Euronext CEO Dominique Cerutti unveiled ambitious plans for a multi-asset future today when presenting the prospectus for the European exchange group’s planned initial public offering.
During today’s presentation Cerutti committed the firm to €60 million in operational savings over the next three years and 5% annual revenue growth, which he said would improve the firm’s long-term EBITDA margin from 42% to 45%.
Revenue growth would come through product innovation across all asset classes, including derivatives, exchange-traded funds and corporate bonds, as well as through a greater focus on small- and mid-cap equities.
Euronext – consisting the national exchanges of Belgium, France, the Netherlands and Portugal – is being floated by InterContinental Exchange (ICE), the US exchange group that bought NYSE-Euronext last year. ICE will maintain both the US operations of the acquired firm, specifically the New York Stock Exchange, and the London-based Liffe derivatives exchange.
Noting Euronext’s limited track record in derivatives on its continental exchanges’ Cerutti said the firm would now “aggressively reposition in this product line”.
Euronext already operates derivatives markets in Paris and Amsterdam, and recently renegotiated its contract with Anglo-French clearing house LCH.Clearnet.
Cerutti added that cost reductions would be realised in part via adjustments to headcount and IT budget based on the need for Euronext to “resize the footprint” as an independent European exchange operator. “The big waves of investment in data centres and infrastructure are behind us,” he said.
One third of the €60 million savings will relate to reduced IT services costs when Liffe completes its transition onto ICE’s technology platform, which is expected by the end of 2014.
Cerutti said Euronext would continue to use the existing instance of Universal Trading Platform as its cash equity trading platform, but for derivatives Euronext would use a “simplified” version compared to that used currently used by Liffe. UTP was initially developed by NYSE Technologies but is now owned by Euronext, Cerutti confirmed, adding, “The UTP will not slow down. Latency remains important for market share.”
Euronext is valued at €1.33-€1.75 billion based on an indicative price range of €19-25 per share. A third of the firm’s stock will be bought by institutional investors at a 4% discount to the IPO price. The offer to retail investors closes on 18 June, while institutional investors have until noon 19 June to register their interest.
Separately, ICE said a number of key Liffe US interest rate futures have “successfully transitioned” to ICE Futures Europe and ICE Clear Europe, including three-month eurodollar futures.
Liffe US MSCI equity index and precious metal futures contracts will transition to ICE Futures US and ICE Clear US on 30 June, where they will trade alongside ICE’s Russell index futures and agricultural commodity contracts.
ICE said the transition of Liffe’s European interest rate, agriculture and equity derivatives markets “remains on track” to migrate to ICE Futures Europe by the end of 2014.As a result, ICE’s global interest rate portfolio will be centralised on one exchange and trading platform, thereby “maximising operational and capital efficiencies for customers”.