Invest in the Eurozone banking sector at a fair price with Euronext's derivatives

Euronext offers to market participants the full spectrum of derivatives to trade the Eurozone banking sector at a fair price. Investors can trade future, option and dividend future contracts based on the Euronext Eurozone Banks Index which shows the performance of the largest companies of this sector in the Eurozone (Bloomberg code: EZBANK).

Trading the banking sector at a fair price

Euronext's derivatives offer strong competitive advantages:

• Fair cost structure taking into consideration the nominal value of the index
• High accessibility thanks to a low minimum sizes to facilitate off-screen transactions
• Higher nominal value to enable further economies at the clearing level
• On-screen liquidity provided by market makers committed to the development of a cost-efficient solution to trade the banking sector
• Off-screen liquidity offered by all the existing main counterparties

Market makers facilitating on-screen liquidity

Trading in Euronext Eurozone Banks Index Derivatives benefits from on-screen liquidity provided by market makers committed to ease the access to the banking sector.

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Euronext Eurozone Banks Index Derivatives vs competition*

*based on data publicly accessible on the competitor website.

Publications about Euronext Banks Index Future

FOW - Global Investor Group (May 2021)

Euronext to offer cheaper access to banking sector through derivatives.

READ THE ARTICLE

Next Finance - interview in French (June 2021)

« Nous allons continuer notre développement avec d’autres produits dérivés sur l’indice Euronext Eurozone Banks »

READ THE ARTICLE

Best Execution - Summer edition (July 2021)

Charlotte Alliot, Head of Institutional Derivatives at Euronext spoke to Best Execution about trading the Eurozone banking sector using derivatives.

READ THE ARTICLE

Related news

Euronext launches new Eurozone Banks Dividend Index Future

Over the first half of the year, Euronext welcomed 41 new listings which raised a total of €3.3 billion.

Flagship new listings

Since the beginning of the year, we welcomed companies from all sectors on Euronext markets including some flagship brands: Industrie de Nora, Euroapi, Deezer, Var Energi, Azerion, Cabka and BenevolentAI.

Euronext’s secondary markets

We are proud to consolidate our leading position in Europe in primary equity listings, while on our secondary markets we executed €13.7 billion raised in secondary equity issues in H1 2022.

World leader for bonds listing

Euronext continues to be the leading listing venue for bonds worldwide, counting more than 52,500 bonds listed at 30 June 2022.

The Euronext Tech Leaders initiative

We also reinforced our offering for Tech companies with the launch of Euronext Tech Leaders, dedicated to high-growth and leading Tech companies. 

Euronext Tech Leaders is composed of 100+ high-growth and leading companies, each meeting a specific set of criteria to qualify. It complements Euronext's existing Tech offer and aims to strengthen the European Tech sector.

Across the primary markets, with our new Tech initiative and our world-leading position in debt listings, we are leading the way in supporting the leaders of tomorrow.

Visit Raise Capital

We want to provide our customers with the highest quality service, whether they interact with us in their local market or across multiple locations. That’s why one of Euronext Securities’ four strategic pillars is to strengthen and to enhance the international and local Customer Experience. And that’s the reason why, as we develop our pan-European CSD organisation, we focus so keenly on our customer relationships. In this article, we discuss how Euronext Securities will improve Customer Experience and what it will mean for our customers in the different markets.

“When we talk about Customer Experience, I think the most important thing to recognise is that having a customer-centric focus is nothing new for our CSDs,” Olga Jordão, CEO of Euronext Securities Porto and Head of CSD Client Services, explains.

“Each CSD has a long track record of working closely with their local, regional and international customers to meet their needs. However, now that we are a large, pan-European institution, we have the opportunity to bring an enhanced experience and a ‘One Euronext’ feel to our customers.” It is in this context that the fourth strategic pillar in Euronext Securities’, “Growth for Impact 2024 Strategy”, comes into play.

“The fourth pillar is about creating stronger ties with our customers, anticipating their needs and strengthening our existing relationships,” explains Mauro Dognini, CEO Euronext Securities Milan and Head of Sales & Relationship Management.

“For our customers, this will mean that they will continue to benefit from locally developed initiatives and services that cater to local and regional specificities. At the same time, they will benefit from new services, tested and proven in other Euronext CSDs, that can create even more value for their business.”

Three primary goals: improving efficiency, harmonisation and partnership

Over the next three years, Euronext Securities will introduce an array of Customer Experience initiatives, all centred around three primary objectives.

“First, we want to make it easier for our customers to interact with us,” says Mauro Dognini. “We’ll do this by improving our efficiency, simplifying our processes and reducing our response time.” The second objective targets customers that use Euronext Securities’ services in more than one CSD, and involves creating a more harmonised experience for them across all Euronext CSDs. “Finally, we want to develop stronger, long-term relationships with our customers. Leveraging data and advanced technology will help us in that respect,” he explains.

1. Improving efficiency by making it easier for customers to work with us.

One of the concrete initiatives designed to improve efficiency in Customer Experience is the introduction of a common customer relationship management (CRM) tool across all CSDs.

This tool will help customer-facing teams monitor day-to-day customer interactions and more quickly identify pain points and potential improvement areas. They can thus be more proactive and responsive to customer needs.

Another initiative, designed to improve response times, will focus on how queries are routed in the organisation, making sure they are directed to specialised areas and that each issue is tracked through to its resolution.

“Every day, we get a large number of queries across our CSDs, many of which relate to the same issue,” states Mauro Dognini. “By being able to identify those trends more quickly, we can use input from across the CSDs to come up with the best response for our customers, rather than developing individual solutions in isolation.”

2. Harmonising the Customer Experience providing a more flexible Customer Service model.

To create one harmonised Customer Experience across all Euronext CSDs, the second objective, Euronext Securities will build a flexible service model that allows customers to choose between a local, regional or global model. In this way, each customer can select the approach that best suits their business.

For example, at Euronext Securities Copenhagen customers can opt for retail segregated accounts, a local settlement platform for local banks, or a Directly Connected Participant (DCP) model for settlement in the T2S platform – an approach increasingly favoured by international financial institutions.

Corporate Actions (CA) is another area where the Euronext CSDs support both local and international models. Euronext Securities Oslo offers standard processing of CA payments for custodians servicing international clients, whereas local retail clients rely entirely on their CSD to process retail operations.

These examples show the importance of balancing harmonisation with local market specificities, as Mauro Dognini points out. “We are a network of CSDs, and at the same time each CSD plays a central role in its local market. That’s why we will work closely with our customers in each market to make sure we create models that work for everyone.”

3. Cementing the partnership mindset while strengthening our customer service culture.

The final objective is about cementing the partnership mindset in all corners of the Euronext Securities’ organisation.

“We want our customers to experience a more partnership-based approach from us in all the CSDs. And they should have this experience across the entire value chain, in all of their interactions with us,” states Olga Jordão. To meet this objective, Euronext Securities will introduce dedicated account and relationship managers in each CSD. “These managers will place us in a better position to support our customers’ growth. They will also give us a deeper understanding of our customers’ business, which will help us further improve the services we provide.”

The 2024 Customer Experience

Although the Growth for Impact 2024 Strategy spans the next three years, work on several initiatives is already well underway. “We expect to have the CRM tool fully implemented across all CSDs by the third quarter of this year. Initially, we'll be reaching out to our customers to share some of our learnings and observations with them and get their feedback. Over time, we plan on launching regular service reviews encompassing all aspects of our service and customer interactions,” states Olga Jordão.

When the full Growth for Impact Strategy is realised, local, regional and international customers alike should feel the positive impact of these initiatives. “Locally, our customers will feel that they have retained the flexibility and local understanding they would expect from their national CSD,” Mauro Dognini says. “Yet they will also see the benefits of working with a large, pan-European organisation, in that the service they receive is even more professional.”

For larger customers who do business with Euronext Securities in multiple markets, they will meet “One Euronext Securities”, regardless of where they access the organisation’s services. However, achieving this level of seamless harmonisation encompasses more than just the Customer Experience. “We have several initiatives underway to pave the way, including building common corporate actions and billing platforms to address the product side. All these common layers are key building blocks to creating the One Euronext of the future,” explains Olga Jordão.

“Our ultimate aim is that customers view us as a partner that helps them accomplish their business goals,” she concludes.

Customer case: Helping BancoBPM Group improve settlement efficiency

An experience from Euronext Securities Milan demonstrates how closer customer engagement can bring value to Euronext’s customers.

Euronext Securities Milan formed an Executive Account Management team in 2016 and implemented a common CRM tool across the Sales, Relationship Management and Customer Services teams. These teams could then share information and work together to identify new solutions for their customers.

Working together with BancoBPM Group, the teams created a new solution which allows the settlement flows coming from trading activities on Borsa Italiana by the group broker to be addressed and centralised directly to the customer’s securities account. According to Gianni Mazzocchi, Head of Finance Operations at BancoBPM, this solution allows the bank to “greatly simplify and optimise the entire end-to-end process for settling trading activities on Borsa Italiana. Trades will be settled in the appropriate securities accounts of BancoBPM without any realignment activities of positions. This will reduce risk and operating costs and significantly decrease settlement instructions.”

An introduction to cash-settled contracts

Caroline Bitton, Sales Manager - Commodities at Euronext, explains what a cash-settled commodity contract is and its advantages, and gives some insight into the new durum wheat cash-settled future contract that Euronext is launching. 

Listen to the full interview. Watch the video.

What is a cash-settled contract?

A cash-settled contract is a futures contract which allows the buyer and the seller to go to the expiry date without the need to start a physical delivery process. This means they can keep their position until the last day, and they have the guarantee of exiting their position at the expiry price.

How is the cash-settled contracts expiry price set up?

The expiry price is calculated by the clearing house which uses a BMR (Benchmark Regulation) index approved by the stock market regulatory authorities. 

The clearing house calculates the arithmetic average of this index based on the last month of trading. It then gives the expiry price at which the buyers and the sellers will exit from their position. 

What are the advantages of a cash-settled contract?

To start with, the advantages are similar to the advantages of a physical delivery contract. The cash-settled contract, just like a physically-delivered contract, works as a hedging tool to manage price risk.

However, settling the contract in cash removes the complexity associated with physical delivery, which can be unsuitable for certain markets for reasons such as logistics, market size, or because of the nature of the underlying product. 

Are there any contracts of this type at Euronext?

We are about to launch a Durum Wheat cash-settled future contract which uses a French-Italian durum wheat index produced by Sitagri Index Services.

How does a cash-settled contract work?

It works like all futures contracts - according to how the position taken by the buyers and sellers develops. The only difference is the calculation on the final day of trading. For example, if you have a December expiry, it will be the index average between the 1^st and the 31^st of December.

And what about historical contracts?

The Euronext MATIF contracts, Wheat, Corn, Rapeseed, involve physical delivery and will remain the same.

Thanks to the launch of our cash-settled platform, we can extend our range and offer new underlyings that are not feasible with physical delivery. 

What is Best of Book and how does it work?

Roland Prevot, Head of Retail Cash Equity at Euronext, explains what Euronext Best of Book is, how it works and the advantages for retail investors.

Listen to the full interview. Watch the video.

What is Best of Book?

Best of Book (BoB) is a functionality Euronext launched to improve the trading conditions for retail investors - those investors who are trading for their own account as private individuals.

With Best of Book, when a retail investor trades on the exchange, they will not only benefit from a better price, but will also have more shares available to trade, compared to those available to professionals.

Best of Book has been designed to guarantee best execution to retail investors when they trade on Euronext. 

What is best execution?

Best execution is a concept implemented by regulators that obliges retail brokers to execute their clients' orders on the trading venue which is the most favourable for the investor.

To do so, the broker needs to consider two elements:

1. The trading price at which the order will be executed.
2. The cost that the broker will have to pay to provide execution.

For instance, for a buy order (an order to buy a share), the best execution will be on the trading venue where the combination of price + cost is the lowest. 

How does Best of Book work?

To build Best of Book, we asked liquidity providers to agree to provide prices at the Euronext Best Bid and Offer (the EBBO) on Euronext's Central Order Book. Those prices are exclusively available for orders initiated by retail investors.

So when a retail investor places an order on Euronext. they have access to the pool of liquidity available to all professionals, plus an additional pool of liquidity reserved only for retail investors.

We have calculated that Best of Book improves the execution price for retail investors by around €1.60 on average (in 2021 the average was €3.00).

How can I benefit from Best of Book?

First. to benefit from Best of Book, you need to trade on Euronext.

Unfortunately, not all retail brokers guarantee that they will execute their clients' order on the exchange; sometimes they choose to trade on alternative trading venues.

So before opening an account with a broker it is best to make sure that the broker is able to trade on Euronext. whether directly or indirectly, and that the broker can deliver best execution via Euronext Best of Book.