Abstract

The Role of Regional Stock Exchanges on the German Capital Market Today and Tomorrow (Part II)

Whilst part I of this contribution attempted to objectivate under framework policy aspects the controversial discussion about the future structure of the German stock exchanges, this Part II analyzes on the basis of the existing structure what the specific consequences would be for the German stock exchanges if competitiveness were made the basis of stock exchange policy also in Germany in order to strengthen and accelerate desirable evolutionary processes. It would not be desirable to rely exclusively on the international competition among stock exchanges because this would cover only parts of the German stock exchange and loan markets. It would rather be more advisable to retransfer from the Working Party of the German Stock Exchanges to the regional stock exchanges the competences that exist in the shaping of products and in marketing so as to give them enough scope for clearly presenting themselves as competitors like their American and Japanese sisters. The competitive pressure emanating from the regional stock exchanges and from systems such as MATIS and IBIS on fee volumes as well as bid and offer price spreads should continue to exist because this makes the German stock market atractive for domestic and foreign investors and because it tends to reduce the capital costs in the corporate sector. However, this presupposes that every stock exchange and every system offers equal opportunities in respect of all the securities for winning execution orders by means of the quality of the trading services and of the especially favourable bid and offer price spreads they quote. The stock exchange supervisory and the legislative authorities must ensure such equality of opportunities and prevent the dominant member banks from using their power of directing order flows in a way that would dry out certain locations or systems, which would increase the costs of all transactions and represent a very heavy burdern on investors and issuers in Germany.