how does the amsterdam stock exchange contribute to the dutch economy

8/13/2019 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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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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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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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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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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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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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

[email protected]



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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

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