London, Frankfurt stock exchanges join hands

"Through this plan, starting with combining the trading of leading German and UK stocks, we aim to create the nucleus of a single European stock market which will ultimately be based on a common electronic trading platform," they said in a joint statement in London.

They said that eventually the pan-European market would cover about 300 blue chip stocks and that participation by other exchanges "will be welcomed".

The first phase of the project is to be completed in time for the launch of the Euro single currency in 11 Eurpopean Union countries on January 1, the statement said.

"The goal of thealliance is to deliver a low cost efficient and accessible equity market infrastructure … to take full advantage of the opportunities arising from the development of a pan-European capital market," they said.

The statement said the first stage would be providing "a common access package for both exchanges and a single point of liquidity on the relevant domestic exchange for UK and German blue chip companies currently traded on both markets."

"It is expected that significant progress can be made within the next 12 months in the harmonisation of market rules and conventions related to these large stocks."

Seifert and Casey said, "With this alliance, which has the full support of the boards of both exchanges, we are beginning the process of creating a unified European equity market — accessible, cost-effective and efficient, benefitting all the users of our markets."

The new partnership was a sharp reversal of policy by the London Stock Exchange, which had resisted links with its rivals in Europe.However, the German equity market has been active in building partnerships with foreign counterparts.

Seifert told reporters in London that the London-Frankfurt deal would not affect the Euro Alliance, in which the German, Swiss and French exchanges have agreed to co-operate on stock indices and derivatives. The deal also comes against a background of fears in the London financial district that its pre-eminence.