Nasdaq in Europe: the stakes are high for high-tech exchanges

At the beginning of November, the US National Association of Securities Dealers (NASD) - best known for its New York-based electronic exchange, the Nasdaq - named London as the chosen hub for its Nasdaq-Europe venture.

The move sees the association team up with News Corporation's epartners investment arm, Japan's Softbank, and Viventures, the Internet investment vehicle for French conglomerate, Vivendi.

UK Chancellor Gordon Brown predictably heralded the announcement as an endorsement for the City. Rightly so. The other obvious option, Frankfurt, is a financial centre that through the success of the electronic futures exchange the DTB (now part of Swiss-German Eurex), the Neuer Markt, and the post-euro European Central Bank, has stolen much of the financial limelight over the past 18 months.

But the choice of London is more important for what it means to start-ups - particularly high-tech start-ups - around Europe.

Although the main stock exchanges in Europe are strong, and there are ongoing negotiations to link the London Stock Exchange (LSE), Deutsche Boerse and six other major markets by November next year, companies floating in Europe have been at a disadvantage compared to their North American counterparts.

Despite the establishment and partial success of exchanges such as AIM, Brussels-based Easdaq, the German Neuer Markt, and Tradepoint (owned by Reuters' Instinet subsidiary), Europe has suffered from a lack of a strong, liquid market for start-ups looking to go public.

Nasdaq has solved that problem in the US.

James Bennet, managing director of the European Technology Forum, said: "If you look at the success of Nasdaq - how it has created the liquidity in the marketplace to enable VCs [venture capitalists] to invest in early stage companies in North America and then get a quick exit - and how poor by relative standards Europe has been, I think that clearly demonstrates the need for a single market."

To great fanfare - and also the support of chancellor Brown - the LSE's techMARK index of high-tech companies was launched a day before Nasdaq's Euro-push, but that initiative may now be overshadowed by the American invasion.

Tim Taylor, MD of Greenfield Ventures and advisor to a number of IT start-ups, said: "The Nasdaq coming here represents an amazing opportunity. It will crystallise the way everyone is thinking in the UK. AIM is starting to show tremendous liquidity, but it's good to see a market come to us."

Tim Simon is the CEO and founder of intranet and business management software company, Mondas, and a veteran of three European floatations, the last on AIM with Mondas three years ago.

He said: "AIM has failed in brand terms. Nasdaq has a very good image and is an exciting brand. In the UK, we're often hopeless at raising money, but this should give companies another option."

Some UK high-tech companies have in the past opted solely for Nasdaq (e.g. Micromuse) or floated jointly on the LSE and Nasdaq (ARM, Freeserve). However, the latest developments should mean the same can be accomplished without venturing to the US.

Moreover, the NASD earlier this year said it will establish a similar offshoot in Japan in 2001.

The prospect of a New York-London-Tokyo axis of electronic Nasdaq exchanges - and how this could make raising investment monies much easier - should be further good news for start-ups looking for funds.

It is also a formidable challenge to established stock exchanges.

As one Silicon.com reader noted: "That sort of set up should also be attractive to any company, not just IT or biotech firms."