NOREX asks Balts to join alliance

TALLINN - The NOREX Alliance, consisting of the Stockholm and
Copenhagen stock exchanges, formally invited the three Baltic bourses
on Sept. 24 to accession talks, signaling a green light for further
negotiations aimed at expanding the Baltic securities markets.

"We are glad that NOREX Alliance has shown its strong determination
to cooperate with the Baltic exchanges. Integration with NOREX should
be a major qualitative leap," Gert Tiivas, board chairman of the
Tallinn Stock Exchange, said in a statement. The next step will be
to sign a letter of intent between the parties, said Eva Palu, head
of the investor relations department at TSE. Palu could not comment
on when the letter would be signed, adding that there are many issues
to be discussed before an agreement would be made.

"Although a lot of issues need to be discussed and resolved, we
strive to move the process forward without undue delay to reach an
agreement satisfactory to all parties," Tiivas said.

The major issues for the exchanges are working out details to connect
the bourses - the information technology software needed - and
hammering out rules to regulate the exchanges.

Currently, regulation between the Baltic exchanges and NOREX differ
and resolving those differences will be one of the first tasks of the
exchanges, said Kristel Kivinurm, managing director of investment
securities at Hansa Investments.

"Tallinn has one regulation, whereas NOREX has another - that has to
be in line [before there can be one trading floor]," she said.

Joining what Tiivas describes as the "one-stop shop for all Nordic
and Baltic financial products" would create more access for the
Baltic bourses to the Scandinavian and European capital markets and
more opportunities to trade at lower cost, he said.

Tiivas added that more direct access to markets creates better and
cheaper financing possibilities for the Baltic exchanges. One concern
to combining the exchanges is the ability of smaller shareholders to
compete on a larger market with different conditions, said Urmas
Riiel, head researcher at Hansapank.

"Playing by the rules of the big boys of Scandinavia is difficult," he said.

Kivinurm said, however, that the TSE would not let smaller companies
fall off the market, and during negotiations the exchange will "take
into consideration the small shareholder."

Besides joining the NOREX alliance, the exchanges of Tallinn, Riga
and Vilnius had considered creating a Pan-Baltic exchange. Riiel said
that the plans for a three country alliance were all but dead in the
wake of the Nordic invitation, but the issue would be discussed at a
roundtable meeting at the TSE next week. NOREX also has plans to
invite the Oslo Stock Exchange to join the alliance, according to
Kivinurm. Because of the larger market volume of Oslo's exchange,
Kivinurm said the Norwegian exchange's accession talks will probably
move more quickly than the those of the Baltic states. She predicts
that between negotiations, updating software and adopting
regulations, the Baltic exchanges will have to wait several months
before they are part of the alliance.