The complexity of some companies hides behind a simple facade. What would be simpler than providing a platform where people can trade stocks? This is like a central market where buyers and sellers meet. The arbitrator sets the prices by means of an order book. There’s not much more to it…
But in fact there is. Euronext and other stock exchanges are like the highway on which we go to work. The main difference is that on the Stock Exchange road, there are no shortcuts or other connection: if the Stock Exchange road is blocked, then there is no traffic.
Euronext was acquired by the New York Stock Exchange in 2006, NYSE “…operates the world’s leading and most liquid exchange group, seeking to provide the highest levels of quality, customer choice and innovation. Its family of Exchanges, located in six countries, include the New York Stock Exchange, the world’s largest cash market, Euronext, the largest cash market in the Eurozone… The nearly 4,000 companies listed on NYSE Euronext represent a combined total global market capitalization of $30.5 trillion/EUR20.9 trillion (as of December 31, 2007), more than four times that of any other stock group.NYSE Euronext stock exchanges trade a average daily trade value of approximately $141 billion/EUR103 billion (as of December 31, 2007), representing more than one-third of global cash stock trading NYSE Euronext is part of the S&P 500 index and the only stock trader in the S&P 100 index:” (1)
Being infrastructure, it is a company that has little visibility. With all the electronic interfaces, it is almost impossible to see when this company is part of the (individual) transaction that investors execute on this exchange. There are few times when this visibility is a problem: when there is a problem. EURONEXT is the bottleneck where everything comes together. Therefore, it is a very worthwhile investment in itself.
And the value is even higher if a single stock market is part of a global platform. “Due to apparent moves by NASDAQ to acquire the London Stock Exchange, NYSE Group offered €8 billion ($10.2 billion) in cash and shares for Euronext (May 2006), beating a rival bid for the operator of the European stock exchange of Deutsche Börse of Germany, the German stock market”. (two)
But it is also important. Today and many other days, banks and brokers cannot show the real price of the AEX index just because euronext has a technical problem. At such times confidence in Euronext falls like shares of a company that is reporting an earnings warning. And this is just the information reporting function. When the Stock Exchange is experiencing a major problem where brokers and banks are unable to trade, it causes a real disaster. That is why the main objective of this company is to offer “availability: like the electric current, it must always be in operation, if this cannot be available forever, the value of the bag is worth nothing.
So yes, “…it seeks to provide the highest levels of quality, choice and innovation for the customer”, but quality in this case begins with the availability of the service. This is a great challenge, because the stock market must adapt to a continuous number of changes and during all those changes, the show must go on!
(1) – http://www.euronext.com/landing/indexMarket-18812-EN.html
(2) – (2) http://en.wikipedia.org/wiki/NYSE_Euronext
HJB