Huw Jones

LONDON, (Reuters) – Pan-European stock exchange Euronext announced Monday that it would clear all trades on the newly acquired Italian platform by 2024. This will allow the European Union to reduce its dependence on London Stock Exchange for its core financial activities following Brexit.

Euronext currently clears most of its clearing through the LSE’s LCH Paris unit, which Euronext was unable to acquire.

Stephane Boujnah, Euronext’s Chief Executive, stated that the company, which has seven stock exchanges across Europe, will build upon its earlier acquisition of Milan.

Boujnah stated that closer ties to LCH (which is eventually controlled by a company outside of the EU after Brexit) were not as appealing as expanding in-house clearing. “The strategy and numbers were convincing.”

To generate higher income, exchanges have sought control over clearing for a long time. Boujnah said that Euronext was the only large exchange with no control over clearing flow.

The Euronext business in France is just a small part of LCH, but the exchange will still pay an LSE breakup fee.

EU policymakers are likely to welcome the move, as they seek to increase the bloc’s capital markets ‘autonomy and reduce reliance upon the City of London after Brexit.

BORSA SAVINGS LARGER

Euronext’s three-year strategy aims to increase “ambition” for traditional clearing and trading activities, as bigger competitors like the LSE or New York Stock Exchange (NYSE:) continue pushing into data.

Boujnah stated, “We’re not at the top of our journey. We are just starting from scratch.”

Amsterdam is now the largest stock exchange in Europe, having displaced large swathes London trading. The Dutch capital has also attracted international listings, which would have otherwise been to London.

He said that although no new acquisitions can be expected over the next few months, he did say that he expects targeted deals of “high-value-added” value to occur “as soon and as practical” in areas such as post-trade, forex or niche data players, or corporate services.

Euronext targets revenue growth between 3% and 4% per year through 2024, compared to 2020. The average annual growth rate in earnings before interest taxes depreciation, amortization (EBITDA), is 5% to 6.

The rate at which capital expenditures are to continue to increase is 3% to 5.5% of total revenues.

Euronext stated that the Pre-tax Savings Rate from Borsa Italiana merger was increased by 67%, to 100 Million Euros. It has been achieved by increasing clearing and moving the core data centre to Italy from Britain. The implementation costs are 160 million Euros ($184.9million).

($1 = 0.8655 euros)