How Does the Amsterdam Stock Exchange Contribute to the Dutch Economy
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Transcript of How Does the Amsterdam Stock Exchange Contribute to the Dutch Economy
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Amsterdam Stock
Exchange contribute to
the Dutch economy?
Research findings summary
FINANCIAL SERVICES
June 2013
2013 KPMG Advisory N.V.
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How the Amsterdam Stock Exchange contributes to the Dutch economy 1
Introduction
KPMG was asked by Stichting Capital Amsterdam to analyse the role of the Amsterdam Stock Exchange
(NYSE Euronext Amsterdam). This study describes the history and current role of the Amsterdam Stock
.
Furthermore, this study presents the view of the stakeholders of the Amsterdam Stock Exchange and
how they see the future role of the exchange. The most important findings and conclusions are
summarised on the next page.
Note: (a) Stichting Capital Amsterdam (SCA) is a foundation established on the first of January 2013, which aims to promote and encourage the international and national
importance of Amsterdam as a financial centre and the Amsterdam Stock Exchange in particular. Stichting Capital Amsterdam originates from the merger between
Stichtin Schadefonds Bele ers and Stichtin Vereni in voorde Effectenhandel
(b) In this research summary the term Amsterdam Stock Exchange refers to the exchange in a broader sense, while NYSE Euronext Amsterdam refers to the
organisation of the exchange in particular.
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How the Amsterdam Stock Exchange contributes to the Dutch economy 2
Key findings
Dutch businesses increasingly need external capital to finance future economic growth.
NYSE Euronext Amsterdam must be proactive and undertake new initiatives and there is an increasing
need for committed, local shareholders to meet the demand for capital. KPMG has performed an
independent study and conducted interviews with 55 market participants who are closely involved with
the Dutch capital market. The most important findings are summarised below.
1. In recent years, the role of the Amsterdam Stock
Exchange in facilitating economic growth has been
limited
It was not attractive for entrepreneurs to raise capital
through an IPO on the Amsterdam Stock Exchange;
It has become more difficult for Dutch companies to
4. The Amsterdam Stock Exchange does have
potential, but action is required. NYSE Euronext
Amsterdam should have more autonomy to :
Be able to proactively stimulate contact between
companies and investors;
Visit companies and attract them to the stock market;
attract investors because investors increasingly invest in
indices and have an international focus: stock picking
of Dutch equities has become less popular.
2. The Amsterdam Stock Exchange is considered to be
highly impor tant for the Dutch economy The exchange is a potential funding source for
companies to diversify their financing structure;
Collaborate with market participants to develop
attractive investment products.
5. Committed local investments for the longer term
should become more attractive
Stakeholders should proactively participate in
discussions on regulatory reforms to increase long term
investment and the rovision of rowth ca ital;
The Amsterdam Stock Exchange provides employment
to a broad range of high skilled professionals;
The exchange contributes to the international position
and reputation of the Netherlands.
3. Especially in the near future, the importance of a well
functioning capital market will i ncrease
Research should be conducted into the social impact
and the differences in return between internal versus
local investment.
growth in companies has decreased;
Retail investors are increasingly responsible for funding
their own retirement schemes.
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How the Amsterdam Stock Exchange contributes to the Dutch economy 3
In Europe in particular, the prevailing business model of stockexchanges has recently come under pressure due to the
internationalisation of capital flows, increasing regulatory
requirements, limited confidence in the economy and the need for
significant investments in IT. This has raised questions about the
need to have a local exchange in the Netherlands and how the
existing exchange contributes to the Dutch economy.
KPMG has researched the contribution of the Amsterdam Stock
1.1 Introduction
The core function of an exchange is to
increasing investor protection.
The Amsterdam Stock Exchange was
the worlds first stock exchange,
Exchange to the Dutch economy by analysing the changing role of
the exchange and conducting interviews with 55 stakeholders. The
main findings are summarised below.
corporates and investors. An
exchange provides a platform for both
the issuance of and trading in
securities. By offering a neutral and
efficient trading platform, an exchange
contributes to the transparent pricing
and liquidity of high-quality financial
founded in 1611. Since then, it has
played an important role in the Dutch
financial infrastructure and the
development of a number of new
trading initiatives. An example is the
creation of the Amsterdam Options
Exchange set up in 1978, which now
products. Furthermore, the exchange
plays a central role in the chain fromorder initiation by the investor to the
execution, settlement and monitoring
of a securities transaction.
Lastly, by imposing certain
requirements on corporates applying
for listin the exchan e stren thens
.
In 1997, the Amsterdam StockExchange demutualised. In 2001 an
IPO took place. This caused a shift in
its policy, with the exchange becoming
more focused on profit generation.
After the IPO the Amsterdam Stock
,
the corporate governance of Dutch
enterprises while at the same time
an integrated part of the international
exchange NYSE Euronext.
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How the Amsterdam Stock Exchange contributes to the Dutch economy 4
1.2 Conclusions
The Amsterdam Stock
Exchange is seen as animportant part of the Dutch
financial infrastructure
Listing has been valuable to
corporates in crisis situations
On the other hand, during the ongoingfinancial crisis, the Amsterdam Stock
Exchange has played a crucial role for
a number of companies which needed
both domestic and foreign investors.
Listing on a foreign exchange would
only be an option for a few Dutch
companies that operate globally.
Bank financing is currently the main
source of funding for Dutch companies
(80%) but this will diminish in theractca y a nterv ewees e eve t at
the Amsterdam Stock Exchange is key
element of the Dutch financial
infrastructure. The most frequently
cited arguments were that:
The exchange provides access to
capital markets and hence
positions. Since 2009 approximately
16 billion has been raised by 35
Dutch companies in secondary
placements. This amount includes
7.6 billion raised by ING to repay the
Dutch government. Local, committed
shareholders often played a crucial
future, which will increase the need for
alternative sources of funding. This
represents an opportunity for the
Amsterdam Stock Exchange as, at
present, only 3 billion to 4 billion per
annum on average is raised on the
capital market.
vers ca on o un ng o
growth and crisis financing), for
mid sized companies in particular;
It maintains a well-functioning
ecosystem around the exchange,
which provides employment to
several thousand specialists;
role in these events.
There is market potential for the
Amsterdam Stock Exchange
The reduced confidence in the
economy and the fact that a proportion
of share trading volumes has been
The exchange itself should takethe lead
Although the importance of the
Amsterdam Stock Exchange is
stressed by the majority of its
stakeholders, it appears that none of
them intends to take the lead to in It contributes to both the reputation
of the Dutch financial infrastructure
and the Dutch business climate.
The role of the exchange to
facilitate growth has been
limited by the fact that equity is
trans erre rom t e mster am
exchange to other platforms
(fragmentation) has led to a 55%
decrease in trading volumes since
2006. In the same period, the market
capitalisation of the Amsterdam
exchange decreased by 16% due to
the limited number of new listin s and
initiating concerted action. The
ecosystem around the exchange
consists of a large number of
stakeholders, each with their own
interests, and few stakeholders seemwilling to play a leading role in
supporting the exchange with
investors
In recent years, the role of the
exchange to facilitate the growth of the
Dutch economy has been limited. This
is the result of various developments
that have reduced the attractiveness
a reduction in share prices.
The fact that currently only 77 of the
2,900 companies with more than 250
employees are publicly listed indicates
that there is certainly potential for the
Amsterdam Stock Exchange in the
Dutch market. As such, the exchange
improving its position.
Despite the fact that, particularly
among banks and advisors, there is a
sense of urgency, many of the
interviewees see the exchange itself
and the Dutch state as the appropriate
parties to take the lead. Market
o nves ors o prov ng cap a o
Dutch companies.These developments have reduced
access to the Dutch equity capital
market, particularly for small and mid
sized enterprises. As a result, only 20
billion of equity capital has been raised
has the opportunity to play an
important role in financing futureeconomic growth in the Netherlands.
The economic crisis has put significant
pressure on profit generation by
businesses and has also limited the
amount of funding available from
par c pan s expec uronex
Amsterdam to formulate a clear and
unambiguous strategy, which is
supported by the Dutch government
and industry regulators. Market
participants also commented that a
certain share of the profits generated
by NYSE Euronext Amsterdam should
corporates and funds between 2002
and 2013, only 6 billion of which was
raised by Dutch companies.
banks and private equity. The
exchange can play an important role in
meeting the continuous demand for
capital by providing companies with
access to a broad investor base of
be available for local investments in
new product and market development
rather than being used for international
investments by the Euronext Group.
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How the Amsterdam Stock Exchange contributes to the Dutch economy 5
The Amsterdam Stock
Exchange must have autonomy
There appear to be various scenarios
in which the Amsterdam Stock
Exchange can fulfil a vital role in the
neighbouring countries, investment
capital is limited, while these investors
in particular are interested in investing
in mid sized companies, which is the
segment that is expected to drive
future economic growth.
introducing new indices (e.g.
sector indices);
3. Investigating changes in the
market structure that could
increase the liquidity in shares of
mid sized companies (similar to,
autonomy seems to be crucial to the
success of any and all of these.
Although many of the past benefits of
consolidation have diminished, most
interviewees consider it practical for
the Amsterdam Stock Exchange to
Maintain a positive reputation
It is crucial for the Amsterdam Stock
Exchange to maintain its current high
international standing. The reputation
of the Amsterdam Stock Exchange
(and the Dutch financial infrastructure)
should be safeguarded by ensuring
the NASDAQ market qualityprogram).
Liquidity could possibly be enhanced
by introducing a sector focus, in line
with the top sectors identified by the
Dutch government, or by the
introduction of relevant new indices,
exchanges, as this structure has the
following advantages:
Greater visibility regarding larger
foreign institutional investors;
Easy access to the exchange for
clearing members and professional
there is a reliable and efficient trading
platform (which reduces operational
risks), a solid corporate governance
framework for listed companies,
quotations of a number of renownedinternational companies and sufficient
liquidity in a broad range of
potentially established in cooperation
with other capital markets.
Increase collaboration with
other market participants
The Amsterdam Stock Exchange
requires sufficient autonomy to be able
market participants.
On the other hand, most interviewees
consider it crucial for the exchange to
increase its focus on the development
of the local market. A number of
recommendations to this effect are
outlined below.
compan es. ur ermore, e
demands of the companies that are
currently listed should be monitored
continuously.
Create greater visibility for mid
sized companies
to stimulate innovation in collaboration
with other market participants. The
exchange and its stakeholders can
increase the attractiveness of the
capital market by improving
cooperation between the various
market participants. While doing this,
the exchan e should also focus on its
1.3 Recommendations
Become more attractive to
committed, local investors
Committed, local investors who
provide corporates with long-term
financin la an im ortant role as
of a capital market, therefore the
Amsterdam Stock Exchange should
investigate ways to increase liquidity.
The exchange and its stakeholders
could attempt to do this by:
1. Proactively approaching both
role as a hub in the ecosystem and
be willing to reinvest a share of its
profits in the development of the local
market and new products.
By increasing collaboration with
market participants, the exchange
would ideall create a breedin round
shareholders. They provide the
company in question with a solid,
steady investor base which can
challenge managements decisions. In
the Netherlands, unlike in some
to enhance the visibility of each
group to the other;
2. Investigating whether liquidity
could possibly be increased by
for ideas to improve the functioning of
the market and for the joint
development of new products that
meet the demands of local investors.
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How the Amsterdam Stock Exchange contributes to the Dutch economy 6
Articulate the positive role
shareholders can play in the
development of a company
A number of environmental factors
have a negative impact on how the
Increase the attractiveness for
local, involved investors
The size of the assets fund managers
with a specific focus on Dutch
enterprises have available is an
investors such as pension funds. The
internationalisation is partly
attributable to the increased regulatory
pressure to reduce concentration
risks. It may well be that the long-term
risk:return ratio is not negatively
ms er am oc xc ange unc ons.
Firstly, a change in the attitude of
entrepreneurs would benefit the
exchange. Sharing ownership can
accelerate company growth and
expand the opportunities to attract
funding. But entrepreneurs must in
turn be willing to allow third parties to
accessibility of the capital market for
(mid sized) companies. The amount of
investable assets at such investors in
the Netherlands is decreasing. It is
therefore important for its future role
that the Amsterdam Stock Exchange
takes steps to increase the
focus. The negative impact of the
reduced availability of capital for Dutch
businesses should be taken into
account in this analysis.
have access to their companies and
provide insight into how they operate.
Furthermore, the public needs to
become aware of its increasing
responsibility to achieve sufficient
returns to fund its own retirement
schemes.
attractiveness of the Dutch capital
market for these investors.
Specialist fund managers also appear
to play an important role in attracting
foreign investors to Dutch companies.A crucial factor in investments by this
group is the 5%-
Legislation should allow for risk
taking in a responsible way
There are several laws and
regulations which together have had a
negative impact on the attractiveness
of investing in listed equities and on
ee nem ngsvr s e ng , an
advantageous tax regime for investors
who hold at least 5% of a Dutch
company. A reduction in the threshold
from 5% to 3% could increase the
liquidity of Dutch small and mid sized
companies.
v u
in equities trading. Both the Dutch and
international regulator needs to realise
that it is essential to increase the
attractiveness for investors to invest in
shares (equities) against reasonable
returns in a responsible way, because
these investments are vital to support
ur er nves ga e e e ec s
of an increase in internationalinvestment by long-term
investors
Finally, the findings of this study show
the need for an investigation into the
social im act of the increasedfuture economic growth.
international focus of long-term
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How the Amsterdam Stock Exchange contributes to the Dutch economy 7
Contact details
KPMG contact regarding this report:
Age Lindenbergh
Partner, Amsterdam, KPMG Advisory NV
Global Head, Exchanges & Financial Market Infrastructure
Telephone: +31 20 656 7965
2013 KPMG Advisory N.V.
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.
prepared for, and should not be considered to be suitable for any other purpose than the purpose as defined in the report
and/or the terms of engagement. This study was commissioned by Stichting Capital Amsterdam. KPMG accepts no liabilitytowards any other party than Stichting Capital Amsterdam for this work and the report.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular
individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that
such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should
act on such information without appropriate professional advice after a thorough examination of the particular situation.
. ., ,
of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG
International Cooperative (KPMG International), a Swiss entity. All rights reserved. Printed in the Netherlands.
The KPMG name, logo and cutting through complexity are registered trademarks of KPMG International.