How To Trade At Euronext In 2021 – A European Trading Powerhouse Examined


The Essential Guide
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Euronext is a pan-European exchange group with regulated markets in Amsterdam, Brussels, Dublin, Lisbon, Oslo, and Paris. In this guide, you’ll learn more about Euronext’s products, services, and how it operates.

What is Euronext?

Euronext is a European marketplace for trading shares, fixed income, derivatives, commodities, ETFs, and other financial products.

Euronext also assists companies with raising equity and debt capital, listing their securities, and managing their exchange listings.

It operates the leading marketplaces for European trading in virtually every major asset class. The exchange plays a vital role in providing liquidity in the European marketplace.

Euronext’s business offering include the following:

ServiceDescription
ListingsEuronext operates a marketplace for the public listing of equities, bonds, ETFs, funds, indices, warrants and certificates, and structured notes. It also helps companies manage their listings.
TradingEuronext operates marketplaces for trading nine different classes of assets:
  1. Equities
  2. Fixed Income
  3. Funds
  4. ETFs
  5. Warrants and Certificates
  6. Structured Notes
  7. Financial Derivatives
  8. FX
  9. Commodities
ServicesEuronext develops and offers a variety of trading-related services, including:
  1. Clearing Services
  2. Best Execution
  3. Euronext Fund Services
  4. Multi-Currency ETF Service
  5. Euronext RiskGuard
  6. Euronext Dark LIS Features
  7. Deferred Settlement Service
  8. Trad Confirmation System
Market DataEuronext offers real-time, historical, reference, and end-of-day index data for assets traded on its platforms
TechnologyEuronext develops and licenses technology such as the new Optiq multi-market trading platform

What Can You Trade on Euronext?

Euronext traders can transact business in one of two broad categories of products:

  1. Cash/spot market – Transactions in which delivery and payment take place shortly after the transaction is concluded.
  2. Derivatives – Securities that derive their value from the performance of another instrument such as an asset, index or interest rate. Futures and options are the most commonly traded derivatives.

Products Traded on Euronext

CategorySub-categoryMarket Facts
Cash/SpotShares / Equities
  • About 1,500 listed issuers
  • Close to €4.5 trillion in market capitalization
  • Fixed Income:
    1. Corporate
    2. Regions
    3. Governments
    4. Financial Institutions
    Traders in this segment can access:
  • Retail-focused regulated markets
  • Illiquid credits (through the Euronext Synapse platform)
  • Funds:
  • Euronext Fund Services a platform for fund trading in Europe that gives access to more than 160 open-end funds from a variety of issuers
  • Euronext Fund360 - a series of fund data solutions
  • Customers can invest in open-end funds across the globe
  • Simplified and automated subscription/redemption service to access funds through a broker
  • Exchange Traded Products:
    1. Exchange Traded Funds (ETFs)
    2. Exchange Traded Commodities (ETCs)
    3. Exchange Traded Notes (ETNs)
    One of the fastest growing investment categories in the world
    Warrants and Certificates: A pre-packaged investment strategy based on derivatives including:
  • Single security
  • Basket of securities
  • Options
  • Indexes
  • Commodities
  • Debt issuance
  • Foreign currencies
  • Swaps

  • Indices: Euronext has launched Morningstar European Indices and associated instruments. It has also offered to make available benchmark indices and create derivative products based on those indices.
    Parties can license these indices and create ETFs, ETPs and structured products for low cost
    DerivativesEquity Derivatives:
    1. Stock Options
    2. Stock Futures
    3. Dividend Derivatives
    4. Equity Index Derivatives
    5. ETF Options
    Provide a leveraged way to invest in equity and equity-linked products
    FX Derivatives: Euronext offers five FX derivatives:
    1. Euro / Dollar Futures
    2. British Pound / Euro Futures
    3. British Pound / Euro Options
    4. British Pound / Dollar Futures
    5. British Pound / Dollar Options
  • To exchange one currency for another at a specified date in the future at a price that is fixed on the date of the transaction
  • Exchange-traded and centrally cleared
  • Trade on Euronext Amsterdam Derivatives Market
  • Commodities:
    1. Corn futures
    2. Milling wheat futures
    3. Nitrogen futures
    4. Options on corn futures
    5. Options on milling wheat futures
    6. Options on rapeseed futures
    7. Options on rapeseed meal futures
    8. Options on rapeseed oil futures
    9. Rapeseed futures
    10. Rapeseed meal futures
    11. Rapeseed oil futures
    12. Residential wood pellet futures
    13. Skimmed milk powder futures
    14. Sweet whey food grade powder futures
    15. Unsalted lactic butter futures
    Products allow traders to manage agricultural price volatility

    Trading Commodities

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    How is Euronext Regulated?

    Euronext’s markets in Amsterdam, Brussels, Lisbon, London, Dublin, Oslo, and Paris fall under the regulated markets framework of the Markets in Financial Instruments Directive II (MiFID II) of the European Union.

    The Markets in Financial Instruments Directive (MiFID) is an EU regulation designed to increase transparency across all member nations. The regulation was passed in 2004 and implemented in 2007.

    As a result of the 2008 global financial crisis, the EU made MiFID more expansive and created MiFID II and Markets in Financial Instruments Regulation (MiFIR). These changes went into effect in 2018.

    MiFID II made the reporting requirements of derivative contracts more stringent, while commodity contracts are subject to position limits.

    In addition to regulated markets, Euronext also operates Multilateral Trading Facilities (MTFs). Each of these MTFs has its own organizational memos and rules:

    1. Euronext Growth operated by Euronext Brussels, Euronext Lisbon, Euronext Dublin, and Euronext Paris
    2. Euronext Access operated by Euronext Brussels, Euronext Lisbon, and Euronext Paris
    3. Euronext Expert Market operated by Euronext Brussels
    4. Trading Facility operated by Euronext Brussels
    5. Global Exchange Market operated by Euronext Dublin
    6. Atlantic Securities Market operated by Euronext Dublin
    7. MTFs operated by Oslo BØrs ASA

    The European Securities and Markets Authority (ESMA) maintains the list of regulated markets. As European market operators, all Euronext markets are subject to the national laws and regulations in force as well as EU regulations.

    How Does Euronext Conduct Trading?

    Euronext conducts trading on several electronic communication networks (ECNs).

    Optiq

    Optiq is the latest generation multi-asset electronic trading platform offered by Euronext. It replaced the Universal Trading Platform (UTP) for the trading of most asset classes at Euronext.

    Optiq provides traders with a streamlined and fast way to send orders for execution. It can accommodate connections with approved Independent Software Vendors (ISVs) (see below) and is compliant with MiFID II.

    Euronext offers other targeted platforms for trading in specific asset classes or market situations:

    FastMatch FX

    FastMatch FX is the fastest growing ECN in the spot FX market. The credit crisis of 2008 has led to an evolution toward greater transparency in the FX market and an increase in electronic trading.

    FastMatch
    This screenshot is only an illustration. Current market prices can be found on the broker website.

    FastMatch FX provides customers with access to large pools of liquidity in FX markets. The ECN has the following features:

    • Colocation in four data centers: London, New York, Tokyo and Greenwich
    • 10 times lower latency compared to most competitors’ ECNs
    • Smart order routing
    • Customizable liquidity pools

    Euronext Synapse

    Euronext Synapse was developed in partnership with Algomi to serve customers transacting in illiquid fixed income markets.

    The service brings together banks and customers and provides liquidity, execution and reporting features in one platform. Euronext developed Euronext Synapse to increase trading opportunities in sparsely traded bonds.

    Euronext Synapse efficiently searches for counterparties and brings together pools of liquidity for bond traders.

    Euronext Block

    This multilateral trading facility (MTF) allows market participants to proactively trade large blocks of securities.

    The platform has a feature called Euronext Block’s Invitation to Trade (ITT), which allows traders to invite trusted counterparties to submit block liquidity.

    Traders can use Euronext Block to transact in 3,000 instruments across 15 markets.

    ETF MTF

    This is a single Pan-European platform for trading all European listed ETFs.

    Euronext Expert Market

    This is the electronically traded market for selling non-listed securities by public auction. Public auctions take place every Tuesday to trade securities, bonds and other fixed income instruments.

    AtomX

    This system allows traders to report customized OTC transactions.

    The platform allows reporting of bilateral contracts with customized expiry dates and strike prices. Traders can report European or American style options and physically or cash-settled products. Essentially AtomX gives traders in the OTC market the security and efficiency of an exchange market.

    History of Euronext

    The birth of Euronext occurred in September 2000 when three European bourses – Amsterdam Exchanges, Brussels Exchanges and Paris Bourse – merged into one entity.

    The merger enabled the parties to take advantage of the financial harmonization in Europe created by the formation of the European Union (EU).

    The creation of the euro currency and the increasing global and electronic presence in securities trading made the new exchange a logical next step for financial markets.

    In order to stabilize the new public company, a group of 11 investment took a stake in Euronext. These investors, called reference shareholders, own a 33.36% stake in Euronext.

    Key Events in Euronext’s History

    EventSubjectYearCommentary
    AcquisitionLondon International Financial Futures and Options Exchange (Liffe)2001Expanded Euronext presence into the United Kingdom
    AcquisitionLisbon Stock Exchange2002Expansion of Euronext into the leading marketplace in Portugal
    MergerNew York Stock Exchange (NYSE)2006In an effort to prevent a takeover by NASDAQ, NYSE enters into a $10 billion merger agreement with Euronext. The merger was completed on April 4, 2007
    Technology DevelopmentNYSE Euronext develops the Universal Trading Platform (UTP)2008-2009The new electronic platform provides for trading of equities, bonds, options and futures
    Product LaunchEuronext London2010London-based securities market targeting new international issuers
    Attempted MergerDeutsche Börse Group2011
  • Deutsche Börse attempted to acquire NYSE Euronext for nearly $10 billion
  • The combination received approval from US antitrust authorities in 2011
  • The European Union blocked the merger in February 2012 over antitrust concerns

  • AcquisitionIntercontinental Exchange (ICE)2013ICE, a global operator of trading marketplaces and clearing houses, acquired NYSE Euronext for $8.2 billion
    DivestmentEuronext2014ICE separated the continental European operations of NYSE Euronext and Euronext London from the rest of the company and launched a public offering of Euronext N.V.

    ICE kept NYSE and Liffe and maintained them as separate entities.

    Euronext is run by a managing board whose activities are supervised by a supervisory board. Stéphane Boujnah is CEO and chairman of the managing board of Euronext.

    FAQs

    Below, we’ve put together some answers to commonly asked questions about Euronext.

    What Type of Memberships Does Euronext Offer?

    Qualifying firms may apply to become a member of the Euronext Cash Market or the Euronext Derivatives Market or both

    All applicants must complete an application, undergo a due diligence review, and sign an agreement affirming that he/she will adhere to all regulations of the exchange.

    Euronext does not accept memberships from individuals or firms that are unauthorized unless the individual or firm is awaiting authorization pursuant to MiFID or can demonstrate why authorization is not necessary.

    The steps for applying for membership are as follows:

    1. Submit an application and necessary documentation
    2. Gain connectivity to Euronext markets
    3. Configure and test connection
    4. Begin trading

    Market Makers

    Euronext has a variety of market-making schemes.

    Firms that intend to disseminate two-sided markets on a regular basis, such as high-frequency traders, must register as market makers with the exchange.

    What Are Euronext’s Margin Requirements?

    Central counterparties (CCPs) provide protection to market participants by acting as a seller to the buyer on a trade and the buyer to the seller. In this regard, they protect market participants from the risk of default and allow markets to operate safely and efficiently.

    Euronext has relationships with two CCPs:

    • LCH and EuroCCP – For cash markets including warrants and certificates
    • LCH – For derivatives markets including commodities

    These clearinghouses act as central counterparties on all transactions. Each of these clearinghouses employs the necessary procedures to protect market integrity and safeguard market participants from systemic risk.

    Each clearinghouse also tries to balance market safeguards with the optimization of capital efficiency.

    LCH website notes its use of the SPAN® margining methodology.

    SPAN® Margin Model

    LCH uses the SPAN® Margin Model to calculate futures and options margin.

    Traders generally have to post initial margin based on the riskiness of a position and any possible offsets the clearing firm may apply.

    Sometimes LCH can require additional margin to account for factors such as illiquidity, concentration risk in an asset class or other factors.

    Traders should consult the LCH and EuroCCP websites for more details about how they calculate margin.

    What Are Euronext’s Fees and Charges for Traders?

    Euronext charges transaction fees for both cash market and derivatives trades executed on its platforms. It bases the fees it charges traders for executions in its cash markets on two factors:

    1. The mechanism for trading (e.g., auction or continuous)
    2. The level of liquidity in the product

    The exchange designs its cash fee scheme to charge lower fees for more liquid instruments and to encourage providing liquidity in less liquid securities.

    Euronext derivatives traders pay trading fees based on three factors:

    1. The product
    2. The type of account
    3. The role of the member

    Euronext does not charge either initial or annual membership fees. However, members receive charges for connecting to the exchange systems and clearing through the exchange partner clearing firms.

    What Market Data Does Euronext Offer?

    Euronext makes a variety of different types of market data available to its customers.

    • Real-Time Data – Euronext makes real-time data available either through the exchange or through authorized vendor partners of the exchange. Traders can obtain real-time data for equities, derivatives, indexes, and bonds.
    • Historical Data – Euronext offers historical tick data on all instruments traded on Euronext markets. Traders can use this data to back-test trading strategies, develop risk and execution models, and perform post-trade analysis.
    • Corporate Actions – Corporate action data products such as dividend news, corporate action calendars, and contract notices.
    • Reference Data – Provides detailed information on trading product attributes.
    • Index Data – Provides current and historical details on index compositions and weightings.

    What Educational Materials Does Euronext Offer?

    Euronext operates local websites for investors in each country in which it operates. These sites provide educational materials and publications to help inform investors about the exchange and its products.

    You can find the links to these sites in the investors’ section of their website.

    Does Euronext Have Vendor Partners?

    Euronext works with many independent software and application service providers that help traders connect to the exchange’s technology and systems.

    Actant, ATEO, BLOOMBERG, Digit Base, Eccoware, and TradeSense count among these providers, but you’ll find a full accredited list on their website.

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