Fireside Friday with… Euronext’s Stephane Boujnah 

The TRADE sits down with the CEO of Euronext in his Paris office for a frank discussion on his ambitious expansion plans, his optimism for equity (now that the days of cheap debt are over) – and why he decided against acquiring Spain’s BME...

Stephane Boujnah

Where is Euronext currently positioned compared to its competitors, and how happy are you with the past year’s progress? 

Euronext is, first of all, the leading pan-European market infrastructure when it comes to equities, and I believe there is no debate about our leadership in listing and in equity trading. The vast majority of listings in Europe last year took place on Euronext platforms.  One of these drivers is the momentum of international involvement. The vast majority of non-European companies coming into Europe are listing on Euronext markets, and not in London. It is a key marker that something has happened in terms of depth of market, liquidity, and relevance of offering. The fact that you have major companies like Universal Music Group deciding to list in Amsterdam, Spanish companies and German companies deciding to list in Paris or in Oslo – that’s a benchmark change. 

But listings are only one set of metrics for us. The second set of metrics comes around trading. A quarter  of the shares traded in Europe are traded on Euronext markets. Our average daily volumes of shares traded are around €11-12 billion changing hands – that’s twice the size of the London market and of the Frankfurt market. 

A second metric, when it comes to aggregate market capitalisation, is that companies listed on Euronext account represent around €6.3 trillion, again twice the size of the London market, and three times Frankfurt. We’re also the global leaders of bond listings, through our Dublin platform, and sovereign bond trading as well as leading in specific sectors such as ESG bonds and bond indices. 

How big a share of Euronext is the exchange business, and where else are you looking to diversify? 

The group is much more than just our equities business, which represents just 20% of our top line. Eighty percent of the group is made up of other activities, demonstrating how diversified the group has become after the recent acquisitions by Euronext of The Irish Stock Exchange in 2018, Oslo Bors in 2019, and the Borsa Italiana Group in 2021. This part of the group is very profitable and growing and we are keen to keep our equity business focus.  

We believe that in the new interest rate environment, where zero-cost money is no longer available, the balance sheet debate is back. That means debt AND equity. Now, if you want to fund growth, you require partners, and equity funding. People will now need to raise equity for these projects, whereas in the past they would have used debt. So we are confident for the equity market outlook.  

The other part of our diversified global business– everyone focuses on the expansion of our exchange business but the reality is that when we bought these new businesses, we didn’t just plant flags on the map, we didn’t just buy exchanges, we significantly expanded our business range. For example, when Euronext acquired Oslo Bors, around half of the top line was came from a CSD platform. When we bought acquired Borsa Italiana we integrated to the Euronext Group not only the exchange but a clearing house, a CSD, and the leading European fixed income trading platform. This explains why Borsa Italiana is the most important contribution to our Group revenue, a third of Euronext revenues. So alongside the expansion to a new core business, we captured new assets. Euronext’s CSD activity, composed of four CSDs in Europe, has significantly grown.  And we have done something no other European player has managed – a consolidation of CSDs, with Portugal, Norway, Denmark and Italy all operating under the Euronext name with an integrated management. We’ve done a Euronext of CSDs just as we have done a Euronext of trading. We’re also expanding in corporate services, since we’ve made significant investment in acquisitions since 2017 – webinars, webcasting, digital governance, regtechs of various natures, and these businesses have been performing very well – from nothing to a family of businesses of around €40 million top line.  

We’re also trying to develop trading platforms in other asset classes, especially in the FX world. We’re diversifying into energy. That commitment to diversify our top line is fundamental to our 2024 strategic plan.  

Another key pillar of this plan depends on the Borsa Italiana acquisition. By the end of 2023, a large part of the €100 million cost synergies we have committed to deliver by the end of 2024 will be delivered. Clearing flows will migrate in-house during the course of 2023 and 2024, for example. 

There is also at the heart of Euronext’s “Growth for Impact 2024” strategic plan a strong commitment to ESG: both in terms of what we can do as a marketplace in progressing new products and developing new solutions for our clients, and as a company in progressing in this new environment.  

Where next for Euronext, what future plans do you have, and do you have any new markets in your sights?  

What we need to do now is to prepare further steps for diversification, and we’re looking and potential new avenues in post-trade, in FX, in energy, in corporate services, in data, to take the company to the next level.  

When it comes to the external development of our trading and listing business – our stock exchange business – our focus is Europe. We know how to manage a culturally diversified group in a very effective manner. We know how to manage a central orderbook and platform. And we know all the effective synergies to create an efficient equity market. Any single country exchange platform in Europe is welcome to join the Euronext federal project, if that meets our acquisition criteria. We can’t control when assets come up for sale, but we can control how competitive we are – we want to be as competitive as possible so that we are the best choice.  
We’ve for example laid a first foot in the Nordic region. Our acquisition of Oslo Bourse was extremely successful, and that has been identified by all the Nordic players. But when it comes to non-exchange and global business, such as data, platforms, post-trade – we are country-agnostic.  

Why did Euronext not buy BME, and do you regret it?  

Spain is a very important component of the European financial sector. I spent six years of my life running a European business for Santander and have been exposed to the sophisticated, experienced, global-minded Spanish financial community. There is no fundamental, completed European success without a Spanish dimension. That’s for sure. However, after a long analysis of the situation we did not acquire BME. It was a perfect natural fit, but we decided not to bid as we could not top the offer price paid by SIX. Besides, we have a clear M&A discipline – we do deals when we can deliver a return on capital employed above our cost of capital after three to five years. So far, we have always been in a position to achieve this return. In terms of the price of the SIX bid, we could not meet our target returns at that price.  

One of the elements that makes integration possible is that for the past 20 years we have developed a united and diversified federal model. We have a harmonised system run by federal governance with a supervisory board where every exchange has representation. Euronext has a managing board with nine nationalities, a supervisory board with eight nationalities. We have a system where the process of integration has been rigorously tested under multiple situations: it works, and it is scalable, because we are united in diversity.  

In May 2021, we raised €1.8 billion of debt in a day and €1.8 billion of equity in five days, because the market believed what we told them about our M&A discipline, and they could see our past successes. They trusted us, because we have a track record of discipline when it comes to capital employment, and that is how we were able to finance the acquisition of Borsa Italiana Group.  

LSEG has made a strong play within the data and technology space – is this a natural next step for you?  

Most of the players that have diversified before us did so because they reached the conclusion that cash equity trading and listing is less profitable or scalable or has less organic growth than other activities. For all sorts of reasons, I think we have on our side demonstrated that cash equity trading can be a very profitable business and can bring a decent strong return. So they diversified because they decided to dilute their exposure to the equity segment. While we are now the leader for equities in Europe, and it is very profitable. But we need to diversify into other asset classes now. Some other players have made some early moves and have decided to reposition themselves. The London Stock Exchange is not just in London anymore – it is a global business. Their actual exchange element is now minimal, especially post-Brexit. They have done something that is very impressive, and I have huge respect for what David Schwimmer has accomplished as a business leader. Deutsche Borse is also not really a Borse anymore – the cash equity trading and listing business is a very small part of it and their focus of expansion is in post-trade, data, indices, and so on, and they have built a fantastic group which is very successful.  

We are, that being said, looking. For a while it was very difficult to buy assets at reasonable prices. I think the world is changing. When the cost of money is rising and the availability of debt is decreasing, then maybe the real pricing of assets will slowly return and may start to reach our strict return on capital criteria.