Euronext’s Ambitious Plan to Consolidate ETF Trading Venues Raises Industry Doubts

Euronext, a major stock exchange group, has put forth an ambitious proposal to consolidate the numerous exchange traded product (ETP) listings spread across its seven bourses onto a single venue. While this move is seen as a potential game-changer in the industry, skepticism looms over the feasibility of Euronext achieving this consolidation, especially within the speculated timeframe ending in September.

Currently, Euronext hosts over 3,300 ETP listings across various exchanges such as Milan, Amsterdam, Paris, Oslo, Brussels, Dublin, and Lisbon, with many funds listed across multiple locations. This dispersion of listings not only hampers liquidity but also contributes to wider trading spreads and increased costs, ultimately impacting investors’ returns.

The proposed shift of all ETPs to a single exchange under Euronext’s purview has sparked mixed reactions within the ETF industry. While some industry experts see the potential benefits of centralizing listings onto one exchange, thus reducing fragmentation and cutting down costs, others remain cautious about the practicality of such a move given the complex political landscape surrounding national stock exchanges.

Market participants have expressed concerns over potential regulatory hurdles and the resistance from different countries to relinquish control over their respective stock exchanges. This sentiment is echoed by Bruno Poulin, CEO of Ossiam, who highlights the challenges posed by national interests in maintaining control over financial markets.

Despite the perceived advantages of consolidating ETP listings, experts like Kenneth Lamont from Morningstar advocate for a broader, continent-wide solution to address the fragmentation and illiquidity prevalent in the European ETF market. This sentiment is shared by many who believe that a pan-European approach would be more effective in streamlining operations and enhancing market efficiency.

However, the path to consolidation is fraught with challenges, including regulatory requirements in certain jurisdictions mandating local listings and the potential impact on settlement processes and listing fees. Additionally, concerns have been raised about the size of Euronext’s consolidated listing venue compared to other major exchanges like the London Stock Exchange, Xetra, and Six Swiss Exchange, which boast larger ETP repertoires.

As Euronext navigates the complexities of its consolidation plan, the industry awaits further developments to see if this initiative will indeed revolutionize the European ETF market. While the road ahead may be riddled with obstacles, the prospect of a more streamlined and efficient ETF trading landscape remains a tantalizing possibility for investors and market participants alike.