ECONOMIC SPOTLIGHT - PARIS BOURSE REFORM
French stockbrokers will lose their
jealously guarded 180-year-old monopoly of share trading over
the next five years under reforms announced on Tuesday by
Finance Minister Edouard Balladur.
    But with the prospect of fresh money flooding into their
seriously under-capitalised share trading business, there were
few signs of regret over the gradual passing of an era.
    "It is a question of survival after London's Big Bang," said
private market analyst Edouard Cointreau.
    Balladur said the long-expected reform of the Bourse
structure will progressively allow domestic and foreign banks
to buy stakes in stockbrokers' capital, while at the same time
brokers will be allowed access to the money markets.
    The project foresees free access to the Bourse by January
1, 1992, the date set for the opening of a unified European
financial market.
    The planned reform, expected to be put before Parliament
before the end of the Spring session, will open up the capital
of the 45 Paris and 15 regional stockbroker houses in three
stages beginning on January 1 next year.
    The aim of the move, following the examples of Tokyo and
London in opening up their tightly-controlled membership, was
"to take up the challenge of European financial integration and
fierce international competition," Balladur announced.
    Cointreau, founder and chairman of the private market
analysis company Centre d'Observation et de Prospective
Sociales (COPS), said the reform was a natural development.
    "The Paris market is rising but that cannot go on for ever.
The brokers know it's a good time to sell part of their
business," he told Reuters.
    The reform was inevitable given the European Community
directive, said Ben Williams of Paris brokerage house
Fauchier-Magnan. "From a French point of view one cannot be very
disappointed," he said, "but some brokers must be a bit worried
as it is not entirely evident that all brokerage houses are
worth a lot of money."
    He said that with the expansion of the market generally
here quality brokerage staff would do very well out of the
reforms in salary terms. "But on the whole expertise is not very
deep and the banks already have a lot of such expertise."
    Dealers agreed generally that by allowing brokers to
reinforce their equity capital, the reform was expected to
improve their ability to take large positions in stocks and
bolster the liquidity of the Paris market.
    The French Banking Association, grouping domestic and
foreign banks operating here, welcomed the reforms. French
banks, which only won direct access to the bond markets last
September, have never been happy with the stockbrokers'
continuing monopoly on share trading.
    Brokers said it was too soon to say what form links with
other foreign brokerage houses and banks might take. "Nobody is
willing to talk about this yet but one can be sure that
alliances have been formed over the past years," Williams said.
    Some brokers said the opening up of their capital to banks
could pose questions such as whether the major banks might all
aim for stakes in the most prestigious and best-performing
brokerage houses, or whether the smaller houses might be
targetted for swallowing up to give banks an easy entry onto
the Bourse.
    Individual banks were reticent over likely strategy with
their future partners. "Discussions will get underway soon but
no specific choice (of broker) has been made yet," a spokesman
for Credit Lyonnais who declined to be named said.
    Balladur's project does not touch on dealing commissions
but many dealers said the question had to be addressed since
current bank commission was higher than that of brokers because
banks, who cannot deal directly in shares, have to pay a fee to
the broker they use for customer trading.
    According to a study by the Bourse official watchdog body
COB in January, dealing fees on a transaction in shares for a
gross total of 1,000 francs were 14.86 pct if the order was
placed directly by a broker, against 20.79 pct for the same
order passed through a bank.
    Xavier Dupont, Chairman of the Stockbrokers' Association,
said the reform would not mean an end to the fixed scale of
commissions. He said the overall reform would give the French
financial markets a "dynamic and efficient organisation." But as
both brokers and bankers commented, "let's wait and see."
 REUTER
