Euronext focuses on the integration of Borsa Italiana

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Stephane Boujnah, chief executive and chairman of Euronext, said large customers were co-locating ahead of its main data center migration from the UK to Italy and the exchange and infrastructure group had bold ambitions. for its index activity.

On April 29, 2021, Euronext announced the closing of the acquisition of Borsa Italiana from the London Stock Exchange Group for a final consideration of €4.4 billion, and added new fixed income trading capabilities , clearing and consolidation of a central securities depository.

Stéphane Boujnah, Euronext

Boujnah told Markets Media: “The integration of Borsa Italiana is going very well and we have three major group projects underway. The first is the migration of the main data center to Bergamo in Italy, which is the physical center of the exchange where trading and order matching takes place. »

The second project is the migration of the Italian spot and derivatives markets from the London Stock Exchange Group’s technology to Euronext’s proprietary Optiq trading platform in the first half of 2023. The third migration is the transition of LCH’s clearing operations SA in France to Euronext Clearing at the end of 2023 or beginning of 2024.

He added that Euronext was founded to be the backbone of the capital markets union, to connect local economies in Europe to global markets and to finance the real economy. The group’s vision is to deploy a single liquidity pool, enabled by a single ledger and powered by a single technology platform, Optiq.

“This is an evolving model implemented in our federal governance framework and our European College of Supervisors,” Boujnah added. “We welcomed the Irish Stock Exchange in 2018, Oslo Bors in 2019, Nord Pool and VP Securities in 2020. We are now integrating Borsa Italiana which has changed the size of the group.”

The data center migration was driven by Brexit, by Euronext’s desire to be close to a market where it has large operations, and also by environmental, social and governance (ESG) factors as the new data center is mainly powered by hydroelectric power plants and photovoltaic panels.

“Large customers are co-locating and migrating their servers ahead of the migration date, June 6, 2022,” Boujnah said. “This will take place just 14 months after the closing of the Borsa Italiana acquisition, and it will be an important milestone for cost and revenue synergies.”

He added that after the migrations, the operations of the entire value chain will be in the hands of Euronext, which is a fundamental facilitator for the development of new products.

Source: Euronext

Euronext was the only market infrastructure that did not directly manage its clearing activities for its listed derivatives markets. Since 2003, Euronext has used LCH SA, the Paris-based clearing house owned by LSEG, to clear most of its cash and derivatives flows and has a revenue sharing agreement.

As part of its new three-year strategic plan, Growth for Impact 2024Euronext announced in November 2021 that it will transform CC&G from Borsa Italiana into Euronext Clearing, which will position itself as a European clearing house.

LCH SA’s agreement with Euronext to clear financial and commodity derivatives ran until 2027, but Euronext had limited early termination rights, one of which is exercisable with an effective date no earlier than January. 2024.

ESG

Boujnah said that the group’s ESG strategy is particularly linked to the financing of the real economy since it has nearly 1,500 ratings of small and medium-sized companies. He added: “We will soon be releasing a program called Fit for 1.5 degrees with targets for massive carbon footprint reduction by 2030.”

The Fit for 1.5 degree ESG strategy will include detailed science-based targets for carbon footprint reduction.

Additionally, Boujnah sees opportunities for indexing activity to help accelerate the transition to a sustainable economy. “We have very broad and bold ambitions for our indexing business because asset managers want more ESG indices,” he said.

The AEX ESG index is expected to launch on Euronext Amsterdam in the second quarter of this year. The new index will identify the 25 companies that demonstrate best ESG practices among the 50 constituents of the AEX and AMX indices and will combine the measurement of economic performance with ESG impacts in accordance with the principles of the United Nations Global Compact.

Source: Euronext

As part of the strategy to offer ESG versions of national flagship indices, Euronext also launched the CAC 40 ESG in France in March 2021 and the MIB ESG in Italy in October 2021.

“We have very successful business in ESG bonds,” Boujnah added. “Euronext Dublin is the leading platform and will position its offer for international issuers.”

Euronext also has its own emission reduction targets, such as encouraging employees to take the train instead of systematically flying and powering the new data center with renewable energy.

Digital assets

The group also believes it remains very close to the digital asset market, but has no ambitions to enter the direct retail segment or launch a crypto trading platform.

“We spend a lot of time and resources finding a way to ensure that digital assets are leveraged in the best way to become relevant,” Boujnah added.

He continued that the regulation of digital assets is improving but that in general, when it comes to liability and systemic risks, European regulators prefer a centralized system which they know rather than a distributed system which they do not know. .

Financial results

Euronext reported record quarterly revenue of €370.1 million in the last three months of 2021, with Borsa Italiana contributing €127 million. Non-volume revenue accounted for the majority, 55%, of total revenue and revenue, up slightly from last year, while at the same time business activity increased.

For the full year 2021, Euronext recorded revenue growth of 46.9% to around €1.3 billion. The exchange generated €10.1 million of run-rate synergies at the end of 2021, eight months after the completion of the acquisition of Borsa Italiana, and is committed to delivering €100 million of run-rate synergies by 2024.

Boujnah said on the earnings call: “It’s the combination of strong organic growth and the combination of the Borsa Italiana group. 2021 has been a strong year and 2022 is a year of transformation projects for Euronext.

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