Supervision of a multi-jurisdictional operator : The Euronext Experience

1. Supervision of a multi-jurisdictional operator :The Euronext Experience Olivier Lefebvre, Member of the Managing Board European Parliament, 14 December 2005, Strasbourg

2. Euronext at a glance EuronextModel Multi-juridiction model : several home regulators Created in 2000, Euronext is the cross-border exchange : in four years, Euronext brought together Amsterdam, Brussels, Lisbon, Paris and Liffe exchanges Horizontal model : divested from post-trade activities Euronext’s open architecture is focused on its core activity: trading and listingfinancial instruments and disengaged from clearing and settlement activities Technological integration of trading platforms is the the basis of its confolidation process • Synergies : • single trading platform • single rule book • single list Goal: Meeting Users needs (market efficiency, low costs and reduced fees)

3. Direct user benefits resulting from the integration of Euronext markets • Exchange fees decrease (Explicit trading costs) • Passing synergies benefits to users • Reduced internal operating costs (Explicit trading costs) • Savings on IT assets and human capital resources needed to access and monitor separate trading platforms • Optimized trading organization • Increased liquidity (Implicit trading costs) • Lower bid-ask spread, greater volume, lower volatility • Wider trading opportunities • Larger set of directly tradable securities • Direct access to all Euronext markets • Increased cross-border trading … but regulatory costs stable & regulatory burden is a limit to the model

4. The Euronext regulatory model A Multi-jurisdiction model : the case of equities Members choose one “preferred” entry point F P X Z B NL Euronext « RuleBook 1 »  Eurolist RM RM RM RM Other regulated and non-regulated markets in various MS (and Alternext) Listed companies choose their jurisdiction of Listing

5. The Euronext regulatory model • A Multi-jurisdiction model with only “home” • supervisors • Cooperation between 5 National Supervisors • Organised Through a MOU: • AFM, AMF, CBFA, CNVM, FSA • Chairs Committee, Steering Committee, • 5 working parties

6. Challenges to be won • Increase cooperation to solve division of competences • Information on listed companies: authority of listing and authority of the country of registration • Market Abuse Directive: authority of the territory where the action has taken place and authority of the regulated market where the financial instrument is admitted to trading • Suspension of trading on various venues in different Member States • Increase convergence in terms of supervisory compliance • Disparities in information and reporting requirements • Disparities in the way supervision is practiced in various countries • Specific legal environment at national level e.g. requirements for outsourcing • Different philosophy towards financial markets e.g. list of insiders of the Market Abuse Directive (pragmatic route versus detailed requirements)

7. Proposed action • Cooperation & coordination between regulators pushed to the greatest extent • A standard toolbox for regulators • Eliminate constraints limiting cross border integration • Strengthen cooperation mechanisms • Improve “Memorandum Of Understanding” • Allow join approval process • Removing differences between regimes on pre-approval or ex-post notification for changes or innovations • Consolidated list of information

8. Proposed action • “coordinating regulator/supervisor” or “convening regulator/supervisor” • rather than a “lead” regulator • Cordinating/convening supervisor does not imply one regulator only • can be organised around a college of regulators • each supervisor coordinator for a specific portfolio • Effective cooperation • Delegation of task • Presemption of cooperation

9. Key requirements • Allow the Lamfalussy process to continue and to develop with appropriate accountability • Political impetus to foster cooperation between regulators • Possibility for the private sector to ask for cooperation between regulators