Pan-European exchange group Euronext NV is set to get a lock on Europe’s ETF market, having announced it will acquire the Irish Stock Exchange, the exchange where the majority of Europe’s ETFs are listed.
The Amsterdam-based group, which is looking to expand in the aftermath of Brexit and in the wake of the EU’s Mifid II regulations, (predicted to be a boon for ETFs) will pay €137 million for the group.
The Irish Stock Exchange is owned by a group of Irish stock brokers as well as Investec and Cantor Fitzgerald.
“In addition to strengthening revenue profile and cost synergies, ISE is ideally positioned to benefit from market opportunities in a post-Brexit environment,” said Stéphane Boujnah, the CEO of Euronext.
The acquisition will allow Euronext to expand its footprint in Europe’s ETF market at a time when the volume of new assets entering ETFs as well as the number of ETF listings is growing across the continent.
The growth is being driven largely by US firms, which, with an intense fee war making profitability a distant prospect on US soil, has left many managers seeing Europe as the next major opportunity.
“For ETF issuers, if the buyout makes the listing process more streamlined then it will be easier to get new ETFs to market,” Bernie Thurston, CEO of Ultumus, told ETF Stream.
“Stock exchanges around the world like ETFs, among other things, because of listing fees.”
“If you have a regular company they can only list their stock once, and generate only one listing fee. Whereas with ETFs, you can have one company list hundreds of ETFs, and each ETF generates its own fee.”
Listing fees on the Irish Stock Exchange are at least €2,000 annually, meaning the 222 ETFs listed on the ISE generate over €444,000 a year in listing fees, before other charges are taken into account.
Euronext was established by merging the main exchanges in France, the Netherlands and Belgium in 2000. The past two decades have witnessed a tidal wave of exchange mergers globally. NASDAQ bought out OMX, which controlled Sweden and Finland’s exchanges, in 2008. In 2013, the New York Stock Exchange was bought out by ICE.
The acquisitions come at a hard time for exchanges. Historically, data and indexing have been how exchanges make the bulk of their money. But both of these activities are under increasing competition. On data, exchanges face competition from low-cost data companies. On the indexing side, famous flagship indexes are under siege from low-cost index providers, who offer the same product but without the branding.