What is an exchange and how can I invest on it?
Roland Prevot, Head of Retail Cash Equity at Euronext, explains what an exchange is, how to invest on-exchange and the advantages investing using the exchange brings, and why zero-commission investment is a myth.
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What is an exchange?
An exchange is a marketplace where buyers and sellers come together to trade financial instruments.
Financial instruments include:
- Shares (a company’s capital)
- Bonds (a company’s debt)
There are also other products such as:
- Exchange-Traded Funds (ETFs), which are index funds that can be used to track indices such as the CAC 40
- Leveraged products, for example derivatives like options, and structured products (including warrants and turbos).
What is Euronext?
Euronext is a global stock exchange. We operate regulated markets in Paris, Amsterdam, Brussels, Lisbon, Dublin, Oslo and Milan.
How to invest on the exchange?
Investing on the exchange is simple. To invest on the exchange you need to ask your bank or broker to open a trading account or a stock savings plan. They may have direct access to the exchange or they may ask an intermediary to execute your stock exchange order on Euronext.
What are the benefits of investing on an exchange?
Liquidity
One of the main advantages of investing on the exchange compared to other methods is that the exchange market has the most liquidity. This means that it has more market participants, increasing your chances of being able to trade at the best price. This liquidity contributes to the quality of the market.
Best execution
With Euronext you can also benefit from our best execution solution, called Best of Book. Best execution means that Euronext is the trading venue where you will have the best execution price.
Our 'Best of Book' service, designed for retail investors, delivers a real advantage to individual investors, allowing them to secure a better price than even a dedicated finance professional could achieve.
Investing with zero commission: myth or reality?
Zero commission means investing using brokers with no brokerage fees.
Roland Prevot says that zero commission is a myth if you are looking for good execution quality.
The broker that sends your order to the exchange will aim to secure the best execution for you, and there will be a charge for that. With a "zero-cost" solution, not having to pay brokerage fees seems like an advantage, but ultimately, what you don't pay in brokerage fees, you will end up paying in the execution price.
Final advice
Roland Prevot believes it is important to choose your broker carefully. Instead of focusing on brokerage fees, look at the terms offered by your broker before opening an account.