the home market function. Larger companies will want to expand more internationally from a strong home market. As I have said, a lowering of the threshold to the Amsterdam market for foreigners has been given the highest priority. We are playing a pioneering role in Eurolist with the largest number of stocks. Now it is time for other European exchanges to show that they also mean business. The national market segment -- for medium-sized and smaller listed companies -- now requires added attention. This year we shall look into possibilities for further improving liquidity in this market segment. The climate for the stock market introduction of new companies -- particularly those falling into the category of second and third generation family-owned firms -- has clearly improved over the last year through the successful launches of 1995. For young high-tech companies, which attract active but often short-lived investor interest in the United States, a dual listing on our home market and on Nasdaq offers a good solution in practice. There does not seem to be much interest in the Netherlands for a separate European market in this segment. The stock exchange is eager to offer a helping hand to companies eligible for listing and help them find their way in what to many entrepreneurs is new territory. It goes without saying that this would not mean entering into the competition between members eager to take on a supervisory role.
Interests of intermediaries
A wave of mergers and takeovers in the brokerage segment has resulted in a strong division between the major internationally-oriented banks and securities houses on the one hand and those institutions operating mainly on the domestic market on the other. Rising costs (technical support, market personnel) and declining margins have forced the smaller houses to go for economies of scale and the well-considered choice to specialise in market segments where they can offer added value. But it is precisely this added value which has come under pressure from growing client independence and sophistication. The application of new communication and calculation techniques will accelerate this trend and strengthen the existing inclination to cut out the middle man (disintermediation). By actively exploiting these new technological possibilities the bourse can support both the intermediaries and its clients in their services to the corporate sector and investors.
Interests of investors
On the supply side of the market, professional investors have claimed the lion's share of attention in recent years -- and justifiably so in view of their increased market share and specific needs. These were met by the creation of specifically tailored market segments. But this does not mean that the status and interests of the private investor on the Amsterdam Exchanges NV have in any way been diminished. The order-driven retail segment has been retained as the centre of our market system -- and rightly so as London is now finding out.
More private investor activity?
All the signs indicate that the private investor is starting to take a more active individual role in the market. Following a period in which investment funds booked strong growth, expanding to account for 22 percent of total market capitalization in 1993, in recent years growth has stagnated and even declined slightly, slipping to 20 percent in 1995. Ranged against this is a slight increase in the share of smaller stock exchange transactions: from 67 percent to 70 percent of a sharply higher transactions total. This points to a degree of growth in the private investor activity on their own initiative. Such a development is welcome, for the active private investor forms an essential part of a healthy securities market. Stock exchange members took advantage of the trend by introducing new techniques and special tariffs.
Integrated services
In view of the deregulation of European capital markets which yesterday entered a new phase with the coming into force of the European directives on investment services and capital adequacy requirements, the new stock exchange organisation must be in a position not only to offer its clients more than competing exchanges (the majority of which are also reforming as public companies) but also to offer them more than the commercial trade and settlement facilities offered over the counter. The new structure of the stock exchange does this in two important ways; namely, integrated services and the seal of quality. To safeguard one's position as a medium-large securities market within Europe, an integrated approach to trade and settlement and to cash and derivatives markets is imperative. The new structure is based on this premise. Over the last year the necessary progress has been made with regard to settlement and the way has now been opened for close consultations with the European Options Exchange on the formation of a joint structure. Here too a welcome breakthrough has been achieved in forging new relations.
Quality
Quality, not only of service but also in the sense of the integrity of the market, will form the second element to distinguish the new structure from the competition. The value of the self- regulating and self-correcting market, which has been recognised as such in the latest government legislation, remains intact. The Association within which this self-discipline has been built up over 120 years will continue to exist for this purpose and the equity built up by it over the period will function as guarantee. It has been agreed that further rulings will be drawn up together with the Netherlands Securities Board STE on the way in which external supervision may be pursued effectively. After all, self regulation is not a goal in itself; it should prove its worth within the legal framework which offers scope for it. In addition the new European directives will result in new working agreements with regard to supervision, aimed at limiting as far as possible the costs of the new regulations which unfortunately are highly complicated in parts. For our medium-large market, the effectiveness and the cost structure of trading supervision is an area where we can and must do better than the competition.
It will have escaped no-one's attention that in recent years the Association has markedly stepped up its supervisory self-disciplinary task in line with changes in trading practice and social norms. In this process the Association has taken the lead, both by imposing its own regulations and in adjusting manpower and procedures. After all, disciplinary procedures offer more opportunities for effective action than existing legislation. In 1994 and 1995 the compliance and enforcement department conducted respectively 25 and 29 specific investigations into irregularities, reporting seven cases to the legal authorities. The follow-up of the latter still leaves much to be desired. In all cases the situation for all those involved must be clarified within an acceptable time frame. To this end there should be greater cooperation between the official investigative agencies -- which will have to make the necessary manpower adjustments -- and the exchanges' compliance departments, whereby the Netherlands Securities Board STE can play a key role as currently envisaged. This would lead to a pooling of expertise and an optimum use of available capacity. It is in the interests of all those concerned that delays such as have occurred in the last two years should not be allowed to arise.
Members' reimbursement
A year ago I ended my address with the announcement that the financial results gave the Council cause to extend a refund to Members of eight million guilders, a move which I stressed was of a singular nature. As such I am all the more happy that thanks to the exceptionally favourable results over 1995 the Council was once more able to extend a refund, and moreover of a bigger amount than the last -- to wit 14 million guilders. This will be divided among members on the basis of their use of the stock exchange's services and infrastructure. You may take it as read that this is the last year in which a measure of this nature will be taken. After all, under the new structure a pay out from the financial results of the holding in the form of a dividend to shareholders is more likely.
It gives me great pleasure that we may close the old regime with this financial windfall for Members. Increased intensity of use and cost controls contributed to this.
In closing
In summing up may I say that we can look back over a favourable stock exchange year, with many records and a good European performance. Moreover a breakthrough has proved possible in a number of important areas: the bourse structure, the new trading system, the debate on corporate protective measures. We have prepared ourselves well for the European challenge. This year the new opportunities afforded by these developments must be exploited further. I refer in particular to the affiliation of securities houses not based in the Netherlands to our market, the combination of trade and settlement in cash and derivative products under the new structure, closer involvement of the corporate sector and investors as well as improved relations between the two and last, but not least more effective cooperation with supervisory bodies and legal authorities for a rapid effective upholding of the regulations.
In short we may look back on 1995 with satisfaction, but there remains much to be done in the year just begun to ensure that within the perspective of European economic and monetary union our national capital market maintains a leading ranking in the European financial "Champions League". A degree of national "Orange" pride as regards our market would not be out of place, and the performance of recent years give due cause. May I close by wishing you a prosperous 1996 both personally and professionally.
Thank you for your attention.
For further information on the Amsterdam Exchanges NV, please contact: Thom Hoedemakers, Director of Communications, Amsterdam Exchanges NV, Beursplein 5, 1012 JW Amsterdam, Netherlands, Tel: + 31 20 5234014, Fax: + 31 20 5234950, or enter a text search "Amsterdam Exchanges NV" and "Business Monitor".
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.
1995: Breakthrough to a new set of relations
At the beginning of a new year it is customary first to look back over the events which characterized the year gone by. Well now, I would like to characterize the 1995 bourse year as one of a breakthrough in the creation of a new set up. Amsterdam forged ahead on a number of fronts. I am referring here not only to the many records which were broken but also to the planned fundamental restructuring of the stock exchange organisation and the changes currently taking place in capital market structures. I would like first, if I may, to review 1995 in terms of these three aspects before outlining several priorities which should emerge there from in the near future.
Excellent year for investors
While the 1994 stock exchange year was seen as disappointing due to the U.S. interest rate shock and the stagnation of the share index, 1995 was an excellent year by any standards. The figures speak for themselves. While the AEX index closed 1994 at 415 points against long- term interest rates of 7.8 percent, 1995 ended with the AEX 17 percent higher at 485 points and long-term interest rates of just over six percent. Moderate economic growth and inflation, combined with an unexpectedly persistent fall in interest rates, created a favourable investment climate for both shares and bonds. Fluctuations in share prices during the year were mainly due to the seesawing dollar, which started the year at 1.74 guilders and sparked investor jitters with its plunge to an historic low of 1.52 guilders in March and 1.55 guilders in October. Nevertheless Wall Street put its best foot forward with a 33.5 percent rise in the Dow Jones index to a record high of over 5,000 points.
Record turnover levels: more balanced composition
It should come as no surprise that these market trends boosted stock exchange turnover levels to a new record total of 1,361 billion guilders (+17 percent), buoyed afresh by a stronger than average surge in share turnover (+28 percent). A noteworthy development was that turnover in Philips shares was the highest at 13 percent of total share turnover, while traditional turnover leader Royal Dutch Petroleum had to be content with second place (11 percent of total share turnover). Measured in terms of market capitalization there was a clear decline in the top three (Royal Dutch Petroleum, Unilever and ING): from 50 percent to 43 percent on a welcome further increase in total market capitalization (shares) to 571 billion guilders from 491 billion guilders (excluding investment funds). This promotes a more balanced market composition. However, given that some three quarters of Dutch market capitalization and share turnover is generated by the ten biggest stocks, our market is still too heavily dependent on its leading issues. The launch of the Mid Cap index (AMX) last October was aimed at stimulating investor interest for medium-capitalized companies. After years of outperforming the AEX, the AMX lagged slightly behind in 1995, rising 16 percent.
Strong European performance
In terms of both share prices and turnover levels, the Amsterdam Exchanges NV outperformed the majority of European bourses. The Eurotop index advanced 14 percent; while the average decline in turnover amounted to -/- 1.6 percent. Amsterdam's performance over the last five years is also something of which to be proud with a 91 percent rise in the index and a 60 percent growth in turnover. Nevertheless our market capitalization of around seven percent of the European exchanges means we would do well to remain modest as well as vigilant with regard to future developments.
Bond market growth
In terms of new issues the record volume of government recourse (no less than 52.5 billion guilders) was noteworthy. The fact that the market coped with this particularly large demand without any problems is exceptional. The Amsterdam Treasury bond Market (ATM), centred on inter-dealer broker BHI, functioned as required. In addition there was a welcome increase in Eurobond issues and mortgage-, bank and savings bonds on the bond market. The doubling of the turnover in Eurobonds is partly due to the adjustment of professional trading possibilities in this segment. The growth of the non-government bonds market is particularly encouraging in view of the expected reduction in the government's recourse to the market in the coming years.
Success of TSA
After just over a year of operation, it may be said that the new trading system for the share market (Trading System Amsterdam, TSA) more than meets the high expectations. The range of possibilities transpires to have met the wishes of the market players. The attractive spreads and enhanced transparency have succeeded in acting as a magnet for the international professional trade, a development which has also been recognised in London. As envisaged, some 50 percent of volume is conducted through the Limit Order Book, thereby guaranteeing the quality of price formation as a sound basis for the entire market. The publication of the best bid and offer price of the limit order book has contributed much to market transparency. Some 10 percent of share volumes change hands automatically through AIDA (more than 100 transactions a day), while direct dealing between members and professional transactions with foreign brokerages and clients through ASSET account for respectively 20 percent and 22 percent of volume. It is worth noting that the hoekman firms are involved in some two thirds of wholesale turnover between members.
Affiliation of "remote members"
Although the attractive figures for 1995 are indubitably due in part to the new trading system, up until now there has been only a gradual shift in Amsterdam's favour in terms of market share. This is due in part to the existing ties between professional investors and their intermediaries. A substantial part of leading Dutch issues are in foreign hands and investors are simply more active than here in the Netherlands. In order to increase our market share it is therefore important that this fragmentation of the market be overcome through the direct affiliation of foreign houses which can offer a positive contribution to the liquidity of Dutch stocks in our market. As such this link ranks high on the list of priorities for this year. This will represent a breakthrough to new relationships. In this we will be able to benefit from the favourable experiences with foreign brokerages on the Amsterdam Treasury bond Market.
Importance of the home market.....
The maintenance of the home market function is not only in the interests of trade and the investors who benefit from liquidity and transparency. The corporate sector, too, stands to benefit from the continuity of the home market in their own shares. Last year showed once more that foreign investors -- for whatever reason -- can suddenly turn against a stock such as Philips en masse, with all the resultant consequences. A well-functioning home market which is both prepared and able to take up the supply is and remains essential.
.... also for protection
The existence of a stable core of loyal investors in one's home country not only enhances the functioning of the home market but is also of key importance to companies in view of the limitations on legal anti-takeover constructions which -- it is to be expected -- will be further worked out this year. At present we are awaiting the government's response to proposals put forward by the Stock Exchange Association and the Association of Securities Issuing Institutions VEUO which -- in view of the situation which has developed in the Netherlands over the years -- are well thought-out. I would view it as a real breakthrough in existing relations if the existing legal anti-takeover constructions of a permanent nature were able to be overridden by a bona fide enterprise.
Corporate Governance
This year the debate is expected to focus further on "Corporate Governance", also a hot topic in international circles. It may broadly be described as the issue of the management of a company. In the coming months attention will focus in particular on an enlargement of shareholder involvement within the framework of the legal regime of large public companies. In concrete terms this could embrace the introduction of proxy votes to improve the functioning of the general meeting of shareholders. Another aspect requiring evaluation is the way in which many companies have statutorily limited the involvement of shareholders prior to gaining a stock exchange listing; a case in point is the position of holders of depositary receipts.
Relations between the private sector and investors must be improved
I deeply regret that -- partly as a result of the long-running debate on these issues -- the relations between listed companies and shareholders' representatives are not all they could be. Particularly in these times of rapid international expansion and economies of scale companies require the wholehearted support of their capital providers. The unmistakably more active role being taken by investors is still experienced by too many companies as a threat, while it could -- if taken seriously -- function to support an effective corporate policy. Constructive relations between companies and their shareholders are essential to the effective functioning of the national capital market. After all, a single joint interest is what it's all about: the continued profitability of our corporate sector. I hope that this year will mark a breakthrough in achieving closer relations between representatives of corporate and investor interests.
New stock exchange structure: common interest
This brings me to the most important task facing the Council of the Stock Exchange Association this year: the creation of a new bourse structure. While the Stock Exchange has as a result of national historical developments been built up and run by intermediaries, the new structure is based on the common interest of the private sector as demanders of capital, the brokers as intermediaries and the investors as capital providers in the healthy functioning of our capital market. The new structure aims to end the traditional distancing between the corporate sector and investors and the market organisation which has evolved from the existing structure. Once again this will represent a breakthrough to new relationships, which at the same time can contribute to eliminating the differences of opinion which have arisen between the corporate sector and investors with regard to anti-takeover constructions and corporate governance.
Interests of the corporate sector
The new structure assumes an active involvement of the corporate sector, due to their vested interest in a well-functioning capital market for their financing. I have already referred to the home market function. Larger companies will want to expand more internationally from a strong home market. As I have said, a lowering of the threshold to the Amsterdam market for foreigners has been given the highest priority. We are playing a pioneering role in Eurolist with the largest number of stocks. Now it is time for other European exchanges to show that they also mean business. The national market segment -- for medium-sized and smaller listed companies -- now requires added attention. This year we shall look into possibilities for further improving liquidity in this market segment. The climate for the stock market introduction of new companies -- particularly those falling into the category of second and third generation family-owned firms -- has clearly improved over the last year through the successful launches of 1995. For young high-tech companies, which attract active but often short-lived investor interest in the United States, a dual listing on our home market and on Nasdaq offers a good solution in practice. There does not seem to be much interest in the Netherlands for a separate European market in this segment. The stock exchange is eager to offer a helping hand to companies eligible for listing and help them find their way in what to many entrepreneurs is new territory. It goes without saying that this would not mean entering into the competition between members eager to take on a supervisory role.
Interests of intermediaries
A wave of mergers and takeovers in the brokerage segment has resulted in a strong division between the major internationally-oriented banks and securities houses on the one hand and those institutions operating mainly on the domestic market on the other. Rising costs (technical support, market personnel) and declining margins have forced the smaller houses to go for economies of scale and the well-considered choice to specialise in market segments where they can offer added value. But it is precisely this added value which has come under pressure from growing client independence and sophistication. The application of new communication and calculation techniques will accelerate this trend and strengthen the existing inclination to cut out the middle man (disintermediation). By actively exploiting these new technological possibilities the bourse can support both the intermediaries and its clients in their services to the corporate sector and investors.
Interests of investors
On the supply side of the market, professional investors have claimed the lion's share of attention in recent years -- and justifiably so in view of their increased market share and specific needs. These were met by the creation of specifically tailored market segments. But this does not mean that the status and interests of the private investor on the Amsterdam Exchanges NV have in any way been diminished. The order-driven retail segment has been retained as the centre of our market system -- and rightly so as London is now finding out.
More private investor activity?
All the signs indicate that the private investor is starting to take a more active individual role in the market. Following a period in which investment funds booked strong growth, expanding to account for 22 percent of total market capitalization in 1993, in recent years growth has stagnated and even declined slightly, slipping to 20 percent in 1995. Ranged against this is a slight increase in the share of smaller stock exchange transactions: from 67 percent to 70 percent of a sharply higher transactions total. This points to a degree of growth in the private investor activity on their own initiative. Such a development is welcome, for the active private investor forms an essential part of a healthy securities market. Stock exchange members took advantage of the trend by introducing new techniques and special tariffs.
Integrated services
In view of the deregulation of European capital markets which yesterday entered a new phase with the coming into force of the European directives on investment services and capital adequacy requirements, the new stock exchange organisation must be in a position not only to offer its clients more than competing exchanges (the majority of which are also reforming as public companies) but also to offer them more than the commercial trade and settlement facilities offered over the counter. The new structure of the stock exchange does this in two important ways; namely, integrated services and the seal of quality. To safeguard one's position as a medium-large securities market within Europe, an integrated approach to trade and settlement and to cash and derivatives markets is imperative. The new structure is based on this premise. Over the last year the necessary progress has been made with regard to settlement and the way has now been opened for close consultations with the European Options Exchange on the formation of a joint structure. Here too a welcome breakthrough has been achieved in forging new relations.
Quality
Quality, not only of service but also in the sense of the integrity of the market, will form the second element to distinguish the new structure from the competition. The value of the self- regulating and self-correcting market, which has been recognised as such in the latest government legislation, remains intact. The Association within which this self-discipline has been built up over 120 years will continue to exist for this purpose and the equity built up by it over the period will function as guarantee. It has been agreed that further rulings will be drawn up together with the Netherlands Securities Board STE on the way in which external supervision may be pursued effectively. After all, self regulation is not a goal in itself; it should prove its worth within the legal framework which offers scope for it. In addition the new European directives will result in new working agreements with regard to supervision, aimed at limiting as far as possible the costs of the new regulations which unfortunately are highly complicated in parts. For our medium-large market, the effectiveness and the cost structure of trading supervision is an area where we can and must do better than the competition.
It will have escaped no-one's attention that in recent years the Association has markedly stepped up its supervisory self-disciplinary task in line with changes in trading practice and social norms. In this process the Association has taken the lead, both by imposing its own regulations and in adjusting manpower and procedures. After all, disciplinary procedures offer more opportunities for effective action than existing legislation. In 1994 and 1995 the compliance and enforcement department conducted respectively 25 and 29 specific investigations into irregularities, reporting seven cases to the legal authorities. The follow-up of the latter still leaves much to be desired. In all cases the situation for all those involved must be clarified within an acceptable time frame. To this end there should be greater cooperation between the official investigative agencies -- which will have to make the necessary manpower adjustments -- and the exchanges' compliance departments, whereby the Netherlands Securities Board STE can play a key role as currently envisaged. This would lead to a pooling of expertise and an optimum use of available capacity. It is in the interests of all those concerned that delays such as have occurred in the last two years should not be allowed to arise.
Members' reimbursement
A year ago I ended my address with the announcement that the financial results gave the Council cause to extend a refund to Members of eight million guilders, a move which I stressed was of a singular nature. As such I am all the more happy that thanks to the exceptionally favourable results over 1995 the Council was once more able to extend a refund, and moreover of a bigger amount than the last -- to wit 14 million guilders. This will be divided among members on the basis of their use of the stock exchange's services and infrastructure. You may take it as read that this is the last year in which a measure of this nature will be taken. After all, under the new structure a pay out from the financial results of the holding in the form of a dividend to shareholders is more likely.
It gives me great pleasure that we may close the old regime with this financial windfall for Members. Increased intensity of use and cost controls contributed to this.
In closing
In summing up may I say that we can look back over a favourable stock exchange year, with many records and a good European performance. Moreover a breakthrough has proved possible in a number of important areas: the bourse structure, the new trading system, the debate on corporate protective measures. We have prepared ourselves well for the European challenge. This year the new opportunities afforded by these developments must be exploited further. I refer in particular to the affiliation of securities houses not based in the Netherlands to our market, the combination of trade and settlement in cash and derivative products under the new structure, closer involvement of the corporate sector and investors as well as improved relations between the two and last, but not least more effective cooperation with supervisory bodies and legal authorities for a rapid effective upholding of the regulations.
In short we may look back on 1995 with satisfaction, but there remains much to be done in the year just begun to ensure that within the perspective of European economic and monetary union our national capital market maintains a leading ranking in the European financial "Champions League". A degree of national "Orange" pride as regards our market would not be out of place, and the performance of recent years give due cause. May I close by wishing you a prosperous 1996 both personally and professionally.
Thank you for your attention.
For further information on the Amsterdam Exchanges NV, please contact: Thom Hoedemakers, Director of Communications, Amsterdam Exchanges NV, Beursplein 5, 1012 JW Amsterdam, Netherlands, Tel: + 31 20 5234014, Fax: + 31 20 5234950, or enter a text search "Amsterdam Exchanges NV" and "Business Monitor".
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.
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