Euronext, a major stock exchange operator in Europe, is set to revolutionize the landscape of exchange traded product (ETP) trading by proposing a groundbreaking plan to consolidate the numerous ETP listings currently spread across its Milan, Amsterdam, Paris, Oslo, Brussels, Dublin, and Lisbon bourses onto a single exchange. This initiative, described as “transformational” by Vanguard, the world’s second-largest asset manager, is expected to significantly benefit retail investors by providing them with easier access to ETFs at reduced costs.

The move by Euronext to centralize ETP listings comes in response to the challenges posed by the fragmented nature of Europe’s capital markets, exacerbated by the introduction of the Markets in Financial Instruments Directive (Mifid) in 2007. While Mifid aimed to enhance competition among exchanges, it inadvertently led to increased fragmentation within European markets, resulting in a proliferation of new platforms and a lack of unified trading data, unlike the consolidated tape available in the US.

Comparing the European and US markets, Vanguard’s analysis revealed that Europe has over four times the number of ETF listings but a significantly lower trading volume, indicating inefficiencies and higher trading costs for European investors. The lack of a consolidated tape in Europe has contributed to wider bid-ask spreads, making trading more expensive compared to the US market. By consolidating ETP listings onto a single exchange, Euronext aims to address these inefficiencies and reduce trading costs for investors.

Notably, Vanguard’s white paper highlighted that the consolidation could lead to substantial savings in bid-offer spreads, potentially up to 35%. This cost reduction would particularly benefit retail investors who are currently limited by the fragmented market structure, leading to higher trading costs when accessing securities across different European exchanges. By centralizing ETP listings, retail investors would gain access to a larger pool of investors, promoting price competition and lowering trading costs.

While Vanguard has not specified the preferred exchange for listing its ETFs within Euronext’s network, the focus remains on countries like the UK, Italy, Germany, Switzerland, and the Netherlands to cater to local investor preferences. The consolidation effort by Euronext, however, does not advocate for a single Europe-wide ETF exchange encompassing non-Euronext bourses, as some experts suggest. Instead, the goal is to enhance competition among venues while ensuring accessibility for retail investors across Europe.

In conclusion, Euronext’s plan to centralize Europe’s ETF trading presents a significant step towards streamlining ETP listings and reducing trading costs for investors, particularly retail participants. By addressing market fragmentation and promoting competition, this initiative has the potential to reshape the European ETF landscape and improve accessibility to investment opportunities across the region.