Whilst the competition and faltering alliance between London and Frankfurt caught most of the attention last year, Paris was quietly exploring new opportunities and posting record figures on the Bourse and its junior markets.
“It has been an excellent year on all our markets, and we are confident that this year will see similar advances,” said Bourse spokesman Bruno Rossignol. “We also have a number of projects involving both other exchanges and independent companies.”
During 1999 the Bourse systems recorded 58.86 million trades, up by almost a third on the previous year. In line with other exchanges its busiest day was in December, with the 22 trading days in the last month of the year totalling E75.825bn. For the whole year, amounts traded totalled E719bn, a new record representing a 40% rise over 1998. With 1,144 listed companies the total market capitalisation of the Bourse is now E1.5trn.
All this meant the CAC 40 index rose 51.12% over the year, its best performance since 1988. Over the same period the SBF 120 was up 52.56%, the SBF 250 up 52.43% and the SBF 80 58.26%. The Second Marché was up 21.74% and the MIDCAC rose 38.57%.
Perhaps the most staggering rise was the Nouveau Marché, which increased by 135% for the year, with a rise of over 40% in December alone. Activity in the 111 listed companies broke all records, with daily trades of E15.5m. Such was the inflow of funds that the market was capitalised at E7bn by the year-end. Meanwhile the derivatives market was equally buoyant with the total number of contracts traded breaking the 188m mark in 1999.
Despite predictions that the bubble would burst in the new year, Paris in line with other exchanges has continued on an upward trend. Equity and index derivatives recorded a 16.4% rise in January, with volume in CAC 40 options up 20.4% on December. Meanwhile more than 19m contracts were traded on the derivatives market, up almost a third on December. Similarly interest in the Nouveau Marché was maintained, with the two latest IPOs being massively over-subscribed. Oddprice.com was offered at E19.06, but traded initially at E50. Similarly Netvalue opened trading at more than three times its offer price of E22.
Mark Vignson at Schroders, new members in Paris, expects 2000 to be a good year for the exchange. “Although it is not possible to make any positive link between the main index and the Nouveau Marché I would expect both to continue on an upward curve. I think the exchange is to be congratulated on the recent developments which make Paris a very good place to trade.”
These developments include the harmonisation of market rules among the eight markets, including Paris, which make up a European alliance. “We also plan to have an intralink in place in November this year,” says Rossignol. There are also plans to extend trading hours to 9–17:30 in line with other exchanges next month. “Although nothing is certain yet, we are also looking at the possibility of extending hours even further.”
The derivatives alliance involving Montreal, Singapore and São Paulo has also been going well, and has proved an invaluable test-bed for the networking of the NSC trading system which is now used on 18 markets on five continents, and is the world's most widely used electronic trading system.
In January the Bourse announced that it was to join forces with information provider Atos to create Atos Euronext, an IT solutions provider for stock markets and financial institutions.
The new company, in which the Bourse will have a 50% stake will employ 800 people and is aiming for turnover of E150m. “We are confident that we can reach our target of Ffr1bn (e152m) in the first year of trading,” says Rossignol. “The company will be in the unique position of offering the markets end-to-end solutions from front to back office and from securities to cash. The aim is to offer a comprehensive e-business service, including e-trading, e-banking and e-commerce,” he says.
Bourse chairman Jean-Francois Théodore was equally bullish about Euronext's prospects. “Paris Bourse is already the world's leading supplier of stock market systems, and at a time when the European stock market environment is shifting, this unique alliance between a stock market and a leading IT partner of the financial services industry has strengthened our assertive strategy worldwide,” he says.
It is anticipated the new company, which will become an Atos operating division, will be positioned in growing markets.
The announcement follows hard on the heels of another innovative move revealed at the end of last year, in which the Bourse announced a link-up of its Clearnet system with Euroclear and Sicovam, aimed at offering the market a pan-European solution for clearance, settlement and netting services.
A definitive agreement is anticipated next month, and is expected to confirm the rationalisation of the respective platforms, and reveal cost-cutting initiatives.
Luc Bomans, managing director and general manager of Euroclear, says: “It’s time to stop duplicating the investments across the European settlement infrastructure. Rather than discard platforms which have proven their efficiency, we will exploit them. This process will lead to a less fragmented securities service environment in the most rapid, low-cost and low-risk manner, for the benefit of all users.”
Cost cutting is a theme which is returned to again and again by representatives of the Bourse and its members, confirming that gone are the days when fees were a problem in Paris. “Reduction in costs has meant that Paris is now one of the cheapest exchanges in Europe,” says Christian Hodara, head of law and compliance at Merrill Lynch in Paris.
“They really have made a big effort to reduce fees. Some fixed costs linked to membership have been cut, and the membership fee has been dropped, and more and more we are moving towards marginal costs,” he says.
He confirms that the initiative to create a new trading environment is leading to greater liquidity, but warns that the next year will be crucial to the success of the project. He adds“It is important to note that the alliance is based on the continental model, except for rolling settlement. In this respect Paris also needs to modernise.”
Nevertheless, with the main indices buoyant and the Nouveau Marché finding its niche, Paris seems to at least have a blueprint for the 21st century.