Euronext Positions for ETF Growth, Brexit
Pan-European exchange operator is acquiring the Irish Stock Exchange.
Stephane Boujnah, chief executive and chairman of the managing board of Euronext, said the acquisition of the Irish Stock Exchange allows the pan-European firm to boost its exchange-traded fund business and best take advantage of opportunities from the UK leaving the European Union.
Euronext is buying the Irish Stock Exchange for €137m ($163m).
— Euronext (@euronext) November 30, 2017
Boujnah said in a briefing this morning that the acquisition will allow Euronext to expand across new asset classes. He said: “Dublin will become centre of excellence for all Euronext’s group activities in listing debt, funds and ETFs.”
Lee Hodgkinson, head of markets and global sales at Euronext, added in the briefing: “We are bullish on ETFs and the drive to passive. The ISE has a strong franchise with issuers such as Pimco and WisdomTree and Euronext is strong on ETF trading so the combination of talent will be fantastic.”
"@IrishStockEx brings to @euronext leading global positions in debt, #funds and #ETF listings markets. This transaction demonstrates the strength of our “united in diversity” federal model.” https://t.co/EjocrV57t0 pic.twitter.com/3Yh5HqL6wk
— Euronext (@euronext) November 30, 2017
Deirdre Somers, chief executive of the ISE, said in the briefing that she described the exchange as a 200 year-old start up as it was founded in 1793. The firm was established in its current form when the ISE demerged from the London Stock Exchange in 1995.
“We are the number one fund listing venue globally with 5,242 investment funds securities and 227 ETFs,” Somers added. “Asset managers from over 50 countries use Ireland to administer 13,000 funds with more €4 trillion of assets.”
She also said ISE is the top venue for listing global debt, with a market share of 70% in Europe, and bond issues ranging from high-yield paper to asset-backed securities and sovereign issuers. Somers will join Euronext’s managing board and have group-wide responsibility for debt, funds & ETFs listing.
She continued that Ireland will be the only common law jurisdiction that is English speaking in the EU after Brexit and so is uniquely placed to deliver Brexit solutions.
“Brexit has implications for London depending upon on the deal that is reached and we have optionality for the business with a commitment to the EU,” added Somers. “We could think about dual listings or other offerings to solve problems.”
With regards to Brexit, Boujnah said: “This is a significant opportunity to expand Euronext’s federal model to an attractive new Eurozone country, especially with the Brexit opportunity.”
Boujnah added that Irish blue chip companies will gain access to a large pool of liquidity while smaller firms will benefit from Euronext’s corporate services for issuers. “We will develop new single stock futures and options on Irish names as well as index derivatives,” he said.
Hodgkinson continued that Euronext has a suite of agricultural derivatives while Ireland has 140,000 farms and the sector is 8.4% of total employment
“Brexit and the removal of EU quotas means it is increasingly complex for farmers to manage their price risk,”added Hodgkinson. “We already have wheat and rapeseed futures but dairy is an interesting opportunity.”
Other growth opportunities for the merged company include foreign exchange, following Euronext completing its acquisition of FastMatch, and fixed income innovation due to the combination with Euronext Synapse, the exchange’s joint venture with fixed income network Algomi.
After the acquisition completes ISE will migrate its technology to Optiq, Euronext’s new proprietary trading platform. Closing is expected in the first quarter of next year subject to regulatory approvals from the Euronext College of Regulators and the Central Bank of Ireland. Boujnah: “We are confident after our initial dialogues.”
ISE is currently owned by five Irish financial institutions, J&E Davy, Goodbody Stockbrokers, Investec Capital & Investments, Cantor Fitzgerald and Campbell O’Connor that have all committed to sell their shares.
Patrick Young, chief executive of Exchange Invest, said in his daily email newsletter: “Congratulations to Euronext on paying a spectacularly low price to acquire a useful asset following a hurried sale process which failed to ignite private equity interest and thus was never much of a bidding war. (The irony of brokers selling their asset cheap ought not to be lost on this narrative for the long term).”
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