Euronext confirms superior market quality for equity trading

Home to seven national exchanges, Euronext is further integrating its capital markets value chain whilst maintaining superior market quality for equity trading, to the benefit of a wide variety of market participants.

Euronext is leading the way in the evolution of the financial markets. Built into its DNA is the project to create the launchpad for integrated European capital markets. As the leading pan-European market infrastructure, Euronext today operates seven national exchanges (Belgium, France, Ireland, Italy, the Netherlands, Norway and Portugal), one international fixed income trading platform, four CSDs, one clearing house in Europe, and its own trading technology and core data centre – covering the full capital markets value chain.

A primary exchange representing over 25% of European Lit Equity trading with superior market quality

Euronext is the largest European cash equity trading venue across both primary exchanges and MTFs. It saw over €12 billion in average daily value traded in the first half of 2022, representing a quarter of European on-book lit turnover, and in Q2 2022 reached 67.1 % market share (continuous and auctions market share, including Borsa Italiana Group). As a primary exchange whose purpose is to shape capital markets for future generations, Euronext strives to help innovative companies grow by raising capital, and improve trading for clients of all sizes, geographies and categories – from institutional and retail investors to international brokers, local boutiques, and liquidity providers.

As a primary exchange, Euronext plays a vital role in guaranteeing fair, orderly and efficient price formation, which is reflected in superior market quality. For almost a decade, Euronext has consistently offered the best market quality in Europe based on a wide range of key metrics.

Euronext offers the tightest spreads on blue chips, approximately 40% tighter than the leading MTF in Europe. It displays an average Liquidity at Touch of above €20,000 on blue chips, twice as high as the best-performing MTFs. It is present at the European Best Bid & Offer (EBBO) on blue chips more than 77% of the time, and sets the EBBO four times more frequently than the leading MTFs.

(Data as of H1 2022 – source: BMLL Technologies)

Resilient market quality and better markouts, even in times of volatility

Since early 2020, volatility has skyrocketed in financial markets worldwide. In H1 2022, Euronext demonstrated its position as the leading European equity venue by maintaining stronger metrics than MTFs in terms of average spreads, presence at EBBO and EBBO setting, even when volatility hit. This enabled Euronext to guarantee execution to market participants with the most limited market impact, testifying to Euronext’s resilient markets, which showed the best performance – including better than MTFs – even in times of unprecedented levels of volatility. This resiliency, along with Euronext’s efficient liquidity programmes, was crucial in maintaining the efficient functioning of European marketplaces during the recent crises.

Read more: Euronext Equity Market Quality Analysis

(Studies published in December 2021 and May 2022 – source: BMLL Technologies)

Recent figures from independent data provider QuantHouse (IRESS) based on public market data on Markouts (which are indicators of elementary market impact), reveal that Markouts at +1 second after an aggressive buy trade are lower, and therefore better, on Euronext markets than on MTFs with comparable market models. This is thanks to the broad distribution of users on Euronext markets, which provide a diversity of flow that is not present on MTFs. For the benefit of investors, the better Markouts available on Euronext should be reflected in overall passive trade allocations.

Read more: Euronext Quant Research

(Quantitative studies based on data as of June-August 2021 and February-June 2022 – source: QuantHouse)

Data centre move paving the way for further transformation in European financial markets

In June this year, Euronext successfully completed one of the most ambitious projects in its history: the migration of its core data centre and related colocation services from Basildon, UK, to the Aruba Global Cloud Data Centre IT3 in Bergamo, Italy. Given that the data centre is one of the most important systems for an exchange, it was key for Euronext to host its trading activity in a first-rate and sustainable data centre facility, with control over its colocation infrastructure. This means that over a quarter of European lit equity trading is now powered by the greenest data centre in Europe, enabling its market participants to lower their environmental impact.

Euronext’s core data centre move was completed in just 14 months, with a smooth migration process for market participants and no significant shifts in the liquidity landscape or the trading behaviour of direct members. Resilient market quality metrics on the Euronext equity markets testify to this beneficial move: average spreads for blue chips on Euronext were still lower than MTFs after the data centre migration, and Liquidity at Touch was above €22,000 on average.

(Data in June 2022 – source: BMLL Technologies)

The core data centre move has paved the way for further transformational migrations at Euronext. In 2023, Borsa Italiana cash and derivatives markets will join the Euronext single order book powered by Optiq®, Euronext’s proprietary state-of-the-art trading platform. The migration to Optiq (pending regulatory approval) will foster investor activity on Borsa Italiana markets and  provide one single access point for investors across seven markets. On the post-trade side, Euronext will migrate clearing services for all its markets to its own multi-asset clearing house Euronext Clearing (previously CC&G), while its four CSD brands have been combined into Euronext Securities.

As the European trading venue of reference for price formation and discovery, Euronext wants to consolidate its European scale, be innovative in terms of market model and be present on the entire value chain. Behind these transformations is one of Euronext’s basic principles: providing a simpler set-up for clients across its markets, harmonising the flows and the trading infrastructure in Europe.