european market vs american market

8/6/2019 European Market vs American Market

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European Market vs American Market



Bond Market EUR vs US; Equity Market EUR vs US; Clearing Systems EUR vs US;

Others

Index



Historically, the U.S. bond market dominated the global bond market, with the U.S. market representing a key sourceof financing for U.S. and foreign corporations.

However, since the expansion of the European Union and the

advent of the Euro-Zone, Europes importance in the global bond market as grown.

In 2001, the U.S represented 44% of the worlds bond market; theEuropean Union represented 28% (the Euro-zone countries: 23%).

By 2009, the U.S. share of the global bond market had fallen to 34%and the European Unions share had grown to 36% (the Euro-zonecountries: 30%).

While today the U.S. market is dominated by U.S. firms, anincreasing of U.S. company bond financing is taking place inthe European bond markets.

Nature of the Global Bond Market



T

rends in Debt Markets



The worlds bond market can be divided into two broadgroups:

(1) the domestic bond market and(2) the international bond market.

(1) The domestic bond market is comprised of all securitiesissued in each country by domestic governmententities and corporates.

In this case, issuers are domiciled (i.e., headquartered) in thecountry where those bonds are traded.

(2) The international bond market is comprised of non-residents borrowing in another countrys bond markets

The international bond market consists of two groups: (i) Foreign Bonds and (ii) Eurobonds.

C

lassifying the Worlds Bond Markets



Domestic Versus International Bond Market by

C

ountry; % of GDP



Foreign Bonds are bonds issued by a non-resident anddenominated in the currency of the country in which it isbeing placed (i.e., issued).

Example: Ford Motor Corporation issuing a yen denominated

bond in Japan Foreign bonds are subject to the regulations of the country

in which the bond is being offered. The SEC regulates foreign bond offerings in the U.S.

Historically, the most important foreign bond markets

have been in Zurich, New York, and Tokyo. Zurich and Tokyo because of low market interest rates; the U.S.because of its large market.

Foreign bonds are often swapped out for another currency.

F

oreign Bonds:C

haracteristics



Eurobonds are bonds issued by a non-resident anddenominated in other than the currency of thecountry in which it is being placed.

The bonds currency of denomination is referred to as anoffshore currency.

Example: Coca Cola issuing a U.S. dollar denominated bond inEurope. They are generally issued and sold simultaneously in

more than one market and thus the advantage of theEurobond market is that issuers can raise large sums of capital from investors all around the world.

Issuers include national governments, supranational organizations (such as the World Bank),AAAcorporations and global banks.

The U.S. dollar is the dominant currency of denomination for Eurobonds.

E

urobonds



Eurobonds are not regulated by the country of the currency inwhich they are denominated.

Eurobonds are bearer bonds, i.e., they are not registeredanywhere centrally, so whomever holds (or bears) the bond isconsidered the owner. Bearer status also enables Eurobonds to be

held anonymously. The Eurobond market is largely a wholesale (i.e., institutional

market) with bonds held by large institutions. Pension funds, insurance companies, mutual funds

Since they are denominated in an offshore currency, investors ineuro-bonds assume both credit and foreign exchange risks (if the

currency if denomination is other than their home currency). Some publically offered eurobonds trade on stock exchanges,normally in London or Luxembourg. Others are placed directlywith institutional investors without a listing (private placement).

T

he MainF

eatures of aE

urobond



Relative Growth of F oreign Bonds and E uro

Bonds



E

uro-Bond Market vs

U.S. Bond Markets Eurobonds: 1964 - 1969 Eurobonds; 1995 - 2006



Equity turnover in theUS rose by a further22% in 2008 to $70.7trillion in 2008, whilefalling by a quarter inEurope to $23.2trillion (Chart 8).Equity trading in

Europe therefore fell

back from 53% of theUS in 2007 to 33% in2008.

Equity Market



More international equity assets under

management

0

1000

2000

3000

4000

5000

6000

7000

L o n d

o n

N e w Y o

r k

B o s t o n

L o s A n

g e l e s

P a r i s

S a n F r a n

c i s c

F r a n

k f u r t

C h i c a

g o

M u n

i c h

International

Domestic

London has a far bigger international presence and weight. 45% of equity assets undermanagement are invested in international markets.

New York is a larger but mainly domestic market.



C

omparing UK and US asl

istingl

ocations London and New York exchanges offer optimal profile London has worlds highest reputation for regulation and governance Principles-based (UK) versus rule-based (US) approach

London has the most liquid equity market in Europe London has the worlds most successful growth market (AIM) London Stock Exchange offers worlds only location for liquid and

transparent trading of GDRs

London combines simple, f lexible disclosure with high reputation of regulators

US disclosure regime more prescriptive, exacerbated by need to protectagainst opportunistic securities litigation

London offers rapid turnaround by regulators, and limits the time regulatorscan take to approve offer documents

US: SEC review periods longer, with no certainty on turnaround time AIM offers potentially shorter transaction timetable

Timing

Disclosure

Trading

Cost-benefit analysis favours London

Profile



Comparison of international

l

istingl

ocations

Optimal Least suitable

High profile Rapid timing Simplified

disclosure

Trading /

liquidity

London Stock Exchange

NYSE / Nasdaq

Bovespa

Strategic financings from global companies will converge on London or New York

european market vs american market

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