NYSE Euronext today launched a Single Order Book in Europe, which unites trading, clearing and settlement across the group’s exchanges in France, Belgium and the Netherlands.
The new unified order book will make it easier for investors in these markets to effect cross-border transactions, according to Roland Bellegarde, group executive vice president and head of European execution at NYSE Euronext. “Traders can access and trade securities from other countries as if they were domestic securities,” he told theTRADEnews.com. “As of today, we have put the multi-listed French, Dutch and Belgian securities on a single order book and harmonised the rules and corporate actions.”
Before the launch of the Single Order Book, cross-border transactions were complicated because of the different ownership rules in the three countries. In France, for example, ownership technically began once an investor had committed to buy a stock. In the Netherlands, however, ownership commenced upon settlement – usually three days after the trade took place.
The Single Order Book removes these differences. This is largely thanks to post-trade provider Euroclear’s implementation of its Euroclear Settlement of Euronext-zone Securities (ESES) project, scheduled for completion on 19 January. This initiative will harmonise corporate actions and legal systems across the three Euronext markets and establish a single settlement system for all of them. As a result, stock ownership now commences when the securities are delivered for all markets. Portugal, the fourth Euronext market, is not included in the new platform because the Portuguese central securities depository, Interbolsa, is not a part of the Euroclear group.
The launch is the culmination of almost nine years’ work since the Paris, Amsterdam and Brussels stock exchanges agreed to merge in March 2000. Trading across the three bourses was harmonised in 2001, and a single clearing house was established between 2003 and 2004. The settlement harmonisation was the final piece of the puzzle.
The introduction of seamless cross-border trading between the three markets should result in efficiencies and cost savings for the buy-side, according to Bellegarde. “It is a big improvement for institutional traders and mid-sized investors,” he said. “Previously, these cross-border trades followed non-standard, manual processes but institutional investors can now standardise them.”
Because of the differences in settlement rules between the countries, cross-border transactions previously required investors to use custodian banks, which created extra costs. “We won’t have those costs any more,” said Bellegarde. “Traders are using the same plumbing and corporate actions are applied in a similar way so the costs are going to be lower.”
Another benefit of the Single Order Book, said Bellegarde, is enhanced liquidity. “Before the volumes were split over two or more order books. Now they are only in one, so the pool of securities available to trade is bigger than before,” he commented.