Euronext N.V

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Euronext N.V

PO Box 19163
Amsterdam, NL-1000 GD
Netherlands
Telephone: (+31 020) 550 44 44
Fax: (+31 020) 550 4900
Web site: http://www.euronext.com

Public Company
Incorporated: 2001
Employees: 2,500
Sales: EUR 1.1billion ($1.4 billion) (2006)
Stock Exchanges: Euronext Paris
Ticker Symbol: NXT
NAIC: 523210 Securities and Commodity Exchanges

BOURSE DE PARIS SEEKING PARTNERS

CREATION OF EURONEXT IN 2000

FORMING THE FIRST TRANSATLANTIC EXCHANGE IN 2007

PRINCIPAL SUBSIDIARIES

PRINCIPAL COMPETITORS

BOURSE DE PARIS SEEKING PARTNERS

The creation of a single European currency with the advent of the 21st century served as a catalyst for the highly fragmented European stock market. With more than 25 exchanges in operation throughout the European Community, the European exchange sector was seen as long overdue for consolidation. Many observers recognized the opportunity to create a single “European” stock exchange, as a true rival to such global leaders as the New York Stock Exchange, the NASDAQ, the Chicago Mercantile Exchange, and the Tokyo Stock Exchange. At the same time, most of the European exchanges, which had long operated as member-owned associations, reincorporated as publicly listed companies, becoming attractive investments in their own right.

The signal for the start of the European consolidation was given in the late 1990s when several German stock exchanges merged into a single company, called Deutsche Boerse, based in Frankfurt. The next company claimed the number two position, behind the venerable London Stock Exchange—and, importantly, ahead of the Bourse de Paris, led by Jean-François Théodore.

The Paris exchange had long been accustomed to its position as one of Europe’s largest exchanges. Although initially created in 1724, the modern bourse had its true start with the arrival to power of Emperor Napoleon. The new government restructured the country’s economy, establishing the Banque de France as the exclusive issuer of banknotes, and placing control of the creation of joint stock companies under government oversight. The modern Bourse de Paris was given official status in 1801; construction of the new exchange building, the Palais Brongniart, began soon after and was completed in 1827. At the time, the exchange listed only 26 companies. Over the next decades, however, the government created a new category of limited liability company, relaxed the requirements for listing companies, and legalized the trading of securities. As a result, by the dawn of the 20th century, the Paris exchange had grown into one of Europe’s largest, with more than 1,000 listed companies.

The Bourse de Paris began the long process of modernizing in the late 1970s. The creation of tax incentives encouraged a surge in new investments, while the “reglement mensuel,” which permitted investors to defer up to 80 percent of their stock purchases until the first of the following month, provided a further jump in volume, particularly among smaller investors. The growing French investment community in turn provided the foundation for the creation of a new market, the Marché Secondaire, catering to midsized and emerging companies.

In the late 1980s and into the 1990s, the French government continued its effort to modernize the French exchange system, bringing it more in line with its European rivals. The Paris exchange adopted electronic trading in the mid-1980s. The system, called the CAC, was then extended to link the country’s smaller bourses in Bordeaux, Nantes, Lyon, Lille, Marseille, and Nancy. These were then merged into a single company, called the Société des Bourses Françaises, and continued to function as branch operations of the main Bourse de Paris.

CREATION OF EURONEXT IN 2000

The French government put into place the last pieces of legislation that allowed the Paris exchange to integrate its operations into the European mainstream. Under the new legislation, enacted in 1996, the Bourse de Paris lost its monopoly on stock transactions in France. At the same time, however, the company was given the right to expand beyond France. The creation of Deutsche Boerse, and its subsequent partnership with the Zurich Stock Exchange led Bourse de Paris to create its own cross-border partnership, with the Swiss Stock Exchange.

In the meantime, the run-up to the creation of the single European currency had led to a jockeying for position among the region’s three largest exchanges, London, Frankfurt, and Paris, to see which would become the financial center for the new Europe. In 1998, Bourse de Paris, which changed its name to Paris-Bourse SA, appeared to have lost the race, after Deutsche Boerse and the London Stock Exchange announced their plans to merge to form the IX Stock Exchange. The new partners offered to include Bourse de Paris in the new company, but only as a minority partner at just 20 percent.

The outraged Théodore declined the offer and instead sent out an offer to the stock exchanges in Milan, Madrid, Amsterdam, and Brussels to form a counterforce to the proposed IX exchange. The Amsterdam and Brussels exchanges took up the offer, leading to the creation of Euronext in 2000.

COMPANY PERSPECTIVES

Euronext seeks to provide the highest standards of market quality and integrity, innovative products and services to investors, issuers, and all users of its markets.

The Amsterdam exchange was one of the world’s oldest, stemming from the activities of the Dutch East Indies Company in the 16th century. By the beginning of the 1600s, the city had launched construction of its first dedicated commodities exchange. Construction of that building, near Amsterdam’s central Damrak, was completed in 1611. The creation of another Dutch super-trader, the West Indian Company, several years later provided a new boost in the volume of shares traded at what became known as the Amsterdam Beurs. The exchange later introduced the trading of bonds and securities. Over the next centuries, the Beurs moved several more times, finally settling into more permanent quarters on the Beursplein in 1913.

The Amsterdam exchange became one of the first in Europe to move toward more international operations. In 1978, the exchange launched a separate European Options Exchange, which became the first to trade options in the European market. While the bulk of the investment market remained focused on cash-based transactions for the time being, the Amsterdam’s move into the options market helped position it at the forefront of the fast-growing derivatives market. Amid the calls for consolidation of the European exchange sector, the Amsterdam Stock Exchange and the European Options Exchange were merged into a single company, Amsterdam Exchanges. The new company then dropped its membership structure, allowing outside investors to participate as shareholders. The Amsterdam exchange also modernized its product offering, in particular by developing the AEX blue-chip index. The company also became a technological leader, creating a “one-stop shopping” concept by providing a full range of clearing, settlement, securities, and data and information services.

The Brussels Exchange too had begun positioning itself for the new era of the unified European market. Belgium’s earliest exchange had been created by Napoleon in 1801 as the Bourse de Fond Publics de Bruxelles. The Bourse initially operated from the Hotel des Monnaies, the national mint, and only moved into dedicated premises in 1874. Created under French rule, the Belgian bourse retained many of the aspects of the French system into the 20th century, and particularly the large degree of government control over transactions and brokers. By 1935, however, the Belgian government had successively deregulated the exchange, creating a free market system. Over the next decades, the government nonetheless introduced new legislation providing more regulatory oversight over the bourse.

In the 1990s, the Brussels Bourse joined in the movement toward creating a single pan-European investment market. The country’s stock market was modernized through the passage of the Financial Transactions and Market Act of 1990. By 1995, the Brussels exchange had been placed under the new directives developed by the European Parliament governing the investment sector. Then, in 1999, the government merged the country’s exchange operations, including the Bourse de Brussels, Belfox (the Belgian Futures and Options Exchange), and the country’s central securities depository, CIK, into a single company, called Brussels Exchanges.

FORMING THE FIRST TRANSATLANTIC EXCHANGE IN 2007

This merger set the stage for the Brussels exchange to join the Euronext merger proposed by ParisBourse. The new exchange, which represented the creation of the world’s first cross-border exchange, emerged as the chief rival to the London Stock Exchange, while also becoming the leading exchange in the Euro currency markets. Euronext’s victory was all the sweeter as the proposed merger between the London and German exchanges collapsed that year. In response, Euronext sent out an invitation to the London Stock Exchange to join Euronext.

While the London Stock Exchange declined the offer, Euronext nonetheless established a foothold in the United Kingdom. In 2002, the company surprised the investment market when it announced that it was acquiring London International Financial Futures and Options Exchange (LIFFE). Founded in 1982 as a financial futures and options exchange, LIFFE had grown into a leader in the derivatives market. The company had blossomed in 1992 through the merger with the London Traded Options Market, expanding its range of products with equity options. The company next merged with the London Commodity Exchange in 1996, further establishing its position as a European derivatives leader. Euronext grew again in 2002, adding Portugal’s Bolsa de Valores de Lisboa e Porto.

KEY DATES

2000:: ParisBourse SA merges with the Amsterdam and Brussels stock exchanges, forming the first cross-border exchange, Euronext.
2002:: Euronext acquires London International Futures and Options Exchange and Bolsa de Valores de Lisboa et Porto.
2004:: Company launches LIFFE Connect derivatives platform across all of Euronext.
2007:: NYSE acquires Euronext for $9.96 billion, forming NYSE Euronext.

Euronext continued to seek partners, launching new talks with the Madrid and Milan stock exchanges. The company also began merger negotiations with the Luxembourg Stock Exchange. At the same time, the company joined in negotiations toward the creation of the Global Equity Market, also called GEM, in partnership with exchanges in New York, Sydney, Hong Kong, São Paulo, Toronto, and Tokyo, with the goal of enabling round-the-clock trading.

In the meantime, the company worked toward full integration of its member exchanges and their platforms. By 2003, Euronext had merged its clearing and counter-party services, the London Clearing House and Clear-net, into a single entity, LCH Clearnet, which then became the European leader in this sector. The following year, Euronext standardized its trading platforms, establishing NSC, developed by the Paris bourse, as its cash trading platform, and LIFFE Connect for its derivatives. The integration of Euronext’s operations, described as “bumpy” and “tedious,” was finally completed in 2004.

Euronext, under Théodore’s leadership, was able to turn its attention once again to expanding its operations. After Deutsche Boerse announced an offer to purchase the London Stock Exchange, Euronext launched its own offer. The London Stock Exchange, which remained one of the world’s largest cash-based exchanges, turned down both offers, however.

Instead, Euronext reached a partnership with the Milan Stock Exchange, forming a joint venture in order to acquire majority control of Italy’s MTS electronic securities trading platform in 2005. Through 2006, Euronext focused on building up its range of products and services. As part of that effort, the company acquired several companies, including CompanynewsGroup, specialized in delivering investment news; Hugin ASA, a communications specialist; and Nyfix Overseas and EMOS, both of which focused on derivatives products and services.

The move toward a globalized investment market, seen as a natural extension of the globalization of most industries, received a new boost at the end of 2006 after the New York Stock Exchange (NYSE) offered nearly $10 billion to acquire Euronext. That bid was promptly met by a rival bid from Deutsche Boerse. Despite the higher price offered by Deutsche Boerse, Euronext agreed to the NYSE bid. By July 2007, the merger appeared all but certain, and the two companies expected to enter the future under the new name NYSE Euronext. With a market value of more than $20 billion, the new company took first place, ahead of the Chicago Mercantile Exchange. Headquarters of the parent company remained in New York, while Euronext’s European headquarters were to be situated in Amsterdam. By creating the first cross-Atlantic exchange, Euronext had assured itself of a future as part of the world’s largest stock exchange network.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Euronext Brussels SA; Euronext Paris SA; LIFFE (London International Financial Futures and Options Exchange); Lisbon Stock Exchange; MBE Holding S.p.A.

PRINCIPAL COMPETITORS

Nasdaq Stock Market Inc.; Deutsche Borse AG; Chicago Mercantile Exchange Holdings Inc.; Bolsa de Mercadorias and Futuros BM and F; Bolsa de Valores de São Paulo; SWX Swiss Exchange; Bolsa Mexicana de Valores S.A. de C.V.; London Stock Exchange Group PLC; Singapore Exchange Ltd.; Bahrain Stock Exchange.