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Industry figures have welcomed ambitious plans by Euronext, the stock exchange group, to consolidate the thousands of exchange traded product listings scattered across its seven bourses on to one venue.
However, some are sceptical about whether Euronext can achieve its aim — particularly by the end of the September, which is believed to be its target — given the political sensitivities around the health of national stock exchanges.
Euronext has more than 3,300 ETP listings spread across the Milan, Amsterdam, Paris, Oslo, Brussels, Dublin and Lisbon exchanges, with many funds listed in several locations.
This saps liquidity and adds to trading spreads and costs, eroding investors’ returns.
Euronext is believed to be in discussions with market participants about shifting all its ETPs to one exchange. This could be a case of moving all the listings to Amsterdam, or alternatively letting each of the 45 ETP issuers that use its bourses nominate one exchange for their products.
If the hurdles can be overcome, many in the ETF industry would welcome this.
“Yes, I can certainly see benefits in combining the listings on to one central exchange and reducing the fragmentation that we see at the moment,” said Nick King, head of ETF at Dutch fund manager Robeco.
“If you can convince the market that this is going to happen, it would be good for everyone involved,” he added. “It would concentrate liquidity in fewer places and it would reduce costs — listing fees and market-making costs will be reduced. With increased trading volumes, spreads should come down, too.”
Andrew Jamieson, global head of ETF product at Citi, hailed Euronext’s initiative as “an interesting concept”.
“[One of] the challenges in Europe [has] been the fragmentation at local listing level,” Jamieson said. “The idea of a single aggregated venue can be appealing.”
At present, Milan dominates Euronext’s ETF listings with 2,019, but its Paris (710) and Amsterdam (634) bourses also boast large ranges, while Dublin, Brussels and Oslo have just a handful and there are none in Lisbon.
Some market participants, however, fear that the political and regulatory barriers to Euronext consolidating its listings may prove insurmountable.
“With the state of the market now, I doubt it’s going to be easy to achieve. Each country, for political reasons, is going to defend its turf,” said Bruno Poulin, chief executive of Ossiam. The asset manager has ETFs listed in Paris and Milan, as well as on the non-Euronext London Stock Exchange, Deutsche Börse’s Xetra and the Six Swiss Exchange.
“Take a look at what is happening now with the Draghi report [on lagging EU competitiveness]. While each country is favourable towards the report, they do not — yet, at least — agree on specific actions that should be taken,” Poulin added.
“Historically, when you speak to a sales team, they say they need something in their own market for patriotic reasons. From a business point of view, it is not very efficient”, he said, with the location mattering most for retail investors.
Jamieson noted that regulations in some jurisdictions, such as Germany and Switzerland, required a local listing, complicating any attempts at consolidation.
Moreover, a consolidated Euronext listing venue would “still be a relatively small proportion of the market”, with the repertoire of ETPs listed on its septet of exchanges “significantly smaller” than that of the London, Swiss and Xetra exchanges, Jamieson said.
The LSE claims to be “the leading European centre for ETFs”, with more than 1,700 ETFs listed on its main market, a figure that balloons to 2,600 when factoring in various currency-based listings. The Xetra exchange features more than 2,300 ETPs, while Six has 2,100.
As a result, the average European ETF is listed on 3.5 bourses, according to ETFbook, a data provider.
Poulin is among those who would prefer to see consolidation that encompasses all of the continent’s bourses, saying “for us, one single market including the UK would be better”.
Kenneth Lamont, principal of research at Morningstar, believed Euronext’s plans were “a step in the right direction” and it “should be applauded” if it succeeded.
Yet, given the fragmentation and illiquidity that plagues the $2.4tn European ETF market, he agreed with Poulin that a continent-wide solution would be preferable.
“[This] might solve a little bit of the problem because you are consolidating some of the local markets in Europe, but it’s not all the local markets in Europe. It’s suboptimal”, Lamont said.
“It is in the interests of the entire industry to co-operate on [a pan-European solution]”, he added. “[But] it is a collective action problem. Everybody in the market wants it to happen but no one has the authority to do it. It has to be a top-down regulatory solution.”
Both King and Jamieson also had concerns about the settlement process Euronext might adopt to service their ETFs if they are all on one exchange, fearing this could create additional fragmentation for asset owners. “Euronext have some history in this regard,” Lamont said.
It may also be the case that Euronext would seek to raise its ETF listing fees, to compensate for losing revenue if it no longer has multiple listings.
Euronext said it “does not comment on this topic”, but added “as outlined in our ‘innovate for growth strategic plan’ for 2027, we are committed to addressing fragmentation in the European ETF market to unlock its full growth potential.
“As part of our road map, we plan to introduce a consolidated European listing, trading and post-trade solution for ETFs. This initiative aims to eliminate the need for multiple listings, streamline distribution, enhance liquidity and improve post-trade efficiency.”
