Irish Stock Exchange plc

28 Anglesea Street
Dublin, D02 XT25
Ireland
Telephone: (+353 1) 617 4200
Fax: (+353 1) 677 6045
Web site: http://www.ise.ie

Wholly Owned Subsidiary of Euronext N.V.
Founded:
1793 as the Dublin Stock Exchange
Employees: 125 (est.)
Sales: €32.3 million ($38.7 million) (2017)
NAICS: 523210 Securities and Commodity Exchanges

Doing business as Euronext Dublin, the Irish Stock Exchange plc (ISE) is a Dublin-based operator of four financial markets. The Main Securities Market is devoted to the listing of shares, debt, funds, and exchange-traded funds (ETFs), and the Global Exchange Market is a specialist debt market. Companies seeking to raise equity rely on the Enterprise Securities Market, which is tailored to the needs of smaller growth companies, and on the Atlantic Securities Market, which provides a complementary quotation for companies listed in U.S. markets. The ISE is 100 percent owned by the Dutch-based Euronext N.V.

18TH-CENTURY ROOTS

The Irish Stock Exchange was founded in 1793 as the Dublin Stock Exchange. Operating out of the Old Exchange Coffee House, the exchange mostly traded the stock of canal companies and the Irish government. Along with an exchange in Cork, it was chartered by Ireland's Parliament with the passage of the Act for the Better Regulation of Stockbrokers in 1799. That year the exchange moved to a new location.

Over the following decades a wider range of companies listed on the Dublin Stock Exchange. In the 1830s the exchange experienced a boom in canal and railroad stocks. Over time a growing number of banks, gas companies, mining concerns, and other businesses formed limited companies and were floated on the exchange. To keep pace, the exchange opened a new trading floor in 1878. The Dublin Stock Exchange joined with other exchanges in Ireland and Great Britain in 1890 to form the Council of Associated Stock Exchanges. Another listing boom occurred in the 1890s, when a bicycle fad led several bicycle manufacturers to go public on the exchange.

For most of the 20th century, the Dublin Stock Exchange continued to operate independently. Much of Ireland gained its independence from Britain in 1922 with the creation of what was then known as the Irish Free State. The following year the first Irish Free State bond was listed on the exchange. It was not until the Dublin Stock Exchange was on the verge of its bicentennial, however, that it took steps to expand its membership.

RENAMED THE IRISH STOCK EXCHANGE

COMPANY PERSPECTIVES

Part of Euronext's federal model powering pan-European capital markets.

Although membership in the ISE now topped 100, it remained a sleepy exchange in comparison to the New York Stock Exchange and other major exchanges and bourses around the world. An April 1972 New York Times article by Daniel M. Doherty offers a glimpse of ISE operations: “From comfortable positions in old, leather-upholstered chairs arranged in twin ovals on the trading floor, brokers convene for 45 minutes mornings and a half-hour afternoons. Scarcely a third of the 104-broker membership was on hand on a recent morning as a man stood in front of a blackboard covering a wall of the trading room and called off quotations on some 100 Irish companies listed on the exchange.” By the end of the day, Doherty noted, only about half the listed stocks had been traded.

At the time, ISE members were deciding whether to merge with other British and Irish exchanges to form the Stock Exchange of Great Britain and Ireland. Several exchanges had already agreed to the merger. Beyond their reluctance to replace deep leather chairs and chalkboard trading with computer terminals and instantaneous electronic stock quotations, ISE members were concerned about “special national status” issues. “Points being discussed with the British include the timing of government stock issues, the setting of commission rates and the licensing of brokers,” Doherty reported.

JOINING THE STOCK EXCHANGE

In March 1973 the ISE, with its 104 members from 33 firms, agreed to join the Stock Exchange of Great Britain and Ireland (known simply as “The Stock Exchange”). The ISE received one significant accommodation: only by the authority of Ireland's minister for finance could the Dublin trading floor be closed. Although part of the Stock Exchange, the ISE also continued to operate under its own name.

The ISE enjoyed another boom period in the 1980s, driven by the listing of and trading on North Sea oil exploration companies. By relaxing rules to allow companies to obtain a partial listing on the basis of a prospectus alone, the exchange also encouraged listings of Irish companies in other industries as well as subsidiaries of U.K. and U.S. firms.

Even greater changes were in store for both the ISE and its parent organization. In what was described as the “big bang,” the London stock market and banks were deregulated in October 1986. Among the changes was the switch from open-cry to electronic trading. At the time, the trading volume of the New York Stock Exchange was 13 times greater than the London exchange. By allowing computer and telephone orders, the London exchange narrowed the gap significantly. Further, fixed commission charges were eliminated and the distinction between stockbrokers and stockjobbers removed. The Irish government, however, did not permit all of the changes, such as the removal of fixed commission charges. Hence, the ISE enacted its own slate of “small bang” changes. With deregulation came a new name for the parent organization. In 1987 the Stock Exchange of Great Britain and Ireland was renamed the International Stock Exchange of the United Kingdom and Republic of Ireland Limited.

Also in 1987 the ISE hired a new CEO, Tom Healy. He was an executive at the Irish Trade Board (Coras Trachtala) in his mid-30s when he noticed an ad for ISE general manager (as the title of the chief executive was then known). After applying for the post, he admitted during his interview that he had no idea how the stock exchange actually worked. He was told that his lack of knowledge could be an attribute, because the “big bang” had upended the traditional ways of running an exchange.

DIVERSIFICATION

Healy's tenure as the head of the ISE lasted 20 years. Under his watch, the exchange began to diversify. In 1995 the ISE regained its independence from the Stock Exchange with the creation of the Irish Stock Exchange Limited, which was owned by Ireland's seven largest stockbrokerages. That year the first U.K.-based members joined the reconstituted ISE. In 1999 the German bank Deutsche Bank joined the ISE, becoming the first member firm located outside the United Kingdom and Ireland.

KEY DATES
1793:
The Dublin Stock Exchange is founded.
1973:
The Irish Stock Exchange merges with the Stock Exchange of Great Britain and Ireland.
1995:
The Irish Stock Exchange regains its independence.
2014:
The Irish Stock Exchange restructures as a public company.
2018:
The Irish Stock Exchange is acquired by Euronext N.V.

The new century was not free of difficulties. In February 2002 two of Ireland's largest companies, Allied Irish Banks and the drug company Elan Corporation, revealed problems that caused a 12 percent drop in the exchange's benchmark ISEQ index. Elan was accused of hiding debt through shady accounting, and an Allied trader in a U.S. subsidiary had run losses of about $700 million on foreign exchange markets. The combined market capitalization of the two companies accounted for 35 percent of the total ISE market, a portion that fell to 24 percent almost overnight.

During this period the ISE also had to contend with stiff competition from London's Alternative Investment Market (AIM), which became the desired choice for small to medium-sized Irish companies seeking a listing. In April 2005 the ISE established its own answer to AIM in an attempt to win back some of the domestic business. Called the Irish Enterprise Exchange (IEX), it was a vehicle designed to help small and medium-sized companies, especially start-ups, raise capital, from as little as €2 million to as much as €100 million. Five years later the IEX was renamed the Enterprise Securities Market.

Healy retired in 2007 and was succeeded as CEO by one of his lieutenants, Deirdre Somers, who had worked with him for 12 years. She would guide the ISE through the next stage of its evolution: demutualization. A plan to restructure the ISE as a joint stock company began to take shape in 2012 but required regulatory approval. In April 2014 the process was completed, and the ISE became a joint stock company, with the six member firms that owned it (the Irish stockbrokerages J&E Davy, Goodbody, Investec Ireland, Campbell O'Connor, and Cantor Fitzgerald Ireland, as well as the Royal Bank of Scotland) as shareholders. As part of the change, they shared a one-time €27.5 million payout. A short time later the Royal Bank of Scotland exited its investment.

BREXIT CHANGES LANDSCAPE

Under the new form of ownership, the ISE enjoyed some notable successes, but conditions changed dramatically in June 2016 when the United Kingdom voted to withdraw from the European Union (EU), a move popularly dubbed “Brexit.” Because Ireland remained in the EU, the ISE became an ideal partner for an international bourse attempting to pull business from the London Stock Exchange. Somers, who had previously defended the ISE's independence, began to soften her stance about the exchange being acquired by a larger foreign concern, provided it was done to achieve goals that the ISE could not accomplish on its own.

In the fall of 2017, an agreement was reached to sell the ISE to Euronext N.V. for €158.8 million, the proceeds to be split among the ISE's five remaining shareholders. Based in the Netherlands, Euronext operated the Amsterdam, Brussels, Lisbon, and Paris bourses. It had been founded in 2000 through a merger of three bourses, and in 2007 it was acquired by the New York Stock Exchange, but in June 2014 Euronext was taken public to regain its independence.

In March 2018 the sale of the ISE was completed, and the exchange began doing business as Euronext Dublin. Somers remained CEO and was also appointed head of debt, funds, and ETF listings for the wider group. The change in ownership also led to the July 2018 closure of the European Wholesale Securities Market Limited, a subsidiary 80 percent owned by the ISE that operated a wholesale debt securities market.

The immediate future brought numerous uncertainties for the ISE, mostly related to how Brexit might play out. As the only English-language, common-law jurisdiction left in the European Union following Brexit, the ISE would be in an advantageous position. It might be able to attract equity and debt listings from United Kingdom entities in need of unfettered access to the European Union, and it could possibly draw listing traffic from London as well. The Irish Stock Exchange had clearly thrown in its lot with Europe, not London.

Ed Dinger

PRINCIPAL SUBSIDIARIES

ISE Listing Services.

PRINCIPAL COMPETITORS

London Stock Exchange Group plc; Nasdaq, Inc.; New York Stock Exchange LLC.

FURTHER READING

Boland, Vincent. “Irish Stock Exchange Goes Public.” Financial Times, April 14, 2014.

Carnegy, Hugh. “Irish Stock Market Prepares ‘Small Bang.’” Financial Times, August 19, 1986.

Coyle, Dominick J. “Dublin Will Join New Single Stock Exchange.” Financial Times, March 21, 1973.

Doherty, Daniel M. “The Irish ‘Big Board.’” New York Times, April 23, 1972.

“Ireland to Have New Stock Exchange.” Financial Times, March 11, 1971.

“Irish Stock Exchange Sale Offers ‘Pivot towards Europe.’” Financial Times, January 30, 2018.

“Light Touch of the Man in the Middle.” Sunday Times (London), February 20, 2005.