Euronext Paris S.A.

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Euronext Paris S.A.

39, rue Cambon
75039 Paris, Cedex 01 France
Telephone: ( + 33) 1 49-27-10-00
Fax: ( + 33) 149-27-11-71
Web site: http://www.euronext.com/fr/

Subsidiary of Euronext N. V.
Incorporated: 1724 as Bourse de Paris; 1991 as Société des Bourses Françaises; 1999 as ParisBourse S.A.
Employees: 1,008
Sales: EUR 723 billion ($700 billion) (1999)
NAIC: 523210 Securities and Commodity Exchanges

Euronext Paris S.A. is the French partner exchange to the Euronext N.V. stock exchange created in September 2000 by the mergers of the Paris, Amsterdam, and Brussels stock ex-changes. Euronext Paris, renamed after the merger from ParisBourse S.A., brings its more than 1,200 member firms, worth some EUR 723 billion in total transactions in 1999, to Euronext to create an exchange powerhouse to rival European leaders the London Stock Exchange and the Deutsche Borse. In total, Euronext N.V., holding company for the three partner exchanges, boasts listings of nearly 2,000 member firms, making it Europe’s second largest exchange after London. The Euronext Amsterdam, Euronext Brussels, and Euronext Paris exchanges link trading services across the Euronext Paris-developed NCS electronic trading system, enabling the new stock exchange to join forces without the need for a common trading floor. The company’s clearing and settlement are unified under the Clearnet platform originally developed by ParisBourse, and settlements are processed through Euroclear. The streamlining of transactions to a single source is expected to bring not only some EUR 50 million in cost savings per year to Euronext, but also reduce the cost of trading to its European customers, who often pay up to ten times the amount charged to U.S. traders. Euronext Paris is headed by Chairman Jean-Frangois Théodore, who also serves as CEO and chairman for Euronext N.V. The company intends to extend its network of exchanges to other European exchanges, such as Milan and Madrid. Analysts expect to see continued mergers among the many European stock exchanges, resulting in just one or two stock exchanges capable of rivaling the New York Stock Exchange.

18th-Century Beginnings

The Paris stock exchange—or bourse, as European stock exchanges came to be known—was among the youngest of Europe’s exchanges when it was created by royal decree in 1724. The Bourse de Paris inherited nonetheless several centuries of French trading activity. As early as 1572, King Charles IX announced regulations governing the country’s “couratiers” (which gave way to “courtiers,” French for broker), establishing practices such as the obligatory separation of a broker’s personal affairs from his dealings with his clients.

Toward the end of that century, the kingdom’s first major bourse was established in Lyon, focused on money changing— the many dukes, counts, and princes, as well as the king himself, had long held a practice of coining their own money. Money changing moved to Paris at the beginning of the 17th century, where the Pont-aux-Changes served as a gathering point for moneychangers. In 1639, the role and function of the kingdom’s moneychangers, called “Agents de change,” were defined by royal decree. The moneychangers were then organized within a Compagnie des Agents de Change and granted exclusive authority to perform money changing duties.

An investment scandal at the beginning of the 18th century led to the creation of an official bourse in Paris in 1724. The new bourse, which opened in the rue Vivienne, granted exclusive rights to negotiate trading to the Compagnie des Agents de Change. The Paris bourse was to become instrumental in raising funds for the French war effort, as well as its colonial expansion. By the end of the century, however, the bourse had fallen into disarray and scandal and was closed in September 1795. One month later, the bourse reopened, with 25 new agents de change granted the monopoly on all transactions.

After taking power in the early 19th century, the new emperor Napoleon had the bourse moved to the royal palace. In 1806, a competition was opened to design a new home for the Parisian bourse. The competition was won by Théodore Brongniart; construction began in 1808. The completed building was inaugurated in November 1826 and became the permanent home for the Paris stock exchange. At its opening, the exchange boasted some 26 listed stocks. By the end of the 19th century—and despite a number of stock market crashes—the number of listed stocks had grown to more than 1,000.

The Wall Street crash, the beginning of the Great Depression, and finally the outbreak of the Second World War were to sink the Paris exchange into a long troubled period. As one government official was reported to say: “I’d close the ex-change and lock up the brokers.” Nevertheless, the Paris ex-change was to prove instrumental in helping to rebuild the French economy after the end of the war.

A European Leader in the 1990s

A series of measures helped to win new confidence in the Paris exchange, such as the end of a double tax on stock dividends in the mid-1960s, and the creation of the COB (Commission des Opérations de Bourse), a watchdog body set up in 1967 as the French version of the Securities and Exchange Commission. The installment of a regulatory body helped to instill confidence in the exchange by new generations of investors and, in particular, private investors. A new law, voted in 1978, giving tax deductions to private investors, also helped to stimulate a growing interest in the stock market. Another incentive to individual investors was the Paris Bourse’s unique “reglement mensuel” or monthly settlement, which permitted investors to defer as much as 80 percent of the cost of their stock purchases until the first of the next month after the purchase. This system enabled investors with limited means to join in the stock market, despite criticism that the system encouraged speculation—investors were granted, in effect, free credit for their market transactions. The “reglement mensuel” was abolished in September 2000, to bring the Paris exchange in line with its European neighbors.

At the beginning of the 1980s, the Paris exchange lost a large part of its value. A wave of nationalization carried out by the new Socialist government led by Mitterand transformed a number of France’s largest public companies into government-run entities, thereby removing them from the Paris bourse. In response, the Bourse de Paris created a new market, called the Second Marché, to encourage mid-sized companies to join the stock market. The Second Marché, which also served as a springboard for larger corporations before joining the bourse’s Premier Marché, enabled the Paris Bourse to boost the number of its quoted companies, and the Paris exchange became one of Europe’s most prominent.

In the mid-1980s, the Bourse de Paris joined the movement toward electronic trading, when it introduced its own computerized transaction system, called CAC, ending traditional floor trading. The new CAC system linked trading in France’s regional exchanges in Lyon, Bordeaux, Lille, Marseille, Nancy, and Nantes exchanges with the larger Paris exchange, as the first step toward creating a single entity, the Société des Bourses Fransaises.

Following the market crash of October 1987, the Bourse de Paris introduced new changes. Most prominent of these was the ending of the long-held monopoly by the Agents de Change in 1988. Abolishing this monopoly opened trading to foreign investors for the first time, while also opening the exchange to banks and other financial bodies. Three years later, the Société des Bourses Fran£aises was officially created when the six regional exchanges were merged into the Paris exchange. The regional exchanges were now operated as commercial branches of the main Paris bourse.

These moves enabled the Paris bourse to take on greater stature among the European and world stock exchanges in the 1990s, attracting increasing numbers of both foreign and domestic institutional investors. At the same time, a growing number of international corporations began to seek listings on the Paris exchange. In the mid-1990s the Bourse de Paris introduced an upgraded version of its CAC software, giving it some of the most sophisticated trading software among world-wide stock exchanges.

The growing number of high-technology stocks, which often presented different financial portraits and requirements from traditional stocks, led the Bourse de Paris to introduce a new market, called the Nouveau Marché, devoted to the new breed of stock. The Nouveau Marché enabled the Paris bourse to go into competition against high-tech leader NASDAQ and more recent rival, AIM, set up by the London Stock Exchange in 1995.

Competition among the European exchanges was slated to heat up, however, as the European Community headed toward the creation of the Euro currency. As countries battled to deter-mine the site of the new currency’s financial center, the stock exchanges also began to jockey for position to become the preeminent exchange of the new Europe. The creation of the Deutsche Borse, gathering a number of regional German ex-changes under the main Frankfurt exchange, and then an agreement to partner with the Zurich exchange—fourth largest in Europe—sparked a wave of market mergers and partnerships in the late 1990s. Paris responded by reaching a partnership with the Swiss exchange.

Company Perspectives:

Euronext was officially born from the merger of the stock exchanges of Amsterdam (Amsterdam Exchanges), Brussels (Brussels Exchanges) and Paris (Paris Bourse). For the first time in the world, three exchanges from three different countries have merged to create one single company.

While talk turned to the creation of a single European exchange—through the merger of the Amsterdam, Brussels, Frankfurt, London, Madrid, Milan, Paris, and Zurich exchanges, the battle to become the “bourse of Europe” quickly came down to a race among the London, Paris, and Deutsche bourses. Yet the French exchange was quickly outpaced by its German and English rivals—in 1998, the London and Deutsche exchanges announced their intention to merge and form the giant IX exchange. The merged exchange was to be some three times larger than its Parisian relative. While the Paris exchange had been offered a place in the new exchange, it was only in a minority capacity—just 20 percent of the proposed new exchange, as opposed to the 40 percent to be held by each of the London and German exchanges. Insulted and angered, Jean-François Théodore announced an offer to the Amsterdam, Brussels, Milan, and Madrid exchanges to join the Bourse de Paris in their own merger. The following year, Société des Bourses Françaises changed its name to ParisBourse S.A.

While Milan and Madrid declined the offer, negotiations began among the Paris, Amsterdam, and Brussels exchanges. By March 2000, the three exchanges announced their intention to merge into a new entity, Euronext. With the holding company Euronext N.V. located in the Netherlands, the new entity was to act as parent to three subsidiary exchanges, Euronext Amsterdam, Euronext Brussels, and Euronext Paris. The three exchanges were to share a common trading “floor,” using the Paris exchanges perfected NCS trading system, while both clearing and settlement activities were streamlined into single bodies for all three exchanges.

The announcement of Euronext—which extended an invitation to the London exchange, as well as began talks over a partnership with the New York Stock Exchange—spurred the proposed IX partners to step up the pace of their own negotiations. By summer 2000, however, it became apparent that the London and German partners were not able to agree, and the IX exchange project collapsed.

The Euronext merger went ahead as scheduled, and the new multicountry exchange, the first in the world, came into being in September 2000. Rivaling the London exchange in terms of market capitalization, worth some $2.3 trillion, Euronext be-came the most important exchange in the so-called “Eurozone” (the United Kingdom had not yet agreed to convert to the new currency), giving it the potential clout to attract more and more of the continent’s largest corporations. The new exchange also announced its plans to extend its trading hours to 20:00 hours GMT in the year 2001, bringing the exchange in line with the NYSE operations. At the same time, Euronext N.V. acknowl-edged its plans to make its own public offering—on the Euronext exchange, of course.

As Euronext turned toward its first full year of trading, it continued to make overtures for new mergers and partners, particularly to the Milan and Madrid exchanges. The exchange had also entered into merger negotiations with the smaller Luxembourg exchange. At the same time, Euronext left open its invitation to the London Stock Exchange, which by then had come under a hostile takeover attack by the owners of the Swedish exchange. Meanwhile, Euronext pursued negotiations toward the creation of a larger exchange partnership—the so-called Global Equity Market, or GEM, to be formed by the New York, Euronext, Sydney, Hong Kong, Sao Paulo, Toronto, and Tokyo exchanges, which promised to enable 24-hour global trading. As the economy had gone global during the 1990s, the world’s stock exchanges were expected to follow. Euronext, as first out of the gate, appeared likely to play a prominent role in the creation of the next century’s investment landscape.

Principal Subsidiaries

Euronext Amsterdam N.V.; Euronext Brussels S.A.; Euronext Paris S.A.

Principal Competitors

New York Stock Exchange; London Stock Exchange; Deutsche Borse; Tokyo Stock Exchange.

Key Dates:

1572:: King Charles IX enacts regulations governing “couratiers.”
1595:: The Lyon exchange is created.
1600s:: Money changing moves to Paris.
1639:: Compagnie des Agents de Change is created.
1724:: Bourse de Paris is created.
1807:: Bourse moves to Royal Palace.
1808:: Construction begins on new Bourse de Paris.
1926:: Inauguration of Bourse de Paris.
1900:: Total listed stocks reach more than 1,000.
1929:: Stock market crash leads to the Great Depression.
1966:: Double tax on stock benefits is suppressed.
1978:: New tax benefits for private investors.
1982:: Beginning of nationalization program.
1986:: Electronic trading is introduced.
1991:: Regional bourses merge under Paris bourse, creating the Société des Bourses Franchises.
1998:: Partner agreement with Swiss exchange.
1999:: Société des Bourses Frangaises changes name to ParisBourse S.A.
2000:: Euronext is created from exchanges in Amsterdam, Brussels, and Paris, Paris exchange name changes to Euronext Paris S.A.