990603 Preda (3276)

"THIRD EUROPEAN FINANCIAL MARKETS CONVENTION"

MILANO, 3 GIUGNO 1999

Testo dell'intervento del prof. Stefano Preda, Presidente della Borsa Italiana e Vice Presidente FESE

1.    Globalisation, market regulation and surveillance

The financial market and, in particular, the European exchange industry are undergoing a thorough revolution which is affecting considerably the strategies and activity of all components.

Vis-à-vis these events, where the priority need is to strongly harmonise and better integrate market operations, it is useful to wonder what is the role of regulation and surveillance.

As it often happens in these situation, a change of vision is probably necessary. So far financial regulation ha been defining procedures and codes of conduct of market participants offsetting stability and fairness requirements, as well as development and innovation. Market and lawmakers'/supervisors' speed is structurally different and it would be dangerous to run after market evolution with overwhelming rules which could speed up centrifugal dynamics.

Probably regulation will be characterised by a new set of common non-strictly codified principles, to leave room to a more flexible enforcement at domestic level.

A few years ago, the implementation of ISD has lead to highly significant results, and FESCO is now moving towards the harmonisation of domestic regulations. I do believe that we all have to define a set of common principle for public saving solicitation, take-over bids (also cross-border), company law (we need articles of association of European companies) and, last but not least, financial tax regimes.

It is important to notice that this harmonisation process is fundamental not only to ensure a balanced growth within the European Union but also to allow a positive confrontation between Europe and other international financial areas.

I am aware of the existence of frictions hindering financial market integration. However, it is of paramount importance to conceive a scenario ruling out regulatory and fiscal arbitrage.

From a European viewpoint, I believe that it is fundamental to stress how to avoid the risk - as it sometimes appears looking at the ES market - that regulation becomes a constraint to the growth of a thorough cross-border trading in all directions in the big financial areas (Europe, North America, Asia).

The same is true at European level. Within this context, I wish to stress that Italy - which until recently was criticised due to its market closeness - has been able to get a new adequate set of rules which, from a certain view point, is in the forefront. It has, in fact, enabled the implementation of a worldwide size hostile take-over bid over a recently-privatised company (active in a strategic sector for the domestic economy) and the presence of relevant foreign stakes in main domestic banks.

So I believe that the central role of the market in orienting economic decisions is one of the main objectives to be pursued at continental level, in favour of all market participants and of our economic systems growth.

2.    The role of Exchanges

For one year now, the European Exchange industry has been characterised by the acknowledgement that international positioning is fundamental for development. You are aware that on 4th May eight European Exchanges - including the Italian Exchange - signed an agreement aiming at creating a pan-European equity market. This project will be possible only after having harmonized market rules, legislation, trading, clearing and settlement systems as well as fiscal regimes.

I believe that the implementation of a strong policy of international alliances is essential for the following reasons:

• to provide members a wide range of products enhancing efficiency and liquidity;
• to provide issuers with an enlarged international exposure;
• to get an efficient competitive positioning of the whole national financial marketplace;
• to benefit from significant economies of scale and scope in the technological development and in market operations management policies.

The process of integration towards a pan-european market is affecting almost all the business system elements of the exchange industry, that is not only the management of trading system. This is the reason why I believe that the integration process will be step-wise.

A rapid basic rule and technological infrastructure harmonisation process (for instance trading hours) seems to be inevitable.

As to all other aspects, it is essential that - as previously said - we reach quickly an adequate level of harmonisation. On the contrary, the persistence of constraints and frictions at domestic level could provoke a distortion of the investment flows allocation and limit development opportunities not only of each market but of the whole European financial region.

Thank you for your attention.