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The agreement covers the exchange of listing and trading technology as well as joint efforts to develop the corporate bond market.
The move fits perfectly into the strategies of both parties, which call for a full range of products that can be readily accessed by the largest possible number of investors.
Developing a European standard for corporate bonds
Under the agreement, Euronext is to adopt the tools used by the Luxembourg Stock Exchange for listing corporate bonds, thus offering issuers a standard based on practices in the market that is the European benchmark in this area.
Concretely, issuers in Luxembourg are offered a portal — “efile application” — that allows them to track issues through each stage in the listing process while respecting the regulatory framework that applies in the country in which they are registered.
NSC®, a single trading platform for markets in the Benelux
The agreement also provides for all products listed on the Luxembourg Stock Exchange’s cash market to be made available on NSC®1, the Euronext trading system for cash products.
Scheduled for rapid implementation, this move will expand the distribution of products listed on Luxembourg markets through the Euronext network, the prime provider of liquidity in Europe, and raise their profile with international and retail investors.
Conversely, the agreement will give members of Euronext markets direct access to products listed in Luxembourg, a European standard-setter for international securities transactions, with over 37,000 products listed, including 27,000 international bonds or nearly 60% of the European total, representing 4,100 issuers from over 100 countries.
The scope of the NSC® network and easy listing will contribute to growth in corporate bonds listed on Euronext and the Luxembourg Stock Exchange.
New joint venture to promote corporate bond issues
The agreement also calls for the creation of a 50/50 joint venture domiciled in Luxembourg to define and coordinate marketing initiatives promoting the new European standards, defined by Euronext and the Luxembourg Stock Exchange, for the listing and trading of corporate bonds. To this end, a label covering operations linked to corporate bond issues on the two bourses will be launched shortly.
Finally, the agreement covers the sale of market data on corporate issues listed on Euronext member exchanges and in Luxembourg.
Initially dedicated to corporate bonds and selected debt products (ABS, CDOs, covered bonds, mortgage bonds and TCNs), the agreement will in time be extended to other products.
Jean-François Théodore, Chairman of the Managing Board and CEO of Euronext, said, “We welcome this agreement with the Luxembourg Stock Exchange, which will make it possible to trade all cash products listed on the Luxembourg Exchange on NSC®, the pan-European platform for securities trading, and establish special links in corporate bonds, an area where the Luxembourg Stock Exchange is particularly well-placed.”
Raymond Kirsch, Chairman of the Board of Directors of the Luxembourg Stock Exchange, said, “The Luxembourg Stock Exchange, Europe’s leading exchange for international bond issues and Euronext, the prime pan-European bourse, are joining forces, without merging, to create an area for bond trading. This will free synergies that will generate mutual advantages for the two partners and their members by enhancing data flows and market liquidity.”
1 NSC is currently used by eleven exchanges worldwide in addition to the four Euronext cash markets.
Euronext
Euronext, the first pan-European exchange, results from the September 2000 merger of equity and derivatives markets in Amsterdam, Brussels and Paris. BVLP, the Portuguese exchange and LIFFE, the international derivatives exchange, joined Euronext in 2002. Euronext offers services that include listing of financial instruments, trading in securities and derivatives, data dissemination and IT support. Measured by value and number of trades processed through its central order book, Euronext is the largest cash equity market in Europe. Euronext.liffe, the derivatives business of Euronext, is Europe's second largest derivatives exchange by volume and second worldwide in value.
Luxembourg Stock Exchange
The Luxembourg Stock Exchange began operating as a limited company in 1929, and has since then gained extensive experience in listing and trading of securities from many different regions. Today the Exchange has two markets—regulated and Euro MTF—with 27,000 international bond issues representing 60% of total bonds listed on EU markets. It also lists some 6,000 investment funds in around twenty currencies, offering a wide range of investment opportunities, as well as 200 Global Depositary Receipts of issuers based in the developing world.
The www.bourse.lu portal gives individual investors easy access to market information on Luxembourg securities. Additional data is available through the CCLux portal (www.cclux.lu ), a company specializing in information on Luxembourg-based funds that became part of the Luxembourg Stock Exchange in May 2002.
