Synergies, risks and the regulation of stock exchange interconnection

Abstract

In this article, the author discusses the phenomenon of stock exchange interconnection and the synergies that it can bring. He investigates the methods and rationales behind various models currently employed such as the Euronext virtual model, the integration between the London Stock Exchange and the Milan Stock Exchange, and the ASEAN model in Asia. Despite the fact that there are many models of interconnection, none of them are truly interconnected in that they share a common trading platform, a single clearing house, and a single central securities depository. Divergence in national law remains a major obstacle to interconnection. This is because, notwithstanding a certain degree of harmonisation achieved in jurisdictions such as the EU, national laws continue to play an important role in regulating financial market infrastructure such as stock exchanges. Therefore, without a clear regime governing jurisdiction and applicable law, true interconnection is unlikely to be achieved.