On Wednesday, I had the opportunity to visit the offices of Euronext, the leading pan-European exchange with operations in Amsterdam, Brussels, London, Lisbon, and Paris. They moved to their current location in Paris two weeks ago. Their office is fantastic. They were incredibly gracious with their time, and I had meetings with Nicole Agopian, Head of Technical Relationship Management; Thibaut Desouches, Head of Business Development; Simon Gallagher, Head of Equties; Brieuc Louchard, ETFs & Funds Business Development Manager; and Charlotte Alliot, Head of Business Development - U.S.A.
Our meetings were rather technical. It was fascinating and exciting to review the “plumbing” associated with trading and operations at one of the highest profile exchanges in the world. It is worth highlighting the tremendous innovation occurring at Euronext. This highlights the broader trend—costs associated with trading in Europe are declining, and at the same time, productivity and efficiency in trading is improving.
I took pages of notes about the details surrounding the European markets for ETFs, derivatives, fixed income, and equities. Instead of the highlighting the details, I’ll share some of the broad takeaways:
It is clear that costs and efficiencies are improving in European trading in part as a response to the Markets in Financial Instruments Directive II (MiFID II). This has increased competition and it is pushing for “on-exchange” trading. On-exchange trading is improving visibility and transparency.
The maturity of the Eurozone, combined with economic recovery and accommodative monetary policy are raising enthusiasm in European shares.
Financing markets in Europe are very different in Europe than in the U.S. In Europe, the majority of corporate debt is financed by banks rather than by the market. In the U.S., the opposite is true. Europe is seeing the beginnings of a trend towards market financing. This could be beneficial for European equity and fixed income markets.
While barriers are being reduced, it is clear that trading and settlement across more than two-dozen countries in the European Union is a daunting challenge. Progress is being made, and I left the meetings optimistic about the improvements associated with implementing European financial strategies.
Special thanks to Brennan Staheli, Michael Willden, and the Lunt Capital team for their contributions to this report.