Euronext has an interesting backstory for a stock exchange. Founded in 2000 when the Amsterdam, Brussels and Paris stock exchanges decided to join forces, it added Portugal soon after and later LIFFE (the London International Financial Futures and Options Exchange). The next big change came in 2007, when Euronext merged with the New York Stock Exchange. That lasted until 2014, when the European arm was carved out of the group as part of Intercontinental Exchange’s takeover of the NYSE and became a listed company. In 2018, the Irish stock exchange joined Euronext and recently Euronext obtained approval from the Norwegian Minister of Finance to acquire the shares of the stock exchange in Oslo.
The company’s a-typical evolution has shaped how it views the market and, accordingly, its strategy. Today the focus is on being pan-European, with a local and global philosophy, and extending into related areas in which the company can be seen as a credible player: IT, corporate services, big data. This in turn is fuelling a wave of takeovers, like that of foreign exchange platform FastMatch (now rebranded Euronext FX), legal compliance tool InsiderLog and others.
To find out more about where the company is going, Legadex’s Hans-Martijn Roos spoke with Maurice van Tilburg, CEO of Euronext Amsterdam, René van Vlerken, Head of Listing for Euronext Amsterdam and Sylvia Andriessen, Deputy General Counsel for Euronext.
Q: How do you see your role in the marketplace? What sets you apart?
Maurice: We see ourselves as providing a platform for multiple parties to find each other and come together. If you look at the financial infrastructure, there are many parties delivering competing services. As Euronext, we have a central role in the marketplace. Since the first Markets in Financial Instruments Directive, which was implemented in 2007, trading and trading platforms have become more widespread, but in terms of financing the real economy, there’s really only one large marketplace where price formation takes place, at least for the Netherlands. And we see a similar situation in other countries, too.
Something else I think that sets us apart is that we are set up as a pan-European project; a combination of multiple exchanges of multiple countries. This shapes our decision making and the way we operate. Our primary focus is on doing business and bringing value to our customers in each country, separately, but doing this with a combined operations teams and one technology platform. This creates efficiency while still allowing us to address local needs and the local ecosystem. I think that's very important.
Q: You launched your Agility for Growth strategy in 2016. What impact has it had?
Maurice: We have increased the number of countries we operate in, the types of products we offer and the markets we serve in those areas where we think we can add value.
Q: Grown your ecosystem?
Maurice: Definitely. We are a natural hub in the ecosystem, and it makes sense to grow this hub, because although there's a lot of disruption in the world, there remains a need for someone who connects different stakeholders. So, whether it's the Dutch pension funds or the Morgan Stanleys or Goldman Sachses of the world, US investors, a South African tech company or an Icelandic one, we have a role to play to connect all these entities, and to enable other parties to bring new products to the market.
Euronext arose from a common sense of urgency about the need to gain scale to compete. By working together, we have way more power and can facilitate each other. It also means we can develop our own systems rather than having to buy other people’s, we can develop marketing together, share the ecosystem, the product development and so on. And we can share technology. As combined European exchanges, we can develop our own technology, share the product development and foster our local ecosystems.
I would generally advise a small biotech or med-tech company to list in Brussels. I would advise a fintech company to come to Amsterdam.
Q Do the Euronext exchanges compete with each other for business?
René: No, we don't compete. We form one global listings team comprising the five countries, and we really look at what is best for the customer and advise them accordingly. Each local market has its own ecosystem and type of investors, so we can basically offer a company the best solution for it. For example, I would generally advise a small biotech or med-tech company to list in Brussels instead of Amsterdam. I would advise a fintech company to come to Amsterdam, because we are creating a fintech community in the Netherlands and we have a lot of international fintech investors active here. And if it doesn’t matter to the company where it lists, they still have access, via our trading platform, to the widest group of global investors. Because we are a true pan-European platform, we can offer the best choice for that specific company. That makes us quite unique.
Sylvia: Our board comprises local CEOs, but every local CEO also has a global responsibility. Every local CEO also has a group function and is globally responsible for market operations for the whole group. That also creates a group feeling.
Maurice: What's also unique is that we have one single order book for our countries; we don’t split liquidity, unlike for example LSE and Borsa Italiana. This means our clients can access any Euronext exchange. They get a form and just check the boxes of the exchanges they want to access instead of having to apply to and connect with each exchange individually. We've already seen some 14, 15 extra companies starting to trade on the Irish exchange because it was connected to our platform and made available through our regular interface. It’s way easier for them.
Q: Your strategy includes offering new services and solutions beyond listings. Why?
Maurice: Our goal is to be more relevant to our clients and to diversify our revenue stream away from listings, which are cyclical. Creating new services, new products, helps us to do both. So, we provide various services, like the listing services, which are the most visible part of what we do. We have trading, there's a derivatives market, we have technology that we offer to our customers and that we also sell to other parties and as white label solutions, and we sell a lot of market data, which is becoming more and more important.
Sylvia: And then we have corporate services, like InsiderLog [see article elsewhere in this issue], which is our newest part. These businesses are very different. They are not trading platforms; they are often tool-based, and they allow us to provide further services for our issuers or other corporates in the market.
Q: IT and data both seem logical extensions, but why the push into corporate services if they are so different conceptually to the rest of your offering?
René: What we see is that MiFID and MiFID II [the EU Markets in Financial Instruments Directive that aims to increase competition and transparency across EU financial markets] are changing the market dynamics and are making it harder for smaller companies, in particular, to access capital markets and find the right investors. Our mission is to support companies in accessing capital markets and finding the right investors, so we decided to fill the gap and step in by offering services and tools that would support them and keep them on investors’ radars. Company webcasting, videos and webinars, for example, are about being present and visible within the market.
Maurice: Last year, for example, we acquired a Dutch web casting companyoffer their webcasting services to our clients outside the Netherlands because we have a footprint and an active ecosystem in all these countries. Today, quite a number of CAC 40 companies have started using this web casting service. Similarly, if you look at what we do, it's logical that the data component and combining data, mainly in real-time, will become more and more important for Euronext. We've partnered with Heckyl, a company that provides sentiment data, for example. And really there is a data component to every new trend, index, product. There is a lot where data plays a role.
Q: Returning to corporate services, your goal is to overcome the barriers that stop some companies, especially smaller one, from accessing investors?
Maurice: If you take it on a meta level, what we are doing is that whenever something becomes less applicable or too expensive or burdensome, we look for disruptive technologies that will enable us to offer similar services at a price and with a degree of effort that fits with the businesses. IR.Manager [a Euronext product managing investor relationship teams and workflows], for example, provides an easy way for people to address investors if, say, they can’t get help from their bank. InsiderLog is another good one, because on the legal side we see more and more legal burdens being placed on companies, and InsiderLog helps you comply with MAR [Market Abuse Regulation].
Sylvia: A lot of the things that we do follow from developments in European legislation. MiFID has completely overhauled the market since 2007, creating more competition. It has also led to less transparency, which was not the goal and which they have tried to correct with MiFID II. That legislation has had many consequences, creating threats to our business but also opportunities. Whatever they are, this is real life and we adapt to that in an agile way.
René: Basically, we say that if an issuer is relevant for investors, of interest to them, then we, as a platform, are relevant to them. If companies are facing a challenge, it's basically a no-brainer for us to act as an independent intermediary between the capital providers and the companies who need capital. It's a very logical fit.
Q: Is there a key to being successful with these kinds of tools?
Maurice: You have to know who you are targeting, the size of that market, how big their problem is and what is a reasonable price you can ask. It is also really important that what you are selling is scalable. For the webcast business, we developed a sort of do it yourself kit that clients can use to set up their own webinars. It’s plug-and-play. Another example is iBaBs, which is a paperless board portal platform that enables you to review, comment on and share documents and boards in a safe environment. That's something which only works if you sell it many times and it is quite affordable.
Q: Is there a thread that pulls your strategy together? What’s your mission?
Maurice: We are powering pan-European capital markets to finance the real economy. Everything we do is around making sure companies can find capital and ensuring that our products bring value to the economy. We help buy-side investors to invest, we bring communication, efficiency and compliance tools to our ecosystem and the final component, which is becoming stronger and stronger, is sustainability. For example, we were the first to create a carbon index together with CDP and today we are doing more and more of these initiatives.
The goal is to move more investments to sustainable assets. Financial markets can make the difference.
Q: What are you doing regarding sustainability?
Sylvia: The goal is to move more investment flows to sustainable assets. There are major risks in our financial markets, with the big funds having most of their money invested in assets that are not sustainable and of which we don’t know what their value will be in the future. I think we can play a role in moving investments to more sustainable assets by offering products – like indices and green bonds – and by lobbying for the financial ecosystem to help creating an appropriate regulatory framework. At the moment, there are no harmonised rules, so the definitions of sustainable assets are not comparable. But harmonising the rules and obtaining all the necessary information, the data, is also very complex. This is where we can play a role. We have investors who want information [on sustainability] and issuers who will need to report on and disclose these non-financial key performance indicators. We are in the middle and can play an increasingly relevant role.
Q: How do people in the industry react to your sustainability message?
Sylvia: It is something that the finance industry is starting to understand; that sustainability is not only for companies with big factories, but that sustainable finance is a completely different way of looking at investing. I think there is a growing a consideration for this in the market. For example, 80% of the new indices we launched last year were sustainability indices, at the request of our customers.
Q: How do you define sustainability? Is it environment and emissions – green, if you like – or does it include responsible investing as well?
Sylvia: There is not one, formal definition, but we now mostly use ESG – environmental, social and governance. That’s the broadest definition of sustainable finance or sustainability in general. But can you address everything at the same time? Some matters are easier than others. For a stock exchange, governance is very important anyway and partially governed by regulation. Social aspects like diversity are also important for every company. If we look at what we can specifically contribute as a stock exchange to our customers, to the ecosystem, I believe climate is the biggest threat we need to address. On the product side, like bonds and indices, the focus is still mainly green. But overall, sustainability for us is all these three elements: environmental, social and governance.
Maurice: This is also why we need standardisation, so that everyone can find information about his or her key investment criteria and select based on that. And we need to do this together on a European scale if we are to identify enough green companies to create green indices. That means standardising the way things are defined, maintained and safeguarded in all countries and I think Euronext, as a pan-European project, can be an important driver of this. We can create a meaningful platform to support this evolution.
Q: You’ve referred several times to Euronext as being a ‘project’. Is that the way you see it?
Maurice: With project, I mean that we are continuously reinventing ourselves to become more and more relevant and effective in the European investor space and European markets. It involves a continuous interaction with the whole ecosystem. It's a continuous journey and one of the examples in which people created something truly European that really serves a value. Europe has a few of those projects in which it is clear that acting as ‘Europe’ makes us more powerful and more relevant in the world, too.
Q: A final question for our legal readers: As deputy general counsel, what is it like to be a lawyer at Euronext?
Sylvia: The role of a lawyer, a general counsel, at Euronext is very different from the businesses I've worked in before. Here, everything we do is heavily regulated, and we are accountable on an almost day-to-day basis to the regulators. That leads to everyone in the company having some inherent legal awareness. You don't have to tell anyone that it is important to be compliant. People understand exactly why I’m here. The other thing is to see the regulatory framework as an opportunity. We have opportunities to turn a legal burden into a business opportunity that benefits our customers, as with InsiderLog. So, Euronext is a very different company from any other, and even any other company in the capital markets, but it’s a fascinating environment for a lawyer.