11 October 2019

WORKSHOP – CASH EQUITY TRADING

SIMON GALLAGHER, HEAD OF CASH AND DERIVATIVES

Euronext 2019 Investor Day

2

AGENDA

1

2

3

4

Background

Volumes

Yield

Market share

5 Questions

3

Simplif ied representation of European and US cash equities markets

EUROPEAN CASH EQUITIES MARKET STRUCTURE REMAINS FRAGMENTED BY COUNTRY

NasdaqNYSECboe EURONEXT LSE DBAG BME

UK DE ESDK FI SE

Nasdaq OMX

US

NSCC

EOC

SW

EOC

FN

VP

Se

curi

ties

LCH SA LCH Ltd.

IT

BorsaItaliana

CC&G EurexClearing

EuroCCP

LCH Ltd.

VP

S

EOC

FR

EOC

BE

EOC

NL

INTE

RB

OLS

A

EOC UK & IRMonte Titoli

CBFIberclear

DTC

CC

PC

SD

Pan-European

Cboe Turquoise

Pan-European platforms settle in national CSDs

BME Clearing

Ven

ue

1

NO PT FR BE NL IE

X-Clear

Settlement through Euroclear Bank for Euronext non-euro transaction

4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 2013 2014 2015 2016 2017 2018 2019

OTC

Off Book

SI

Periodic Auction

Dark

Auction

Lit - Other

Lit - MTF

Lit - RM

1 Source:Thomson Reuters Market Share Report

MIFID II HAS PRIMARILY DRIVEN SHIFTS IN OTC AND GREY MARKETS

Breakdown of European equities trading volumes by venue type 1

1

YTD

5

Revenue = Volumes x Yield x Market Share

THE CASH EQUITY BUSINESS IS DRIVEN BY A SIMPLE FORMULA1

6

AGENDA

1

2

3

4

Background

Volumes

Yield

Market share

5 Questions

7 1 Eurostat and Thomson Reuters Market Share Report 2 Summer 2019 Economic Forecast, European Commission

DRIVERS OF EQUITY VOLUMES ARE COMPLEX, BUT ECONOMIC GROWTH PLAYSAN IMPORTANT ROLE

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

0

10

20

30

40

50

60

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

EU Lit ADV (€bn, Left axis)

Eurozone GDP YoY Growth (Right axis)

2

Summer 2019 forecast

Spring 2019 forecast

% growth 2017 2018 2019 2020 2019 2020

Germany 2.2 1.4 0.5 1.4 0.5 1.5

Spain 3 2.6 2.3 1.9 2.1 1.9

France 2.3 1.7 1.3 1.4 1.3 1.5

Italy 1.7 0.9 0.1 0.7 0.1 0.7

UK 1.8 1.4 1.3 1.3 1.3 1.3

EU 28 2.5 2 1.4 1.6 1.4 1.6

GDP growth vs volumes 1

Economic growth is slowing but expected to be positive, boosted by lower interest rates and QE

Volatility outlook remains uncertain

Short term GDP outlook 2

8

AGENDA

1

2

3

4

Background

Volumes

Yield

Market share

5 Questions

9 1 Euronext analysis of company disclosures and Thomson Reuters Market Share Reporter 2 Internal data

EURONEXT HAS DELIVERED STRONG YIELDS ON CASH EQUITY

Relative performance on yield and volumes 1

3

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1 2 3 4 5 6 7 8 9 10 11

Esti

mat

ed y

ield

s(b

ps)

2018 Equity ADV (€ bn)

0.20

0.25

0.30

0.35

0.40

0.45

0.50

0.55

0.60

-

2,000

4,000

6,000

8,000

10,000

12,000

ADV Yield

Euronext yield and equity volumes 2

10

3 SEGMENTATION IS KEY TO YIELD MANAGEMENT

Direct membership

Quant-driven AM funds

Hedge funds / Electronic LP

Traditional asset managers

Euro

ne

xt

Global Broker (DEA, prime, execution)

Retail Broker

Local Institutional

Broker

SLP scheme

‘Best of Book’ service & fees

Fees and services by f low type, near to end buying centresStandard fees

Pack Omega

Local schemes

Intermediated

11

CASE STUDY: PACK OMEGA IS FORGING RELATIONSHIPS WITH HEDGE FUNDS

Ω CLIENT

NON-MEMBER PROP. FIRM

Dedicated Pricing

Proprietaryflow

Transmission of eligible flow

The scheme creates a win-win relationship with end clients and their intermediaries

MEMBER

3

-

100

200

300

400

500

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A

2016 2017 2018 2019

AD

V €

m

ADMISSION

Case study: effect on volumes of admission of an Omega participant

12

AGENDA

1

2

3

4

Background

Volumes

Yield

Market share

5 Questions

13

Market share1

1 Markit TAG and Liquidmetrix 2 BigXYT, 3 Refers to the % of time in the trading day during which Euronext is alone at the prevailing European Best Bid and Offer

EURONEXT OFFERS SUPERIOR QUALITY OF EXECUTION 4

Market quality2

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2bps 3bps 4bps 5bps 6bps 7bps 8bps

EBB

O E

xclu

sive

Pre

sen

ce T

ime

3

Volume-Weighted Average Spread for €5k trade size

Performance on EBBO and spreads CAC40 (2018)

Lower spreadsSuperior price formation

50%

55%

60%

65%

70%

75%

2014 2015 2016 2017 2018 2019

Euronext listed stocks % ‘lit’ trading

14

THE SLP1) MARKET MAKING SCHEME SUPPORTS BLUE CHIP LIQUIDITY ON EURONEXT MARKET

TierPresence

TimeAvg Size

BBO Pres.

BBO Setting

BBO Setting

Lifetime

Maker Market Share

Total Market Share

Taker Fee Maker Fee

1

≥ 95% ≥ €5000 ≥ 20%

≥ 10%

≥ 20s

≥ 1.5% ≥ 5.0% 0.25bps -0.10bps

2 ≥ 5% ≥ 1.2% ≥ 3.5% 0.30bps -0.05bps

3 ≥ 0% ≥ 1.0% ≥ 2.0% 0.35bps 0.00bps

Requirements not met 0.55bps

4

Continuity of liquidity

Tiering rewards best performers

Presence translates into volumes

Quality of liquidity

1 SLP: Supplemental Liquidity Programme

The SLP scheme contains 8 market maker firms with different trading strategies

Firms are rewarded for improving order book quality (tighter spreads, depth at best limit, …)

The scheme is the most demanding of its type in Europe

15

In February 2019 three fragmented Irish stocks were admitted to the SLP programme

CASE STUDY: SLP BOOSTED MARKET SHARE ON IRISH BLUE CHIPS4

0%

10%

20%

30%

40%

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

2018 2019

Smurfit

0%

10%

20%

30%

40%

50%

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

2018 2019

CRH

0%

10%

20%

30%

40%

50%

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

2018 2019

Ryanair

Market share and market quality increased significantly on these multi-listed stocks

In addition, Irish membership base doubled as the Euronext broker base began to connect directly

Q&A

THANK YOU

www.euronext.com

INVESTOR RELATIONS

Aurélie Cohen, Head of Investor Relations

Clément Kubiak, Investor Relations officer

ir@euronext.com

+33 1 70 48 24 27

www.euronext.com/en/investor-relations

19

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