Francesca Landini & Elvira Poloina

MILAN (Reuters – Euronext wants to be a major service provider of European Union bonds. The pan-European stock exchange is trying to leverage the newly acquired Milan stock and debt exchange groups to seize business from its rivals.

Euronext, which operates stock markets in Amsterdam and Brussels, Dublin Lisbon, Lisbon Milan, Oslo, Paris, Milan, Oslo, Paris, Lisbon, Lisbon, Milan, Oslo, Milan, Oslo, Paris, and other European countries, purchased MTS, an Italian bond platform, this year, as part of its €5 billion (4.3 billion euro) acquisition of Italy’s Boursese Group.

Given the EU’s pandemic recovery fund’s 800-billion euro borrowing plan, it has set its sights now on EU debt. This could help to create a European “safe asset”, which would then be traded widely.

More than 50 million euros worth of long-term EU debt have been already issued. EU is currently holding periodic auctions using almost 50 primary banks to organize the sale and trade of the bonds.

These bonds are currently listed by the European Commission via the Luxembourg Stock Exchange, and Clearstream is provided by Deutsche Boerse (DE) for custody and other services.

MTS is already used to trade EU debt. The EU does not yet have plans to establish a secondary market. This is because, unlike other European countries, it doesn’t require that the banks selling its bonds trade these notes at a specific volume per day or ensure market liquidity.

Fabrizio Testa, MTS CEO, said that MTS offered data, market infrastructure, and reports to the European Commission on primary dealer activity.

It also offered its platform for the EU Commision to organise buybacks and trades.

Testa is a member of Euronext’s extended management board. He stated that the new EU bonds were already trading on MTS. However, introducing incentives to primary dealers for continuing trades on a regulated platforms like ours would make a big difference.

Investors would have unbroken access, even during market volatility, to trading and prices, he stated.

Testa said, “At this moment there’s an open dialog with the European Commission… We hope that there will be a determination at the beginning next year.”

SERVICE SPECIALISTS

Euronext also recommended its Dublin Bourse to list the bonds and Monte Titoli as a custody service provider for EU bonds. This is in addition to Clearstream and the Luxembourg Stock Exchange, Testa stated.

The spokesperson of the Commission refused to discuss specific Euronext proposal, but stated that they were “actively in touch with all relevant stakeholders”.

The spokesperson stated that “our bonds are listed currently on the Luxembourg Stock Exchange (LuxSE), and we wouldn’t speculate about other solutions.”

LuxSE responded to a question about Euronext’s proposal by stating that it has a 45% market share in the international listing of debt securities from sovereign and supranational agencies.

LuxSE spokeswoman, claiming that the exchange had long-standing relationships with European agencies and institutions. She also added that the EU’s 12 billion euro green bond has been listed on LuxSE.

Clearstream claimed that recent Eurobond growth has proven that both investors and issuers are confident in Clearstream.

Guido Wille from Clearstream, the head of Clearstream’s Eurobonds company in an emailed statement said that they will work together with their partners “to develop and further increase Europe’s biggest debt market.”

According to independent experts, introducing bonds obligations for primary dealers as well as creating a liquid secondary marketplace for EU debt will bring benefits.

Traders noticed that EU bonds have a higher yield than similar German bonds, even though they share the same triple-A credit rating. An anonymous trader stated that Brussels would be able to save “a few basis point” on auctions if MTS proposal boosted transparency, liquidity.

Nils Kostense, a trader in an EU primary bank dealer, at ABN Amro agreed with Nils that increased liquidity could lead to cost savings.

If (investors can) offload the things they’ve already loaded, they will be able to take part in an auction more easily. This could benefit the EU as more people will participate,” Kostense stated.

($1 = 0.8661 euros)