Euronext Preps Multi-Currency Trading Service for ETFs, Ahead of Spin-Off

The soon-to-be spun-off business line of IntercontinentalExchange Group, under the Euronext N.V brand - preps for an IPO after reported

NYSE Euronext

Euronext announced today that it is providing a way for international investors with foreign denominated currencies to purchase ETFs priced in euros by converting the exchange rate of up to 20 different currencies so that investors could have a more streamlined experience.

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As local exchanges seek to acquire market share in regions outside their domestic locations, the allure of providing clients ease of access can be facilitated through numerous methods of approach, such as the one announced today.

How the Technology Works

Forex Magnates’ reporters spoke with Pedro Fernandes, Head of European Exchange Traded Products of Euronext, during an email interview regarding the announcement, Mr. Fernandes responded as follows:

FM: How does the technology work?

Paul Fernandes, Head of European Exchange Traded Products of Euronext
Pedro Fernandes, Head of European Exchange Traded Products of Euronext

Pedro Fernandes: “We will be using the same technology and framework that we currently use. Order and Trade management through UTP/Euronext, Clearing through LCH.Clearnet SA set-up, and settlement on Euroclear Bank.”

FM:Is the solution from a 3rd party and if so can you provide who?
Pedro Fernandes: “It’s a solution supported by the market infrastructure – Euronext, LCH.Clearnet SA and Euroclear Bank.”

FM: Will this be for all 568 ETFs listed on the site, and if so when will it be available?

Pedro Fernandes: “Please see: https://etp.euronext.com/etps/etfs/etf-directory
Listed ETFs will be made available on different currencies upon issuer request.”

FM: Will the rates reflect in real-time on client’s platforms from respective brokers?
Pedro Fernandes: “Trade through Settlement occurs in the same currency.”

CNY and HKD a First for a US/European Exchange, As per Euronext

As many as 20 different currencies will be supported, including for the first time on a U.S. or European exchange –the Chinese Yuan Renminbi (CNY) and the Hong Kong Dollar (HKD) according to Euronext, the press release also stated that this would be subject to approval of the relevant clearing authorities. The plan is to make it available from Monday February 17, 2014 – less than a month away.

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A copy of the press release from NYSE Euronext contained the following list of currency ISO Codes for each supported currency in the new offering:

AUD Australian dollar
CAD Canadian dollar
CHF Swiss frank
CNY Chinese Yuan Renminbi
DKK Danish krone
EUR Euro
GBP British pound
HKD Hong Kong dollar
HUF Forint
ISK Icelandic crown
JPY Yen
MXN Mexican peso
NOK Norwegian krone
NZD New Zealand dollar

The new service will allow international investors to trade any Euronext listed ETF in 20 different currencies, according to the announcement. Euronext lists some 568 Exchange Traded Funds (ETFs) on its corporate website, and said how it is considerably simplifying access to the international markets, reducing currency exchange risk and foreign exchange costs, and providing investors broader investment opportunities by way of this launch.

Aimed to Appeals Issuers if Exposure to Larger Pool of Investors is Reached

The service was positioned as also appealing to ETF issuers by allowing for easier asset gathering as their exposure to a deeper pool of global investors would be increased, and noted they will also no longer need to create a separate fund with a different ISIN code to list in another currency.

Lee Hodgkinson, Head of Markets and Global Sales Euronext
Lee Hodgkinson, Head of Markets and Global Sales Euronext

Lee Hodgkinson, Head of Markets and Global Sales Euronext, said in the official press release, “We are excited to offer such a large number of different currencies and particularly proud to be the first U.S. or European exchange to offer the Chinese Renminbi and the Hong Kong dollar. This initiative makes trading ETFs in a different currency easier, simpler and more efficient for both issuers and investors.  International investors can now buy ETFs in one of 20 different currencies on the Euronext platform giving them broader investment opportunities, while  issuers can improve their product visibility and enlarge their target audience.”

Euronext is the first pan-European exchange, spanning Belgium, France, the Netherlands, Portugal and the UK. It is the primary exchange in the Euro zone with over 1,300 issuers worth €2.2 trillion in market capitalization, and is the wholly-owned subsidiary of InterncontinentialExchange Group (ICE).

Euronext is preparing for an IPO after reported regulatory backing that its spin-off from its parent company has been supported, anticipated in February.

The exchange has some 179 members that are able to use Euronext’s unique Single Order Book allowing investors to trade, clear and settle in a uniform way across all of its markets and using its UTP technology.

Euronext Reports Record Growth for its index-linked Exchange Products

The news comes just a day after the Exchange reported that the number of Exchange Traded Products linked to Euronext indices listed on its markets increased by 61% in 2013 to over 4,000 products, achieving record growth.

The most important increase was for products linked to the CAC 40 and PSI 20 where growth was 83% and 500% respectively. The assets under management (AUM) of Exchange Traded Funds (ETFs) on the Euronext indices remained stable in 2013 at €5 billion. The AUM in ETFs linked to the PSI 20 showed an increase of 96% to €58 million.

As indices and benchmarks, including exchange traded products become a conduit for Forex and binary options brokers to created CFD offerings or actual exchange-traded execution capabilities (non-CFD), brokers can stay up to speed on the next popular instrument, provide it in return for specialized needs of clients or anticipate it in advance (by launching a new product without the demand being there first).

In the end, the merging of multi-asset offerings is likely to continue, as well as multi-denominated account balance capabilities.

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