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Securities Act of 1933
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Re: | Barcelona Stock Exchange, Bilbao Stock Exchange, Madrid Stock Exchange and Valencia Stock Exchange Incoming letter dated February 10, 2003 |
Luis de Carlos Bertrán
Uría & Menéndez
Jorge Juan 6
28001 Madrid
Spain
Re: Barcelona Stock Exchange, Bilbao Stock Exchange, Madrid Stock Exchange and Valencia Stock Exchange
Dear Mr. Bertrán:
This letter will confirm the response of the Division of Corporation Finance to your request that the Division designate the Barcelona Stock Exchange, the Bilbao Stock Exchange, the Madrid Stock Exchange and the Valencia Stock Exchange each as a "designated offshore securities market" within the meaning of Rule 902(b) of Regulation S under the Securities Act of 1933. A copy of your letter is enclosed in order to avoid having to recite or summarize the facts set forth therein. On the basis of the facts presented, we hereby so designate the Barcelona Stock Exchange, the Bilbao Stock Exchange, the Madrid Stock Exchange and the Valencia Stock Exchange.
Pursuant to delegated authority,
Paul M. Dudek
Chief
Office of International Corporate Finance
JORGE JUAN 6,�28001 MADRID,�SPAIN
tel:�34 91 586 04 00 fax:�34 91 586 04 04
email:�all@uria.com
url:�www.uria.com
Madrid, February 10, 2002
Alan L. Beller, Director
Division of Corporation Finance
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 25049
Dear Mr. Beller:
We are writing to you on behalf of the Barcelona Stock Exchange (Bolsa de Barcelona), the Bilbao Stock Exchange (Bolsa de Bilbao), the Madrid Stock Exchange (Bolsa de Madrid) and the Valencia Stock Exchange (Bolsa de Valencia) (these four stock exchanges collectively, the "Official Spanish Stock Exchanges") to seek the classification of each of them as a "designated offshore securities market" for purposes of Regulation S ("Regulation S") under the U.S. Securities Act of 1933, as amended. This designation is being sought in order to assist market participants who are eligible for the safe harbor provided by Rule 904 of Regulation S in satisfying the requirements specified in that rule when reselling securities "in, on or through the facilities of" the Official Spanish Stock Exchanges.
As discussed below, each of the Official Spanish Stock Exchanges, both individually and in its joint operation with the others of the Spanish continuous trading system, has the attributes specified in Rule 902(b)(2) of Regulation S. Further, as demonstrated by these and other factors discussed below, each of them constitutes a market with a clear "foreign locus," subject to extensive home country regulation, in which investors cannot fairly be viewed as relying for protection on U.S. registration requirements. Accordingly, we are requesting that you, as Director of the Division of Corporate Finance, exercise the authority delegated to you by the Commission (see 17 CFR § 200.30-1(i)) to classify each of the four Official Spanish Stock Exchanges as a "designated offshore securities market."
The four Official Spanish Stock Exchanges operate as distinct markets linked together through an electronic continuous trading system known as the Sistema de Interconexión Bursátil Español (the "SIBE"). On a combined basis, the Official Spanish Stock Exchanges constitute the fourth largest market in Europe for equity securities based on trading volume. Trading volume in equity securities on the Official Spanish Stock Exchanges exceeded €444 billion in 2001, of which more than 99.2% involved securities traded through the SIBE. The total market capitalization of the Official Spanish Stock Exchanges was approximately €580 billion at December 31, 2001, of which 76.7% related to securities traded through the SIBE.1 Detailed information regarding trading volume in equity securities on the Official Spanish Stock Exchanges is attached hereto as Appendix A.
In addition to equity securities, fixed-income instruments are listed and traded on the Official Spanish Stock Exchanges. Trading in fixed-income instruments exceeded €57.4 billion in 2001 with an aggregate face value of €17.2 billion at December 31, 2001. Detailed information regarding trading volume in fixed-income securities on the Official Spanish Stock Exchanges is attached hereto as Appendix B. Less significant markets exist on the Official Spanish Stock Exchanges for warrants and securities referred to as "certificates" (commonly linked to stock or industry indices). The most important of these is the Madrid Stock Exchange, which as of December 31, 2001 listed 1,092 separate issues of warrants (with €1.6 billion in premiums traded in 2001). As a result of the recent creation of a new market segment for warrants, certificates and other products within the SIBE, trading in these securities on the Official Spanish Stock Exchanges is expected to increase in the future. No trading facility or privileges are provided on any of the Official Spanish Stock Exchanges for any security that has not been registered with the CNMV and duly listed on the relevant exchange.
Despite the strong relationships among the four Official Spanish Stock Exchanges, each of them is organized as a separate exchange with individual operations, and all transactions carried out through the SIBE are allocated to one of the exchanges (i.e., the exchange to which the member who enters the buy order belongs).
Barcelona Stock Exchange. The Barcelona Stock Exchange was officially founded in 1915. As required by Spanish law, it is managed and operated by the Sociedad Rectora de la Bolsa de Valores de Barcelona S.A., a corporation organized under the laws of the Kingdom of Spain. The membership of the Barcelona Stock Exchange consists of 18 major financial institutions and nine established securities dealers. At December 31, 2001, approximately 715 domestic and foreign companies had their equity securities listed on the Barcelona Stock Exchange. The total market capitalization of the equity securities listed on the Barcelona Stock Exchange at December 31, 2001 was €515.4 billion.
Bilbao Stock Exchange. The Bilbao Stock Exchange was officially founded in 1890. As required by Spanish law, it is managed and operated by the Sociedad Rectora de la Bolsa de Valores de Bilbao S.A., a corporation organized under the laws of the Kingdom of Spain. The membership of the Bilbao Stock Exchange consists of seven major financial institutions and one established securities dealer. At December 31, 2000, approximately 413 domestic and foreign companies had their equity securties listed on the Bilbao Stock Exchange. The total market capitalization of the equity securities listed on the Bilbao Stock Exchange at December 31, 2001 was €485.5 billion.
Madrid Stock Exchange. The Madrid Stock Exchange was officially founded in 1831. As required by Spanish law, it is managed and operated by the Sociedad Rectora de la Bolsa de Valores de Madrid S.A., a corporation organized under the laws of the Kingdom of Spain. The membership of the Madrid Stock Exchange consists of 41 major financial institutions and 12 established securities dealers. The Madrid Stock Exchange is the largest of the Official Spanish Stock Exchanges. At December 31, 2001, approximately 1477 domestic and foreign companies had their equity securities listed on the Madrid Stock Exchange. The total market capitalization of the equity securities listed on the Madrid Stock Exchange at December 31, 2001 was €552.4 billion.
Valencia Stock Exchange. The Valencia Stock Exchange was officially founded in 1980. As required by Spanish law, it is managed and operated by the Sociedad Rectora de la Bolsa de Valores de Valencia S.A., a corporation organized under the laws of the Kingdom of Spain. The membership of the Valencia Stock Exchange consists of 12 major financial institutions and two established securities dealers. At December 31, 2001, approximately 593 domestic and foreign companies had their equity securities listed on the Valencia Stock Exchange. The total market capitalization of the equity securities listed on the Valencia Stock Exchange at December 31, 2001 was €469.9 billion.
Ownership of the Official Spanish Stock Exchanges. As mentioned above, each Official Spanish Stock Exchange is managed and operated by an individual corporation, referred to as a sociedad rectora. The sociedades rectoras are statutorily created for-profit entities required to carry out their activities in the best interests of the market and investors and under the direct supervision of the CNMV. Until recently, the sole shareholders of each of the four sociedades rectoras were the members of the relevant exchange. As part of an initiative to simplify the corporate structure governing the secondary markets and settlement systems in Spain, all of the members of the Official Spanish Stock Exchanges recently exchanged their respective shares in the individual sociedades rectoras for shares in a new holding company, the Bolsas y Mercados Españoles, Sociedad Holding de Mercados y Sistemas Financieros, S.A.(the "OSSE Holding Company"). As a result of this reorganization, which was completed in October 2002, the individual corporations that formerly operated the Official Spanish Stock Exchanges, the national clearance and settlement system and certain other secondary markets in Spain are now owned and controlled by the OSSE Holding Company. In turn, the members of the Official Spanish Stock Exchanges and the shareholders of the other secondary market systems in Spain own, directly or indirectly, all of the shares of the OSSE Holding Company.
The corporate reorganization described above is intended to achieve greater administrative efficiency, and does not affect or reduce the oversight functions of the CNMV over the affected entities or materially change the attributes of the Official Spanish Stock Exchanges discussed later in this letter. Further, each of the Official Spanish Stock Exchanges continues to operate as a separate exchange in the same manner as it did previously. Accordingly, the classification of each of these exchanges as a "designated offshore securities market" as requested herein is not affected as a result of the reorganization.
Trading on the Official Spanish Stock Exchanges. As mentioned above, trading on the Official Spanish Stock Exchanges occurs primarily through an electronic continuous trading system linking the four exchanges known as the SIBE. The SIBE is managed and operated by the Sociedad de Bolsas S.A., a corporation organized under the laws of the Kingdom of Spain and owned in equal parts by the four Official Spanish Stock Exchanges. In 2001, trading through the SIBE represented approximately 99.2% of the aggregate trading volume in equity securities on the Official Spanish Stock Exchanges, with the remaining 0.8 percent represented by trading through a traditional "call market" conducted every morning at each of the Official Spanish Stock Exchanges.
Orders to buy and sell securities are entered into the SIBE through members of the Official Spanish Stock Exchanges. A pre-opening session is held from 8:30 a.m. to 9:00 a.m. on each day of trading, during which an opening price for each security is established through a real-time auction in which orders can be entered, modified or cancelled, but not executed. The SIBE operates from 9:00 a.m. to 5:30 p.m., during which period buy and sell orders entered into the system are executed as soon as they can be matched. Additionally, trades in excess of €300,000 may occur outside the SIBE between 5:30 p.m. and 8:00 p.m. without prior approval from the Sociedad de Bolsas within a specified price range and subject to certain conditions, and may also occur outside the SIBE at any time and at any price with prior approval from the Sociedad de Bolsas in special cases, such as negotiated block sales of securities. Regardless of whether a trade occurs within or outside the SIBE, it must be communicated to the Sociedad de Bolsas on the same day and reported the next day electronically and in the Boletín de Cotización, an official publication of the Official Spanish Stock Exchanges.
Clearance and settlement of securities traded on the Official Spanish Stock Exchanges occur exclusively through an entity analogous to The Depositary Trust Company in the United States, referred to as the Servicio de Compensación y Liquidación de Valores (the "SCLV"), of which the Official Stock Exchanges and the OSSE Holding Company are shareholders. All securities listed on the Official Spanish Stock Exchanges are held in book-entry form and all trades are settled on a T+3 basis in accordance with procedures that are fully compliant with the standards recommended by the "Group of Thirty," which are intended to increase efficiency and reduce risks in the settlement of securities transactions. In addition, the SCLV is a covered system under Spanish legislation implementing a special European Union directive concerning the reduction of system risks in clearance and settlement activities. As a result of recently approved legislation, by May 2003 the activities of the SCLV are required to be merged with the activities of the settlement system currently used for transactions in public sector debt securities. In furtherance of this new legislation, the relevant Spanish authorities are expected to issue rules and regulations to govern the activities of the merged entity.
Regulation of the Official Spanish Stock Exchanges. As mentioned above, each of the Official Spanish Stock Exchanges is managed and operated by a statutorily-mandated corporation whose sole shareholder is the OSSE Holding Company. These corporations establish rules and standards governing the trading activities of the exchange's members. All activities of the Official Spanish Stock Exchanges and their managing corporations are under the direct supervision and regulatory authority of the CNMV. The CNMV fulfills a role similar to that of the Commission in the United States, acting as the primary government regulator of the securities markets in Spain whose ultimate mission is to protect investors. The CNMV is a member of the International Organization of Securities Commissions (IOSCO) and serves alongside the Commission on the Technical Committee, which consists of members from more developed securities markets.
Rule 902(b)(2) contains a non-exclusive list of the attributes to be considered by the Commission in determining whether to classify a particular securities market as a "designated offshore securities market." As discussed below, each of the Official Spanish Stock Exchanges possesses those attributes.
When the Commission adopted Regulation S, it established a process for the designation of securities markets as "designated offshore securities markets" in the context of resales under Rule 904, modifying the more liberal approach in its original proposal that would have automatically extended the safe harbor for resales to qualifying transactions carried out on any "established foreign securities exchange" (with no definition of that term provided). See Offshore Offers and Sales, Release No. 33-6679 (June 10, 1988) (proposed rule). In the Commission's view, transactions carried out on a foreign securities market that had been so designated would "provide objective evidence of the foreign locus of the transaction" such that "buyers in such markets may be presumed to rely on the regulatory protections afforded by local law and not U.S. registration requirements." See Offshore Offers and Sales, Release No. 33-6863 (April 24, 1990) (final rule).
As demonstrated by the above discussion, the Official Spanish Stock Exchanges constitute well-established, robust securities markets, subject to extensive home country regulation. Transactions carried out on those exchanges have a clear foreign locus and the parties thereto cannot fairly be viewed as relying for protection on U.S. registration requirements. Accordingly, market participants who sell and purchase securities "in, on or through the facilities of" those exchanges in transactions otherwise complying with the requirements of the safe harbor for resales provided by Rule 904 should be provided with the additional measure of comfort provided by that safe harbor. Accordingly, we respectfully request that you confirm the designation of each of the Barcelona Stock Exchange, the Bilbao Stock Exchange, the Madrid Stock Exchange and the Valencia Stock Exchange as a "designated offshore securties market" under Rule 902(b)(2). This action on your part would be consistent with the similar designation, subsequent to the adoption of Regulation S, of the Berlin Stock Exchange, the Copenhagen Stock Exchange, the European Association of Securities Dealers Automated Quotation System, the Lima Stock Exchange, the Mexican Stock Exchange, the Singapore Stock Exchange and the Warsaw Stock Exchange.
* * *
We would be happy to discuss our request with your further and answer any additional questions you may have about the regulatory or operational aspects of the Official Spanish Stock Exchanges. Please do not hesitate to contact the undersigned on +(34) 915 860 374, with any questions.
Sincerely,
Luis de Carlos Bertrán
1 The statistical information regarding the Official Spanish Stock Exchanges cited here and elsewhere in this letter were obtained from the Informe anual sobre los Mercados de Valores 2001 (Annual Report on the Securities Markets for 2001), published by the Comisión Nacional del Mercado de Valores ("CNMV"), as well as official information made available on the websites of the Official Spanish Stock Exchanges.
SECONDARY MARKETS. EQUITIES.
EFFECTIVE TRADING IN EQUITIES ON
THE SPANISH STOCK EXCHANGES.2001
Amounts in millions of euros
Total | Electronic Market | Outcry Market | Outcry Markets | Second Market | ||||
---|---|---|---|---|---|---|---|---|
Madrid | Barcelona | Bilbao | Valencia | |||||
1998 | 261,092.6 | 257,921.1 | 3,158.2 | 2,291.0 | 475.9 | 176.3 | 215.0 | 12.7 |
1999 | 289,353.9 | 286,020.4 | 3,302.4 | 2,003.1 | 885.1 | 170.2 | 244.0 | 31.1 |
2000 | 492,301.7 | 488,888.5 | 3,382.2 | 2,062.4 | 695.1 | 259.9 | 364.7 | 18.3 |
2001 | 444,301.8 | 440,604.8 | 3,672.1 | 2,469.6 | 660.2 | 296.7 | 245.6 | 24.9 |
January | 46,611.4 | 46,432.6 | 177.7 | 119.1 | 31.0 | 11.0 | 16.7 | 1.1 |
February | 36,831.8 | 36,579.2 | 252.0 | 178.5 | 45.5 | 15.9 | 12.3 | 0.5 |
March | 39,486.6 | 39,270.4 | 215.4 | 130.9 | 54.1 | 15.2 | 15.2 | 0.8 |
April | 36,018.7 | 35,868.4 | 149.8 | 113.2 | 24.4 | 6.4 | 5.8 | 0.5 |
May | 36,703.2 | 36,487.8 | 214.9 | 156.2 | 29.0 | 15.8 | 13.9 | 0.5 |
June | 38,600.1 | 38,320.2 | 277.4 | 159.7 | 62.6 | 29.5 | 25.6 | 2.6 |
July | 35,866.6 | 35,117.5 | 745.4 | 584.9 | 103.4 | 27.2 | 29.9 | 3.7 |
August | 27,520.6 | 27,332.5 | 187.9 | 109.2 | 12.9 | 45.7 | 20.1 | 0.2 |
September | 34,640.7 | 34,417.3 | 220.3 | 130.9 | 37.9 | 23.2 | 28.3 | 3.2 |
October | 35,321.6 | 35,041.7 | 277.3 | 172.6 | 58.0 | 18.5 | 28.1 | 2.6 |
November | 38,358.2 | 38,016.8 | 338.1 | 244.1 | 60.5 | 20.6 | 12.9 | 3.4 |
December | 38,342.3 | 37,720.5 | 615.9 | 370.4 | 141.0 | 67.7 | 36.8 | 5.9 |
Pro Memoria Change 01-00 (%) Share in 2001 (%) |
-9.8 100.0 |
-9.9 99.2 |
8.6 0.8 |
19.7 67.3 |
-5.0 18.0 |
14.1 8.1 |
-32.7 6.7 |
35.9 0.0 |
Share: Trading on the electronic, outcry and second markets of the total and trading on the outcry market in each exchange as percentage of total outcry trading.
SECONDARY MARKETS. FIXED-INCOME. STOCK EXCHANGES.
EFFECTIVE TRADING VOLUME. 2001
Amounts in millions of euros
Total | Electronic Market | Outcry Market | Outcry (2) | Pro Memoria E.M. share (%) (3) | |||
---|---|---|---|---|---|---|---|
Barcelona | Bilbao | Valencia | |||||
1997 | 54,219.6 | 25,546.7 | 28,672.9 | 10,468.7 | 17,965.0 | 239.2 | 47.1 |
1998 | 53,238.0 | 2,607.5 | 50,630.5 | 23,136.4 | 27,211.8 | 282.3 | 4.9 |
1999 | 44,908.9 | 2,598.0 | 42,310.9 | 28,615.0 | 13,405.6 | 290.3 | 5.8 |
2000 | 40,704.0 | 1,965.3 | 38,738.7 | 30,729.0 | 7,440.1 | 569.6 | 4.8 |
2001 | 57,463.1 | 2,383.8 | 55,079.3 | 50,498.8 | 4,142.8 | 437.6 | 4.1 |
January | 2,524.1 | 137.0 | 2,387.1 | 2,014.7 | 317.7 | 54.7 | 5.4 |
February | 2,559.3 | 123.1 | 2,436.2 | 2,101.3 | 291.3 | 43.6 | 4.8 |
March | 5,043.4 | 151.2 | 4,892.2 | 4,489.7 | 360.4 | 42.0 | 3.0 |
April | 5,363.4 | 474.0 | 4,889.4 | 4,428.6 | 440.4 | 20.3 | 8.8 |
May | 5,570.3 | 139.1 | 5,431.2 | 4,987.6 | 404.1 | 39.6 | 2.5 |
June | 4,957.1 | 100.4 | 4,856.6 | 4,386.3 | 445.0 | 25.3 | 2.0 |
July | 5,251.6 | 130.0 | 5,121.6 | 4,765.8 | 296.7 | 59.2 | 2.5 |
August | 4,507.0 | 62.0 | 4,445.0 | 4,164.0 | 243.7 | 37.4 | 1.4 |
September | 4,854.6 | 425.1 | 4,429.5 | 4,081.5 | 317.1 | 30.9 | 8.8 |
October | 6,081.2 | 318.1 | 5,763.1 | 5,392.5 | 330.8 | 39.8 | 5.2 |
November | 6,293.4 | 181.1 | 6,112.3 | 5,683.3 | 405.1 | 23.9 | 2.9 |
December | 4,457.6 | 142.7 | 4,314.9 | 4,003.5 | 290.5 | 20.9 | 3.2 |
Change (%) | |||||||
1998 / 97 | -1.8 | -89.8 | 76.6 | 121.0 | 51.5 | 18.0 | |
1999 / 98 | -15.6 | -0.4 | -16.4 | 23.7 | -50.7 | 2.8 | |
2000 / 99 | -9.4 | -24.4 | -8.4 | 7.4 | -44.5 | 96.2 | |
2001 / 00 | 41.2 | 21.3 | 42.2 | 64.3 | -44.3 | -23.2 | |
Share (%) | |||||||
1998 | 100.0 | 4.9 | 95.1 | 43.5 | 51.1 | 0.5 | |
1999 | 100.0 | 5.8 | 94.2 | 63.7 | 29.9 | 0.6 | |
2000 | 100.0 | 4.8 | 95.2 | 75.5 | 18.3 | 1.4 | |
2001 | 100.0 | 4.1 | 95.9 | 87.9 | 7.2 | 0.8 |
(1) Includes fixed-income warrant trading. 198 millions euros in 1999 and 902 millions euros in 2000.
(2) All fixed-income trading on the Madrid Exhcange is conducted in the electronic market.
(3) Percentage of total fixed-income trading. E.M.: Electronic Market.
http://www.sec.gov/divisions/corpfin/cf-noaction/offshore031103.htm
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