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Euronext is expanding its retail-focused multilateral trading facility, Global Equity Market.
The venue was inherited as part of Euronext’s acquisition of Borsa Italiana. The expansion — set to happen before the end of the year — will see GEM launch outside Italy for retail traders and brokers in other countries that Euronext operates in.
Euronext is boosting the number of US and European stocks that retail traders can invest in, but US stocks could garner the most attention.
Vincent Boquillon, head of cash equities at Euronext, said 70% of volume on the platform right now is US stocks.
“We don’t expect that ratio to change significantly as we extend the platform,” he said.
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Once the expansion goes live, 400 stocks will be tradeable by retail investors; 250 from the US and 150 from Europe. Trading hours will also be extended to 8.30pm European time.
Retail investors in the US make up a fifth to a quarter of equities trading volume. In comparison, retail trading on Euronext exchanges makes up around 20% in Italy, 10% in the Nordics and 5% in France, said Boquillon. GEM accounts for about 50% of retail volume Euronext sees.
In the UK and EU there has been a push to better the retail trading experience, as both jurisdictions seek to improve the vibrancy of their capital markets.
Though the expansion of GEM wouldn’t immediately improve the attractiveness of European stocks’ to retail investors, Boquillon said it was a stepping stone in the right direction.
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“It’s ease of access. For retail investors it provides a one-stop shop for trading European and US equities,” he said.
Boquillon added that several major market-makers were prepared to trade on the platform and provide liquidity once the expansion goes live.
The expansion of GEM was made possible by Euronext’s ongoing restructuring of its post-trade business. For clearing, Euronext is ditching LCH SA, the London Stock Exchange Group’s Paris clearing house, in favour of using Euronext Clearing, its in-house service.
From November, equities traded on Euronext venues will be cleared through Euronext Clearing with derivatives set to follow suit in 2024. As part of the migration, Euronext sold its 11% stake in LCH SA back to LSEG in June for €111m.
“We’ve been trying to offer pan-European and US coverage for the last six or seven years. We couldn’t do it before because we were not directly managing our post-trade infrastructure, which is obviously changing now,” Boquillon said.
Coupled with its own clearing house, both European and US stocks certificates will be held in a central securities depository operated by Euronext Securities.
“Now that we have our own clearinghouse and CSD, we have the full market infrastructure to finally offer pan-European and US coverage,” Boquillon added.
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When it initially expands, the US shares traded on GEM will not be interchangeable with those on US exchanges, as Euronext’s post-trade services won’t be connected to the main US clearing house and CSD, the DTCC.
But Boquillon said a fix was on the agenda for next year.
“As soon as we are done with our clearing migration, we will look at connectivity into DTCC,” he said. “If you’re a retail trader, you don’t necessarily need fungibility with DTCC; you’re looking for exposure to the performance of those stocks in euros to avoid currency risks without the need for a US dollar account.”
To contact the author of this story with feedback or news, email Jeremy Chan
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