Part Three: Euronext chief Boujnah tracks Brexit-related changes

By Luke Jeffs

Euronext’s acquisition of Borsa Italiana from the British exchange cannot be divorced from the UK’s decision to leave the European Union.

The British people voted to leave in 2016 and the UK officially left the European Union at the start of last year, but it is only relatively recently that trading patterns have started changing to reflect the new political landscape.

Boujnah said the first obvious sign of change was at the start of this year when London lost its crown as the share-trading capital of Europe.

“Everyone focused in January on the fact that equity trading in Amsterdam was bigger than equity trading in London, partly reflecting the fact that Cboe Europe and Turquoise had established their headquarters for trading European equities in Amsterdam. In reality, most of that trading in terms of operations and technology was still taking place in London.

“But what is happening now is different and more profound. When you look at listings, I am surprised at the number of international listings we get at Euronext Amsterdam and Euronext Paris, and to a lesser extent in Oslo.”

Boujnah said that firms interested in listing their shares through an IPO are thinking differently than they did pre-Brexit.

“Two things have happened over the past few months. First, Brexit became so real that international companies that want to list in Europe have decided it is more convenient to be listed on a European venue than in London, because London is pursuing a project that is now diverging from its historical connection to the European Union. If you want to be listed in Europe, the incentive to choose London is less strong than it used to be.

He added: “The second point has to do with the corporate development of Euronext, namely that Euronext became the largest liquidity pool in Europe, where 25% of shares are traded on Euronext markets.”

Boujnah said the combination of a larger Euronext after the Borsa Italiana merger and the London regulatory framework moving outside of the EU has “created an opportunity for us in international listings”.

And the numbers back him up. “We have already achieved this year more than 155 listings, which is a multiple of previous years. I am surprised by the number of non-Euronext country companies listing on Euronext, either in Paris or Amsterdam.”

Boujnah said the UK is facing a choice between remaining aligned with its largest trading partner or positioning itself as an ultra-competitive deregulated alternative to Europe.

“Finance is affected like any other sector of the British economy by the fundamental question as posed by Brexit – does the UK stay close to the European Union on a selected group of issues to maintain proximity, which for the finance sector means equivalences, or does the UK try another route that is more autonomous with no equivalence access to the single market?”

The Euronext chief added: “That is true for everything about Brexit, and finance is not immune from that fundamental debate. For finance, either there is continuity of regulation, which will lead to continuity of operations and access to the EU, which is equivalence; or there is discontinuity of regulation which means a discontinuity of access to Europe. Like everything to do with Brexit, the answer is in London.”

By contrast, the situation within the European Union is more certain. “One thing that isn’t going to change is that there are 450 million people in the European Union with a very high standard of living and who need to do something with their savings,” he said.

Boujnah added: “Similarly, there are more than 300 blue chip companies who need funding. The European bloc is trying to rebuild a group of open, integrated, interconnected finance centres to address those needs.”

For Boujnah, we are now seeing the first signs of new, post-Brexit European marketplace: “What was normal when London was the largest financial centre of the European Union has now become an anomaly because those 450 million people and more than 300 blue chip companies cannot rely on an offshore platform to finance their growth, so we need to invent a different way of working together. The ways that things are being done are changing slowly.”

And Euronext, as one of two large, European regulated exchanges, is well-positioned to benefit from these changes. “Something is happening. Either people are moving or they are hiring locally. Without Brexit, Paris, Amsterdam and Dublin would not be reactivated financial centres.

“But the UK left the European Union. I think we need to find ways to continue to benefit by building something new, something different but most of the decisions are going to take place in London.”

While Boujnah will no doubt be a keen observer of the direction taken by UK regulators, for now, he has his hands full building with Borsa Italiana a new Euronext to meet the challenges posed by the changing European market.