Home Stock exchange Euronext targets EU bond activity in competition with competing sites

Euronext targets EU bond activity in competition with competing sites

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Overview of the interior of the Euronext stock exchange in Amsterdam, The Netherlands, September 11, 2019. REUTERS / Piroschka van de Wouw / File Photo

  • EU will decide whether or not to introduce market making obligations
  • Dealers say it would help cut costs on new EU bonds
  • MTS’s new owner Euronext has offered a complete package

MILAN, Oct.21 (Reuters) – Euronext (ENX.PA) is keen to become a key service provider for European Union bonds, a senior executive said, as the pan-European exchange seeks to leverage its stock exchange. newly acquired shares and debt securities in Milan. group to wrest business from its rivals.

Euronext – which manages the Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris stock markets – this year bought the Italian bond platform MTS as part of its 4.3 billion euro (5 billion euro dollars) of the Italian stock exchange group.

He has now focused on EU debt, given the bloc’s € 800 billion borrowing plan for its pandemic stimulus fund, which could lay the groundwork for a potential “active European “safe” that would be widely marketed.

The EU has already issued more than 50 billion euros in long-term debt and regularly holds auctions, using nearly 50 primary banks to organize sales and negotiate bonds.

The European Commission currently uses the Luxembourg Stock Exchange to list these bonds, while Deutsche Boerse (DB1Gn.DE) Clearstream provides custody and other services for notes.

EU debt is already trading on MTS. However, the EU has yet to come up with plans for a full-fledged secondary market because, unlike several European governments, it does not stipulate that the banks managing its bond sales trade the notes for a certain volume each day. and ensure market liquidity.

MTS has offered the European Commission its market infrastructure, data and reports on the activity of primary dealers, CEO Fabrizio Testa told Reuters.

He also offered his platform to help the European Commission organize buybacks and trades.

“The new EU bonds are already traded on MTS, but introducing incentives for primary dealers to permanently trade the ratings on a regulated platform like ours would really make a difference,” said Testa, who is headquartered at enlarged board of directors of Euronext.

This would give investors uninterrupted access to prices and trade, even in times of market volatility, he said.

“At the moment, there is an open dialogue with the European Commission (…) We hope that there will be a decision early next year”, added Testa.

CHILDCARE SERVICES

Euronext has also suggested its Dublin Stock Exchange for listing and Monte Titoli for custody of EU bonds, as an alternative to the Luxembourg Stock Exchange and Clearstream, Testa said, confirming what sources told Reuters .

A Commission spokesperson declined to comment specifically on Euronext’s proposals, but said the EU was “in active contact with all relevant stakeholders”.

“Our bonds are currently listed on the Luxembourg Stock Exchange (LuxSE) and we would not speculate on other solutions,” added the spokesperson.

Asked to comment on Euronext’s offer, LuxSE said it currently holds a 45% market share in the listing of international debt securities issued by sovereigns, supranationals and agencies.

“The exchange has a long-standing relationship with European institutions and agencies,” said a spokesperson for LuxSE, adding that the EU’s first EUR 12 billion green bond had been listed on LuxSE.

Clearstream said the recent growth in the Eurobond market has proven the confidence that issuers and investors have in the services of the company.

“We will continue to work with our partners to develop and further grow Europe’s largest debt market,” Guido Wille, Head of Clearstream’s Eurobonds business, said in an emailed comment.

The introduction of bond bonds for primary dealers and the creation of a liquid secondary market for European debt would bring benefits, independent experts told Reuters.

Traders noted that EU bonds pay a premium over comparable German bonds despite the same AAA credit rating. A trader, who requested anonymity, said Brussels could save “a handful of basis points” in auctions if the MTS proposals boost transparency and liquidity.

Another trader at a leading EU bank, Nils Kostense at ABN Amro, agreed that better liquidity would lead to cost savings.

“If (investors) can easily offload what they have charged … they would more easily participate in an auction. It could also benefit the EU because of more customers,” Kostense said.

($ 1 = € 0.8661)

Reporting by Francesca Landini and Elvira Pollina in Milan, additional reporting by Yoruk Bahceli in Amsterdam and Huw Jones in London; Editing by Valentina Za

Our Standards: Thomson Reuters Trust Principles.

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