TSE may join alliance

TALLINN - A union-happy Europe also takes into consideration the power of stock exchange alliances.

Paul Arlman, Secretary General of the Federal European Stock Exchange, said a decision on the Tallinn Stock Exchange's admission as a corresponding member of the 19-exchange, Europe-wide conglomerate will be made in June. The next step toward accession is associate member status, which could take nearly a year to acquire, he said.

FESE aims to develop security markets in Europe by cooperating in trading, clearing, settlement, security deposits and regulatory matters.

"[Joining] allows Tallinn Stock Exchange's voice to be heard," Arlman said. He pointed out that financial markets harmonizing are often a precursor to governments' attempt at the same, as markets integrate significantly faster.

Arlman explained that the benefits of stock exchanges are two-fold, the first being cost.

"If you provide services together, it becomes a trading machine," he said, adding that today's stock exchanges have evolved into intensively client and general public-oriented services.

The second major benefit is strategic, Arlman explained, as the exposure given the exchange is much greater under a large group of investors and intermediaries.

"It would be silly to have Netherlands, Belgium and Luxembourg represented separately in London. Of course, we do it together," he drew as a comparison.

Tallinn Stock Exchange has also signed a letter of intent, officially charting objectives and a negotiation timeline, to link itself with the Scandinavian stock exchange alliance NOREX.

"We are very pleased with the benefits we expect to get out of this [union,] from all that we've already seen," NOREX president Paul Erik Skaanning-Jorgensen told reporters, noting that since NOREX was created and 12 new members have joined, liquidity has gone up in their respective markets "very significantly so."

The integration of the TALSE, he said, would signal reaching over the traditional Western European borders into a new and growing market.

However, Estonia still needs to adopt EU-compliant regulations, so the process will be prolonged indefinitely, he reminded.

Kristel Kivinurm, managing director of investment security at Trigon Capital, agreed that a Tallinn Stock Exchange union with NOREX would be desirable, despite delays due to legislation requirements.

"It would enable [the TALSE] to go up. We would be able to generate more interest in the Baltic markets, especially for the leading stocks like Hansapank and Estonian Telecom," she said.

The TALSE has proved it is an up-and-coming bourse, gaining 38 percent last year, while market capitalization of the exchange skyrocketed 298 percent to 28 billion EEK ($1.75 billion), according to the Estonian Securities Market yearbook.