EXCHANGE SEGMENTS OF THE SECONDARY MARKET IN DENMARK

We talked in a previous article about : PARTICIPANTS ANDISSUES TRADED

Today we talk about: EXCHANGE SEGMENTS OF THE SECONDARY

MARKET IN DENMARK

1. Hovedbrsen

The securities subject to the trading procedures of the

Main Exchange are the major shares and almost all

bonds. Today bonds may be admitted to the Hovedbrs as

soon as paper amounting to a face value of Dkr 500 000

has been placed, although this admission is based on

the assumption that further bonds in the same issue

or series will subsequently be floated on the stock

exchange; the average issue volume of a listed bond

is Dkr 100 million. For a share to be listed, there

must be a par value of at least Dkr 5 million outstanding.

In addition, it is stipulated that 15% of the share

capital, but with a minimum of Dkr 2.5 million, must

be publicly held. Usually a share is first listed on

the Efterbrs. If regular trading develops in that

market, the share may, on application from the issuer,

be admitted after three months to the HovedbgSrs.

a) Dealings in "A List" shares and bonds

Dealings in bonds and shares are catered for by the

provision of a hall for each, in which sit the stock

exchange members or their authorized clerks. Opposite

them and next to the chairman sit the stock exchange

secretary, a stenographer and the representatives of

the national bank and several commercial banks and

savings banks. Dealing commences at 10.30 a. m. and

takes place at individual prices according to a

procedure clearly based on auction principles (see Annex 2)

The chairman calls out the names of the securities in

the order they appear on the official list, repeats

the highest bids and the lowest offers cried out by

members and notes bargains if bid and offer happen to

coincide. The unit of trading or round lot is normally

Dkr 4 000 par value for shares and Dkr 20 000 face

value for bonds. If some dealers then indicate by

hand signals that they have further bids or offers, the

chairman maiKS additional bargains at the price that

has just been established by calling out "igen" (again).

However, usually a bargain cannot be made at once. But

if the bid and offer are close to one another, the

chairman will call out a gradually increasing bid and

a gradually decreasing offer until these modified bids and

offers either coincide or are withdrawn. During the course

of dealing the banks' representatives - who are not

authorized to deal - may continue to signal orders

to stock exchange members which they were unable to

communicate before dealings commenced. The prices of

and turnover in each security are published in the

official price list. This also applies to bids and

offers provided that the spread is not more than five

points in the case of shares and two points in the

case of bonds.

cents zero

b) Dealings in "B List" bonds

As can be seen from Table B - 1, there are over 260

bonds on the B List; they account for some 1% of

turnover in bonds. Up till 1972 the B List also included

18 equities, but these were subsequently transferred

to the Efterbrs. Bonds may be placed on the B List if

the value in circulation is less than Dkr "!0 million

and if the series has been closed for more than two

years, in other words if the placing of the security

through the stock exchange can be regarded as at an end

and little further turnover can be expected. As is well

known, the majority of Danish bonds are introduced on the

stock exchange not by the issuers but by their borrowers;

the borrowers of the mortgage credit associations,

instead of receiving cash, are given bonds to the amount

of their loan, which they may then sell, either on or

off the exchange, at what they consider to be the most

opportune moment. This circumstance shows, incidentally,

that a substantial part of the turnover in A List bonds

must be regarded as coming under the new issue market

rather than the secondary market

Table B - 2

Sales of the Hovedbrs at par value and as

a percentage of the total amount outstanding

EXCHANGE SEGMENTS OF THE SECONDARY MARKET IN DENMARK 

Trading procedures for these securities are basically

the same as for bonds on the A List. However, the

B List issues are called out regularly for dealing

purposes only on Wednesdays after the A List titles have

been called. On other business days B List titles are

dealt in and quoted only if application for calling has

been made to the stock exchange secretary before ten

o'clock on the day in question.

2. EfterbgSrsen

The shares admitted to the Efterbrs are those which

have not (or not yet) qualified for admission to

the Hovedbrs. A stock may be traded here provided

that the related share capital of the issuing company

amounts to Dkr 1 million at par value. The majority

of stocks (177 at the end of 19 74) are quoted on the

Efterbrs. In addition, some 50 very small bond issues

are traded on the After Exchange, but they are quoted

only if application has been made to the stock

exchange secretary beforehand.

The securities to be quoted are divided into four

groups. A board is provided for each group. The names

of the issues are displayed on these boards and trading

takes place in front of them. In the presence of a

fairly large number of stock exchange members and bank

representatives - the latter are not authorized to deal

on the Efterbrs either - these groups of shares are

called out in sequence every business day after the

end of share trading on the Main Exchange. The members

first cry out their bids and offers for stocks in the

first group in any order they like. The chairman's two

assistants write these bids and offers down on the first

board and replace them with higher bids or lower asks

as and when these are called out. They also note

bargain prices and turnovers on the board. When activity

begins to tail off, the chairman announces that dealing

is coming to an end and switches on a wall-clock which,

after 60 seconds - during which time trading again becomes

brisk - rings to signal the end of the session. The

other groups then go through the same procedure. Each

group's dealings normally last between 5 and 10 minutes.

The participants have to spend about 10 seconds of

their time on each issue; such a short average

trading period per stock cannot be achieved in

dealings on the Main Exchange.

Turnover on the After Exchange is very modest, if

one disregards newly listed securities and certain

stocks which should be allocated to the Main Exchange.

However, what is interesting for the purposes of our

study is not the absolute amount of this turnover but

the difference in turnover between securities that

are representative of the two methods of stock exchange

trading. A typical stock on the Hovedbrs will have

about ten transactions per week, its equivalent on the

Efterbrs less than one bargain. Even in the most

active shares the relationship of the respective turnovers

is about 10 : 1; in the leading shares on the

Hovedbrs 10 - 20 round lots are traded per day and

average daily sales at market value amount to

Dkr 60 000 - 100 000.

the source by Dr.Hartmut Schmidt