Euronext Series Part Two: Euronext chief Boujnah outlines key themes for 2023

Euronext Series Part Two: Euronext chief Boujnah outlines key themes for 2023

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Euronext hosted in January 2023 the first Euronext Markets Insight conference in the impressive Pavillon Elysee on the famous Avenue des Champs Elysees in Paris. The Euronext Markets Insight Conference was the Group’s first of a series of European conferences dedicated to Derivatives, Index and ETF activities.

Main speakers of this event included Jean-Claude Trichet, Former President of European Central Bank and Honorary Governor of the Banque de France, Jean-François Cirelli, Chairman and Senior Advisor of BlackRock France, Belgium and Luxembourg, and former CEO of Gaz de France and GDF Suez, Declan Costello, Deputy Director-General at European Commission DG ECFIN, Imène Rahmouni-Rousseau, Director General Market Operations at the European Central Bank, Benjamin Clerget, Portfolio Manager at Hudson Bay Capital, Cédric Baron, Head of Multi Asset Strategies at Generali Investments and Gabriel Messika, Head of Index Forward Trading Europe at JP Morgan.

Euronext’s derivatives market is the second equity derivatives franchise in Europe and a recognised innovative player in the industry, with the recent launch of new products such as a futures contract on the CAC 40 ESG, the extended maturities on the Total Return Future on the CAC 40 index, and the launch of the CAC SBT 1.5° and the BEL ESG indices.

Euronext’s thought leadership industry event aimed to gather together macro-economic experts and key industry players to provide market participants with the best tools to navigate the coming trading challenges. Inflation and interest-rate policies, energy shortages and their overall consequences on European economies have been at the heart of the discussions.

Euronext chief Stephane Boujnah opened the event by welcoming the 200 guests, before commenting on the state of play of the European capital and trading markets and current key challenges facing Europe.

Looking back at 2022 and ahead at the 2023 outlook for European markets

In 2022, the European Central Bank (ECB) raised interest rates four times. The ECB declared it will go further in 2023 to tackle European inflation running at 9.2% last month, down on the previous month but still way off the ECB’s 2% target.

 “Some 50 years ago, each country had its own inflation rate and monetary policy. But now there is a single monetary policy and fragmented inflation rates. <…> Another difference with what we experienced 50 years ago is that the second round inflation and the impact on salaries has been this year relatively more limited than we experienced in the 1970s,” said Boujnah, chief executive and chairman of the board at Euronext.

Boujnah further highlighted: “It is also worth noting the ambivalence between the signalling of interest rates and the reality with the gap filled between real interest rates and nominal interest rates pre-inflation, while we are seeing earlier than we did in the 70s the impact of inflation on monetary policy.”

Stepping back from inflation, Boujnah commented on the impact of the current geopolitical events on the market activity.

“We should not underestimate the effect of ongoing military operations on talent destruction. War undermines predictability, you create in the mindset of market operators the idea that anything can happen and anything is possible.” He also highlighted the current threat to social cohesion, with “markets underestimating that social cohesion is an asset”.

Against this backdrop, Boujnah recalled that Euronext is fulfilling a crucial role in the evolving financial market infrastructure that underpins the European Union.

The Euronext chief executive told the delegation: “What we are trying to do at Euronext is build the backbone of the Capital Markets Union. We are heavily equities focused but we are also the second largest equity derivatives venue in Europe.”

Euronext has transformed in the past decade, boosted by the 2018 acquisition of the Irish Stock Exchange, the 2019 takeover of Norway’s Oslo Bors and, most recently, the 2021 purchase of Borsa Italiana from the LSE Group.

Boujnah commented on the European leadership secured by Euronext in terms of listings, as one of the exchange’s recent success stories: “Most of the European listings last year were on Euronext platforms, including 15 international listings, so this is proof that if you want to list in Europe now, you mainly list in Paris, Amsterdam or Oslo.”

Euronext reported 83 new equity listings last year, which was more than double those on the LSE Group and Deutsche Boerse combined, according to Euronext. The Euronext IPOs contributed an aggregate market capitalisation of €23 billion (£20.20bn) at the time of listing.

“The aggregate market capitalisation of Euronext listed companies is now about twice the size of the London Stock Exchange and three times that of Frankfurt. More important however is the average daily trading and we trade each day on Euronext €12bn which is about twice the size of the London Stock Exchange”.

Main highlights in Euronext’s derivatives, index and ETF franchise

Euronext has also developed in recent years its listed derivatives business, with a recent success being the exchange group’s total return futures segment.

Boujnah announced during the conference: “In derivatives, we just passed in early January a milestone of a million lots for our CAC40 Total Return Future”.

The Euronext derivatives markets had 127 new contract listings in 2022. Euronext has also built a strong market share in Sweden, “a country where we are not present and have taken a significant market share in single stock futures and dividend futures.”

Euronext’s exchange-traded products business is also moving from strength-to-strength, as it benefits from the combination of the exchange’s established European markets with the Borsa Italiana ETF business. “On ETFs, through the diverse pool of liquidity, the excellent market quality, the tight spreads and the secure markets for investors, we have been able to consolidate the leadership position of Italy in the ETF market.”

Euronext also played in the past year a key role in international commodities trade as the home to the European wheat futures market, a sector that has been roiled by the Russian invasion of Ukraine, a massive wheat producer.

“In commodities, 2022 was a peculiar year where Euronext’s Matif activity and the soft commodities markets in general were absolutely essential to mitigate the underlying crisis of the export of grains from the Black Sea,” said Boujnah.

Euronext is also leading Europe in its adoption of environmental, social and governance (ESG) products to help move the European economy to a more sustainable footing.

Boujnah said: “Finally, the CAC 40 ESG was launched a couple of years ago and we are launching now the CAC 40 SBT 1.5° with the support of SBTi, of CDP but also of Amundi which confirmed the upcoming launch of an associated product. This launch aims to allow investors to track firms that are differentiating themselves with outstanding carbon reduction targets. We are going to continue launching blue chip ESG indices and we are going to launch soon the BEL ESG in Brussels.”

Euronext launched in January an index called the CAC SBT 1.5 that includes only CAC listed firms that comply with the 1.5 degree reduction target specified under the Paris Agreement. French asset management giant Amundi has already committed to launch an exchange-traded fund based on the climate focused index.

2023, a key year for Euronext to further deploy its “Growth for Impact 2024” strategic plan

Stepping back, Euronext is also forging ahead with a multi-year strategic project to reduce its reliance on third parties, as part of its “Fit For 1.5°” ESG strategy. Euronext has committed to reduce by 2030 its Scope 1 and Scope 2 market-based greenhouse gas emissions by 70% compared to 2020 and its Scope 3 travel emissions by at least 46.2% compared to 2019. 

Boujnah commented on the Group’s strategy: “We believe that physical market infrastructure matters a lot and that is why we have migrated our core data centre from Basildon near London to Bergamo in Italy. We are going in 2023 to migrate the Italian cash markets to the single liquidity pool and that is an important event for the Euronext project.”

Besides, part of this strategic project is to reduce Euronext’s use of LCH, the clearing house owned by the LSE Group which currently clears Euronext’s equities and derivatives.

The chief executive said: “The fact that we are going to internalise the clearing to our own clearing operations in Italy is also crucial because that is a fundamental brick of the strategic autonomy of Europe.”

Euronext said in January that it will migrate the clearing of its listed derivatives from LCH to its own clearing arm Euronext Clearing in the third quarter of next year. The exchange plans to switch its cash equity markets to Euronext Clearing by the end of this year.

Boujnah concluded his welcome address by saying: “In the current context of the war in Europe, our main contribution to tackle it is to build integrated European capital markets. If we want Europe to be at peace, we need Europeans to be totally integrated.”

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