“THE DEVELOPMENT OF STOCK EXCHANGES”
Santiago, Chile - June 26 & 27, 2008
© 2007 NYSE Euronext. All Rights Reserved.
Table of contents 1. The Consolidation Process of NYSE Euronext Step 1 – The Euronext Story Step 2 – the NYSE Euronext merger
2. Benefits of listing on NYSE Euronext 3. Focus: the European Platform: 1. Main benefits 2. NYSE Alternext :The SME Market
Conclusion
2
Step 1. The Euronext Story
© 2007 NYSE Euronext. All Rights Reserved.
A transformational opportunity • Creation of Euronext in 2000, from the merger of the three national stock exchanges: Amsterdam, Paris and Brussels • IPO in 2001 • Portuguese exchange and Liffe joined Euronext in 2002 • Key factors: • • • •
Demutualization of exchanges The Euro-zone created in 2000 Harmonization of regulations (the EU Directives) And, first above all: Technology harmonization in order to maximize economy of scale “IT has no borders and makes trading easier, more efficient and less expensive”
4
An incontestable integration track record…
Amsterdam Brussels Liffe Lisbon Paris Futures Paris Options
Amsterdam Brussels Lisbon Paris
2004
Liffe.Connect Amsterdam, Brussels, London, Lisbon, Paris
NSC Amsterdam, Brussels, Lisbon, Paris
Independent Settlement & Custody Euroclear/Crest
CASH TRADING
DERIVATIVES TRADING
2001
…to 2, respecting domestic regulations
Independent Clearing LCH.Clearnet
From 10 trading systems…
S.T.P
5
One holding company: one legal entity in each of the five jurisdictions EURONEXT NV
Euronext Amsterdam
Euronext Brussels
Euronext Lisbon
Euronext Paris
Liffe London
CASH TRADING Single Trading System: NSC
DERIVATIVES TRADING Single Trading System: Liffe.Connect
6
A horizontal model with governance harmonization • Each market undertaking receives a licence to operate markets from its national regulators (e.g. Euronext Paris exchange’s licensed by the French AMF, Euronext Amsterdam by the Dutch AFM…). • The governance of the Holding Company is the same as the governance of each local market undertaking: - In some cases: existence of a dual-body (Supervisory Board and Managing Board e.g. Euronex N.V., Euronext Amsterdam). - Everywhere (except for Liffe): a Managing Board which is identical, and composed of the 5 respective CEOs, chaired in each case by the local CEO (M. Theodore as CEO of Euronext N.V. and Euronext Paris, M. Joost van der does de Willebois as CEO of Euronext Amsterdam…)
7
Euronext regulators AFM NL
CMVM
AMF
P
F
Euronext NV Amsterdam
Brussels
Liffe
Lisbon
Paris
FSA CBFA
GB
B * Euronext N.V. is also regulated by the Dutch Ministry of Finance, as the Holding Company of an Exchange operating a Dutch market
8
Euronext College of Regulators Each Euronext market has a local regulator All Euronext regulators are party to one MOU signed in March 2000 (and completed later) which facilitate the process and which inter alia covers: Co-ordinated supervision of the Euronext group; Co-ordination with regard to approval of rules and regulations (dedicated working groups, Steering and Chairman committees); Regulators co-operation enhances harmonization in the context of the E.U. directives implementation.
9
Entry Point for Issuers: indifferent Each company chooses his main entry point
Regulated market under Dutch Law
Regulated market under Belgian Law
Regulated market under Portuguese Law
Regulated market under French Law
Each member chooses its main entry point One single Euronext rule book (admission criteria for companies) One single Euronext rule book 23(admission criteria for members)
10
The different Euronext cash markets
Amsterdam
Brussels
Lisbon
Paris
Euronext
Euronext
Euronext
Euronext
Alternext
Alternext
Marché Libre Vrije markt
Regulated markets
Alternext
Mercado Estrudurado
Marché Libre
Non regulated markets
11
Euronext Rule Book
Contractual basis: Admission agreement with Brokers Written confirmation from Issuers to comply with Euronext Rule Book (or Listing agreement)
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Step 2. The NYSE Euronext merger
© 2007 NYSE Euronext. All Rights Reserved.
The emergence of a World leader • April 2007: combination of NYSE group and Euronext NV, teaming up the largest stock exchange in the world e.g., NYSE in US$ and the first pan- European exchange, Euronext in €; • Creating a truly global market place; • With, once more, advanced Trading Solutions to drive Software & Technology Services Revenue Growth: the Universal trading Platform (“UTP”)
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With a Universal Trading Platform (target architecture) Legacy Trading Engines
ARCA
NYSE
Liffe Connect
TCS
Universal Trading Platform
NSC
The global platform will be implemented in different data centers or instances, according to: - Regulatory specificities
UTP UTP Cash Cash Cash
UTP UTP Cash Cash Derivatives
- Trading methods - Products - Business initiatives
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2. Benefits of listing on NYSE Euronext
© 2007 NYSE Euronext. All Rights Reserved.
Global Choice of Listing Venues & Products Flexible Listing Venues Complement Capital Market Objectives
NYSE Euronext
Strategic Relationships
Americas
Europe
The world’s largest equity market
Gateway to the Euro-zone
NYSE Cash Equities Fixed Income ETFs DRs
NYSE Arca
Cash Equities Equity Options ETFs DRs
Euronext Cash Equities Bonds ETFs Certificates Warrants DRs
Alternext Cash Equities DRs
Asia
5% equity stake
Liffe
Derivatives
5% equity stake
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Value Proposition For Issuers Listing Venue Choice • • •
Multiple entry points for issuers of any size and geography in Europe, U.S. and Asia Listing options complement issuer’s strategy over time Fast Path access to European platform for US listed companies (using SEC filings)
Unique Global Visibility/Marketing • • •
Unparalleled Brand Association Superior service offerings Superior peer alignment
Broad Investor Pool • •
Global and local investor access to the world’s largest sources of capital Investor outreach programs
Enhanced Liquidity & Valuation • • • •
Access to $ and € – the world’s two leading currencies Single Order Book Product extensions (GDRs, ETFs, Options, Futures…) Indices – international companies eligible for key indices (Shares & GDRs accepted)
Sound Regulatory Framework • • •
Simplified Processes and Reporting Filings/Ongoing Obligations in English European listings under EU regulatory regime, no Sarbanes Oxley
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Vibrant NYSE/Latin American Partnership The NYSE is the Destination for Latin American Companies Outside their Home Market
NYSE
Nasdaq
LSE
Number of Latin American Companies
88
6
2
Number of Latin American listings Since 2004
16
1
1
Number of Latin American IPOs Since 2004
10
1
1
Latin American IPO Proceeds Since 2004
Average Daily Trading Value in Latin American Companies
More than $5 billion
$4.7 billion
Less than $500 million
$800 million
$50 million
Source: Bloomberg; NYSE Research for Q1 2008 *2 UK incorporated, Latin American-based companies (Hochschild Mining, PLC, Antofogasta, PLC) not accounted for in this figure; Grupo Clarin (59,606 shares/day), Banco de Chile (0 shares/day) are the companies that have been included.
$883,000
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An NYSE Listing Boots Liquidity for Latin American Companies C
$8 000 000 000
Trading of Latin American NYSE listed companies
$7 000 000 000 $6 000 000 000 $5 000 000 000 $4 000 000 000 $3 000 000 000 $2 000 000 000 $1 000 000 000 $0
2002
2003
2004
Average Daily Value NYSE
2005
2006
2007
Q1 2008
Average Daily Value HOME MARKET
Over 67% of the trading in NYSE listed Latin American companies occurs in the U.S. Source: NYSE Research
Source: NYSE Research
20
A NYSE Listing Boosts Global Liquidity for Chilean Companies NYSE listing for Chilean companies is a “win-win” – providing liquidity and a broader shareholder base
C $160 000 000 $140 000 000 $120 000 000 $100 000 000 $80 000 000 $60 000 000 $40 000 000 $20 000 000 $0
2002
2003
2004
Average Daily Value NYSE
Source: NYSE Research
2005
2006
2007
Q1 2008
Average Daily Value HOME MARKET
Source: NYSE Research
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3.NYSE Euronext: Focus on the European Platform
© 2007 NYSE Euronext. All Rights Reserved.
Euronext Corporate structure
Euronext NV
100%
AMSTERDAM
100%
BRUSSELS
100%
LISBON
100%
PARIS
100%
LONDON (Liffe)
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A leading Marketplace For Listings • Multiple entry points for issuers of any size and geography in Europe and the U.S. • Access to the €uro-zone • IFRS accounting standards recognized by the SEC • While, acceptance of Canadian GAAP, Japanese GAAP & US GAAP by E.U regulators; • Innovative “Fast Path Listing” gaining traction, with several NYSE-listed companies choosing to cross list on Euronext: – Anheuser-Busch – Philip Morris International – Satyam Computer Services (India) • The Universal Trading Platform project (U.T.P)
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Euronext’s Competitive Position in Europe TRADING VOLUMES
MARKET CAPITALISATION
(2007)
European cash equity market capitalisation (end 2007)
180 160
3,000
SWX 8%
Spanish Exchanges 11%
2,500
120
2,000
100
1,500
80 60
1,000
40 500
Deutsche Börse 14%
M illion trades
140
Euronext 27%
Value trad ed € bilion
Borsa Italiana 7% OMX 8%
3,500
London Stock Exchange 25%
20
0
0 Euronext
• Largest equity market in Europe
London Deutsche Spanish Borsa Stock Börse Exchanges Italiana Exchange Turnover
OMX
SW X Group
Trades
• Largest trading platform in Europe Source: Federation of European Securities Exchanges (FESE) Figures include domestic & primary international listings
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Sector Comparison Euronext vs. LSE • Euronext sector profile very similar to London Stock Exchange • Euronext – larger in Technology, Consumer Goods, Utilities, Industrials London Stock Exchange
Euronext Utilities 10% Technology 3%
5%
Consumer Goods 14%
4%
6%
4%
Basic Materials 12%
1%
Basic Materials Consumer Goods Consumer Services Financials
9%
15%
10%
Oil & Gas 16%
Health Care Industrials
11%
Oil & Gas Technology Telecommunications
7%
Utilities Industrials 12%
24% 4%
Total market cap = €2,982 billion
6% Financials 26%
Total market cap = €2,769 billion
Source: Bloomberg, Euronext & LSE data as December 2007. ICB classification, domestic & primary listings, includes main market, SME market, equity investment instruments.
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Listing Requirements - Summary Euronext
Alternext Public Offer
Track record
Accounting rules
Minimum free float
Documentation
Compulsory advisor Language
3 years
2 years
IFRS compulsory or US, Canadian or Japanese GAAP 25% or 5% if shares in public > €5m Prospectus approved by the home country regulator (visa)
Private Placement
2 years
IFRS or home country GAAP ( US, Canadian, Japanese…) €2.5m
Prospectus (visa)
Listing Agent (Euronext member)
€5m
Offering circular
Listing Sponsor
English authorized
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NYSE Alternext: the SME Market
© 2007 NYSE Euronext. All Rights Reserved.
Alternext – The SME Market Alternext is an exchange-regulated market: • Designed for small and mid sized companies • Simplified listing rules and ongoing obligations • Open for companies from all sectors and countries • Launched mid-2005 • Broad €uro-zone access • Same 4-country trading platform for Euronext and Alternext • Alternext today: Number listed companies………………..
120
Total market capitalisation……………….
€ 5 billion
Average deal size…………………………
€ 9.4m
Deal size range……………………………
€ 2.6m to € 34m
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Alternext – Key Listing Requirements 2 year company track record (exemption for funds) IFRS or US GAAP • Audited FY accounts, un-audited 6 months report Choice of Market Access: Public offering
Private placement
Access to retail and/or qualified investors
Access to qualified investors only
Minimum free float: € 2.5m
Minimum placing: € 5m
Prospectus cleared by regulator
Offering circular
EU Prospectus Directive
Not cleared by regulator; disclosures under responsibility of the Listing Sponsor & Issuer
• Fast track dual listing through recognised market status • Access via offering circular for companies listed on another market
Use of Listing Sponsor mandatory
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Alternext – size profile Distribution of companies by market capitalisation
Alternext 35% 30% 25% 20% 15% 10% 5% 0% 0-2
2-5
5 - 10
10 - 25
25 - 50
50 - 100 100 - 250 250 - 500
500+
Alternext’s target company size of €20m - €250m achieved.
€m
No micro-caps… …better liquidity
Distribution of companies by market capitalisation
AIM 25% 20% 15% 10% 5% 0% 0-2
2-5
5 - 10
10 - 25
25 - 50
50 - 100 100 - 250 250 - 500
500+
€m
Source: Euronext, LSE, December 2007
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Alternext: IPOs and Investor Base Alternext: Truly Pan-European Origin of institutions (as of October 2007)
IPOs: • 80% institutional investor participation, underpinning valuations
Canada 1% Australia U.S. 1% 2% U.K. Switzerland 4%
13%
Sweden 2% Spain 2%
Euronext zone 58%
Luxembourg 5% Germany 9% Denmark 2%
Austria 1%
Investors: • Institutions from 14 countries • Broad continental European institutional take-up • Strong US-UK acceptance
Source: Lionshares
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Conclusion…
© 2007 NYSE Euronext. All Rights Reserved.
Conclusion The following Key Elements of a consolidation… 1. A Unified Technology Platform •
Next step : a Universal Trading Platform (UTP) for both regions (US/EU) and both cash and derivatives
•
Combined with the creation of well targeted MTF’s (Smartpool, High Frequency Trading …)
2. Harmonization of Exchanges Listing venues between the consolidated Exchanges (rule book) 3. Sound regulatory framework common to the various jurisdictions (E.U. Directives/ Corporate governance) •
An on going effort aiming at simplifying listing process and on going reporting obligations (ex/ Mutual recognition process) 34
Conclusion … Do allow attraction for Issuers and Investors given: •
Access at once to multi-markets in various countries (e.g.7 markets in 6 countries for NYSE Euronext) in a simplified and less costly way,
•
Provides Liquidity enhancement,
•
Creates a broader Investors Pool and,……but not least,
•
Reduces costs due to the unified technology platform and simplification of listing venues and ongoing obligations
So that…
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NYSE Euronext ‘s strategy may be defined as follows: Continue Continueto tobuild buildthe themost mostglobal globaland andtechnologically technologically advanced advancedmarketplace marketplacefor forthe thebenefit benefitof ofour ourcustomers customersand and shareholders shareholders
Maintain Maintainaasteadfast steadfastcommitment commitmentto toour ourcustomers customersand and maximize maximizechoice choicefor forissuers issuersand andusers userson onaaglobal globalscale scale
Utilize Utilizebest bestininclass classtechnology technologyand andbusiness businesspractices practicesto to deliver deliversignificant significantoperating operatingleverage leverageand andsuperior superiorfinancial financial results results
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NYSE Euronext
© 2007 NYSE Euronext. All Rights Reserved.