What is Euronext?
First of all, let's take a few moments to introduce you to Euronext in a little more detail by giving you its complete definition.
Euronext is actually the name of a listed company. This company is itself responsible for ensuring the smooth operation of the European stock markets, guaranteeing their security and transparency and helping them to develop properly.
The history of Euronext began in September 2000 with the merger of three major stock exchanges in Europe, namely the Amsterdam Stock Exchange or AEX, the Brussels Stock Exchange or BXS and the Paris Stock Exchange or ParisBourse. The three entities thus combined gave birth to the largest financial centre in the euro zone: Euronext.
It should also be remembered that the Euronext company is also the head of the derivatives market which is based in London and is known as Liffe. Later in 2017, Euronext also acquired the Irish Stock Exchange.
Today, the Euronext group is responsible for the management of 1,300 listed companies in the euro zone. Its activities are also supervised by the Financial Markets Authority or AMF.
Why is Euronext currently the most important financial market in Europe?
Thanks to the fact that it is made up of several important financial centres, Euronext has become over time the main financial operator in the euro zone. Indeed, as mentioned above, this market is responsible for organising the listings of more than 1,300 companies listed on the financial markets of Paris, Amsterdam, Brussels, Lisbon and Dublin. In total, these companies have a market capitalisation of more than EUR 2,600 billion.
We also know, as seen previously, that in 2017, Euronext acquired the ISE or Irish Stock Exchange, which is none other than the Dublin financial centre that has a very significant activity in bond management, asset management and index funds. This entity has therefore been added to the market capitalisations mentioned above.
In order to further accentuate its presence and facilitate the management of these countless European assets, in 2018 Euronext implemented a trading platform based on a specific and in-house technology and named Optiq. It was during the fourth quarter of the same year that the migration from the old Xetra platform to the Optiq platform took place. The main advantage of this new platform is the significantly improved latency times and the improved time-to-market and flexibility.
It should also be remembered that the Euronext group has become the leader it is today thanks to a long-term strategy of acquisitions of all kinds. In 2007, we know that the group got closer to the New York Stock Exchange in order to form NYSE Euronext. However, it was in 2013 that this new market came under the control of the American group ICG or International Exchange Group which decided to separate the American and European branches of this stock exchange operator.
Finally, in 2014, the Euronext group became an independent company listed on its own markets, including compartment A of the Paris market for capitalizations of more than one billion euros.
The capital of the Euronext group is also subject to a shareholders' agreement. Thus, and among the major shareholders of this group, we find notably large international banks such as BNP Paribas and Société Générale. This shareholders' agreement was renewed during the summer of 2017 and for a period of several years.
To understand what Euronext is all about, it is also important to know that, like all listed companies, Euronext generates and publishes annual revenues and pays dividends to its shareholders.
What are the main roles and missions of Euronext?
Let's now move on to the real utility of the Euronext market with its main functions and role. Indeed, under the supervision of the Financial Markets Authority or AMF, Euronext is in charge of establishing the membership rules for investment services providers wishing to become members of its markets, the rules for the admission of companies to the list and the rules for the operation of the markets it organises, including :
- The 1st market
- The free market
- EnterNetx which is dedicated to the financing of SMEs and ETIs
- Derivatives markets
Another important mission of Euronext is to ensure the management and supervision of the markets and the computerized listing systems, the dissemination of real-time prices and the assistance to listed companies for the listing of their shares and the management of all their financial operations. Euronext is also responsible for monitoring market members.
Still among Euronext's roles and functions, we can highlight the fact that the group also markets services that can be grouped into three main sectors of activity. The first of these sectors is listing, with the admission to listing, publication and updating of the list of securities and derivatives traded and their prices. Here, Euronext is in charge of managing the markets and the computerized listing systems and ensures the dissemination of prices in real time by monitoring market members and assisting companies in listing their securities or managing their financial operations. The second sector is trading, with the matching of buy and sell orders. For this purpose, Euronext manages a central order book through which investors can trade, clear and settle in a uniform manner on all markets. Finally, the third area is the dissemination of information, including the dissemination of prices and market data.
How is Euronext organised?
As regards its commercial activities, the Euronext Group has created a specific division called "Global Markets and Sales". This division is currently organised into five different business units, as follows
- The cash markets unit which includes equities, trackers, structured products and bonds.
- The financial derivatives unit with index futures and option futures.
- The commodity derivatives unit.
- The unit of information services with the price in real time.
- And finally, the post-trade unit with the clearing, custody and settlement of all exchange-traded and OTC products that are eligible for the Euronext portfolio.
It should be noted that this division also includes the departments responsible for customer service, global analysis and project management.
The different compartments of Euronext Paris :
Let's now take a closer look at the Euronext Paris financial market and its organization. This financial market is divided into two distinct parts by the companies listed on it.
The first part of this market is the regulated market and the second is the non-regulated market.
The regulated market is governed by several rules. First of all, there are three compartments, namely compartment A, compartment B and compartment C. In these compartments, listed companies are classified according to their market capitalization, in other words, according to their value on the financial markets.
In order to better understand how this breakdown is made, it should be noted that the companies listed in compartment A of Euronext are those with a market capitalisation of over 1 billion euros. In Compartment B, we find companies with a market capitalisation of between 150 million and one billion euros. Finally, in compartment C, we find companies with a market capitalization of less than 150 million euros.
On the non-regulated market, we find companies that cannot be listed on the regulated market, such as smaller companies, many of which are SMEs. Thanks to this non-regulated market, companies that do not have the capitalization and therefore the sufficient value to integrate the regulated market, have the possibility to raise capital or to benefit from a greater media and commercial exposure without having to undergo the same constraints as the companies that have chosen to integrate the regulated segment of the Euronext market.
In the non-regulated market of Euronext, there are also several smaller markets with notably Euronext Access which is the former free market and was renamed that way in 2017. It is itself composed of two compartments with Euronext Access and Euronext Access +. Finally, the non-regulated market also includes Euronext Growth which is the former Alternext market and was also renamed in 2017. In these different compartments, a company's market capitalisation is no longer taken into account but other specific criteria.