The Amsterdam, Brussels and Paris bourses will merge to form a new exchange whose units will trade specific financial products - a major move toward reshaping Europe's markets amid mounting global competition.
"They sealed the pact on Saturday," a source close to the tripartite talks said. "The big innovation is that they'll trade different products."
The move will put increasing pressure on the Dublin exchange which was one of the worst performing in the EU last year and was relying on a general European alliance for its future. Mr Tom Healy, chief executive of the Dublin stock exchange, said the news undermines the alliance of the European exchanges, of which Dublin was a part. There will be a European blue chip index next year, he added. It now appears that it will be more competitive with a number of groupings vying for it.
The French newspaper Le Journal du Dimanche said the new "Euronext" exchange, set to become Europe's second largest after London, was preparing for a launch in September and would be headed by Mr Jean-Francois Theodore, president of Paris-Bourse.
Paris-Bourse officials were not immediately available for comment but the source said a news conference to announce the merger had been scheduled for today in London.
The Paris exchange's $1.4 trillion capitalisation is already the second-largest in Europe, due to heavyweights like France Telecom and conglomerate Vivendi.
Paris is expected to extend its blue-chip portfolio with the addition of top Belgian and Dutch picks.
"For the small European exchanges, specialisation may be not only the name of the game but of survival," a banker at a Paris brokerage firm said.
Mergers have drained Brussels' capitalisation, now down to about $180 billion (€185 billion) concentrated in a handful of major companies, including financial group Dexia, which also trades in Paris.
Amsterdam's capitalisation of about $680 billion (€704 billion) is also mostly held among a few big issues, such as Dutch financial group ING, which is bidding for French bank CCF.
Belgium is expected to become the hub for small and mediumcap companies, a market that could become very attractive to growing numbers of small investors using on-line brokers, traders said.
Le Journal du Dimanche also said Euronext, which will be incorporated under favourable Dutch laws, would handle futures and derivatives trading.
Paris may also launch a market for spot electricity trading late this year that would be based around the French and Benelux power markets.
Euronext still needs approval by the European Commission that clears mergers and aims to block anti-competitive practices.
The Commission is already looking into a planned eightbourse European alliance that includes Euronext's members but the future of the pan-European bourse seems shaky, given uncertainty over the London and Frankfurt exchanges' strategies.
Both the London Stock Exchange and the Deutsche Boerse have announced they will go public to finance unspecified expansion plans. Euronext's birth may just have upped the ante for other bourses to compete for capital against fee-slashing on-line brokers and electronic exchanges.
