Evolution of Exchanges: Same But Different?
With Isabell Moessler, Head of Business Management, Global Sales at Euronext
(This article first appeared in GlobalTrading magazine.)
Describe the current landscape in the exchange business?
Exchanges have always been at the heart of the financial ecosystem, connecting investors with companies seeking to finance their innovations, first locally and then for the global economy. That is still our outlook today and where we see ourselves – at the centre of local and global interactions.
Of course, the nuances have changed. In the past, exchanges were straightforward – you had the local market place, the members and day-to-day transactions. But exchanges are now much broader organizations – geographically, in terms of services they offer and reflecting the hyperconnected world. Euronext has its historical roots and is well-established in Europe, but we are expanding our global footprint, to be close to our customers, hear their concerns, and stay relevant.
With great scale, comes great complexity. The market infrastructure landscape in Europe became highly fragmented, with clients now facing a byzantine range of execution methodologies, and Post Trade being highly divided, with member states having their own national depository and clearing models.
At the same time, there has been a trend towards simplification, with mergers between national exchanges and the rise of pan-European execution. Euronext’s mission in this environment is to aid in European consolidation and the Capital Markets Union. Our recent integrations of the Irish Stock Exchange and Oslo Bors are a testament to this ambition. While preserving specificities of local markets, we create synergies, using a single connection, rulebook, market model, IT system and pool of liquidity.
Finally, it is our obligation as an exchange not only to connect different parties within the market, but also to represent the industry and serve as a vocal advocate on market structure or regulatory discussions.
How are exchanges staying ahead of disruptors and driving their own change via innovation?
The approach we take on innovation is to look at the broader value chain and move into new areas where we can serve our clients.
We have actively expanded into other asset classes. Euronext has acquired FastMatch, a Foreign Exchange ECN, subsequently rebranded Euronext FX. We have moved into the commission management space, with Commcise. We spread to seafood commodities with Fish Pool in the Nordics, adding to our global benchmark agricultural products. And our most recent acquisition, Nord Pool, is the leading power market in Europe.
Naturally, every company is assessing how they can innovate to protect our planet, so Euronext is also actively committed to empowering sustainable finance, through various solutions, from green bonds, ESG reporting guidelines for our listed companies, financial products driving investment towards ESG (indices, data, derivatives, etc.), and more.
Finally, when one talks about innovation, people immediately think technology, and that is absolutely relevant for us. For example, Euronext has invested in LiquidShare, using blockchain for post-trade, and with Tokeny, specialised in the tokenisation of financial assets. But broadly, in technology, you have to innovate constantly just to stand still. Technology has to be robust and state-of-the-art, but it’s not the differentiator it once was. With Optiq®, Euronext’s award-winning proprietary technology, we can offer a truly unique and unprecedented trading experience to our customers.
How is Euronext evolving?
The company has transformed significantly. I’ve been here only two and a half years, and even in that time I’ve seen tremendous change. Since Euronext’s IPO in 2014, market capitalisation has quadrupled, from 1.4 billion euros to 5.6 billion euros. The number of people has almost doubled, and our geographical footprint has expanded significantly, adding offices in the Nordics, Baltics, U.S., India, Hong Kong, Singapore… In 2014 we had five exchanges, we now have seven.
Interestingly, our own talents are evolving too. People from banks and clients are joining Euronext – they are drawn by the innovation potential in market infrastructures like an exchange, whereas it was not seen as a career move before. We also have a great number of young candidates looking for careers in Fintechs.
Client centricity is another focus area for us. We no longer want to be just an intermediary, so we put our clients at the centre and increase proximity with them.
Euronext is an entirely different animal, and the evolution won’t stop here.
What are growth areas for Euronext?
Aside from expanding service in other asset classes, there are also opportunities in more mature businesses.
Cash Equities traders are always looking for new solutions – we have a significant initiative with regional banks and brokers, and we have reintroduced retail broker advisory committees to hear more from end customers and provide more services for them. For instance, we will continue to provide the best execution and market quality in Europe for retail investors with our service Best of Book, and Euronext will also strongly focus on improving liquidity for small and midcap stocks and aim to be the hub for SME block trading.
There also is a lot of innovation happening in our Derivatives franchise, so watch this space. 2019 was a record year for several products, such as our Total Return Futures on the CAC 40 launched the same year, with already over €19 billion traded, or our single-stock futures, which by introducing semi-annual maturities, have seen a growth of almost 300% year-on-year.
In Fixed Income, we are the largest corporate debt listing venue with Euronext Dublin coming on board two years ago, and our Green Bonds initiative is very successful.
Euronext is house of six European national blue-chip indices, the leading index provider for Structured Products in Europe, and one of the biggest ESG index providers. We are continuously growing in this business, with 2020 promising to be an exciting year.
We are greatly innovating in our Market Data offering, designing new targeted products and commercialising Euronext analytics. We also have a FX data product, Euronext FX Tape, combining data from our FX ECN and external contributors worldwide, which backs our position as leaders in market transparency.
Finally, we are also diversifying in Foreign Exchange, where we will no longer enable only spot FX trading but add NDFs very soon.
What is Euronext’s message to the buy-side?
We engage directly with buy-side customers and have made significant effort reaching out to them, via both one-to-one and one-to-many conversations, to learn more about how we as an exchange can be a strong partner.
For instance, we have direct access to regulators of the different jurisdictions where we operate, so we have the opportunity to represent the interests of our clients. This goes back to the core mission of exchanges, which is to be a facilitator, a key conduit when bridging supply with demand. We also adhere to a high moral code and provide full transparency, as we sit at the very centre of the liquidity ecosystem.
What is Euronext’s culture?
At Euronext, we are “United in Diversity”. We pride ourselves in having a great mix of people, with multiple nationalities and backgrounds, whether they be from the industry, from the client side, or even with completely nonfinancial backgrounds. For example, one of my team members has a Ph.D in neuroscience, and her way of looking at things is very valuable. Having different points of view is something we feel very strongly about; it’s a differentiator and it helps us stay relevant and better understand our clients.
Buy-side firms can integrate technology to improve the infrastructure of multi-asset trading desks, AMP Capita...
EFAMA joined French and Dutch authorities in calling for European regulation.
CEO expects more large asset managers such as endowments and hedge funds to adopt public cloud.
The majority of investment consulting firms released their data for the first time this year.
The US ETF issuer has spent the last decade developing a suite of thematic strategies.