Road Trip to IDX: Euronext's Alliot on Enhancing Access to European Markets

Charlotte Alliot, the Head of Financial Derivatives at Euronext, joins the show from the sidelines of the International Derivatives Expo in London to discuss trends that are shaping European markets. Alliot highlights Euronext's growth in equity options and explains the cultural differences in European derivatives trading. Alliot outlines Euronext's initiatives to enhance interest in retail trading, including educational programs in multiple languages and the launch of mini options for high-nominal stocks. Alliot also details the upcoming launch of mini futures on European government bonds, aimed at both retail and buy-side investors, to enhance liquidity and market access.

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Transcript

(Note: This transcript was created using artificial intellignce. It has not been edited verbatim.)

Sean McMahon  0:07  

Hello everyone, and welcome to the Modern Money Smart pod. I'm your host, Sean McMahon, and today I'm coming to you from the International Derivatives Expo hosted by the Futures Industry Association. We're here in London, gathering insights from some of the leading experts in the financial services industry. And joining me right now is Charlotte Aliott, head of financial derivatives for Euronext, Charlotte, how you doing today?

Charlotte Aliott  0:31  
Very good. Very happy to be here. Thank you, Sean, for this opportunity.

Sean McMahon  0:35  
Yeah, there's a lot of excitement in the air. IDX just kicked off a few hours ago. So what's the vibe been like for you so far?

Charlotte Aliott  0:42  
Well, first, it's fantastic to see so many people coming from all around the world together for this event, and we are very happy to be here. It's an important event, and for us, it's really the opportunity, of course, to advertise on everything which is happening at your next a group is absolutely transforming. But I beyond that. I think it's important for the industry to gather all together. The world is extremely challenging. You know, we have been living not so long ago, the COVID crisis, Ukrainian war is this had impact on the market. Look at the, you know, the yield on fixed income. A lot is happening, and I think, more than ever, especially with the new vibes also coming from the US, it is important to gather in Europe and to discuss on the future of capital markets.

Sean McMahon  1:34  
And what do you see? Can you look into your crystal ball and anything you kind of see coming our way for capital markets. 

Speaker 1  1:41  
Well, what we see is that at Euronext, we really want to participate to what we call the capital market union. You know, it's in our DNA to create a unification of the markets. We have been making many acquisitions. We are creating a unique order book, a very strong liquidity pool. We have internalized clearing, and we are creating one of the largest liquidity pool in Europe. It is our I would say the European project is really into our DNA, and in this complicated world, we really believe that we're going to bring a lot of value to investors.

Sean McMahon  2:24  
aAlright. And now, you know, speaking of the landscape for capital markets right now, you'll be appearing in about an hour or so, you'll be appearing on the future of options in Europe panel. You want to give us a preview of what some of the key themes of that session might be.

Charlotte Aliott  2:37  
Sure, you know there is. It will be an interesting discussion, because very often people oppose the trend in the US on options with the trend in Europe. But first, there is one thing which is important to say is that the options business in Europe is growing. Our volumes are up by 20% on our equity options franchise across all countries. So it shows that, you know, there is a positive trend in Europe too, and it's also not because the markets operate differently. You know, there is no interoperability on derivatives in Europe compared to the US. But this doesn't prevent competition. You know, we do have a lot of competition on our options segment. And also, you need to realize the options market in Europe is very different. First, the US investor is very different from the European one. And there's not one European investors. There are differences, you know, cultural differences per countries. The US investor is alone to prepare his retirement. He has no pensions from the state, so is going to be naturally more active on financial markets to prepare his future in Europe, the dynamic is a bit different, and there are a lot of differences per countries. For instance, the Dutch, they love options. You know why they love options, why they trade so much? It's because, long time ago, they used to be a minister of education who used to be an ex options trader, and you put options at the program at high school. So the participation of retail in the Netherlands is huge. In France, the people are more going to invest into warrants. It's cultural. And in Italy, people are going to love fixed income and love futures. So you don't have one habit, which is harmonized, you know, across Europe. So this is why the comparison is is complicated, but what we do believe at Euronext is that we are an aggregation, you know, of local exchanges, of course, so we have very tight links with retail communities, and we think it is our duty to accompany the retail investors, especially into derivatives investment. And we are. We have put in place a retail educational program with all the largest retail brokers in the. In Europe, and we do webinars, we do podcasts in four different languages. Soon, five. Soon, we're going to add Portuguese. So it's we really believe it is in our mission and but it's also about putting the right product for retail. So very few days, just to give you an example, a few days ago, we released some mini options. So for instance, we have stocks which are very high nominal like, for instance, LVMH, ASML, they're expensive for retail. And so we have put in place many options for them, you know, to access these contracts more easily. And you know what we launched, I think it was two weeks ago. We have more than 70,000 lots traded. And we're going to add many options on German names on the 23rd if I'm right, yeah. 

Sean McMahon  5:46  
So okay, well, I like what you're saying about how your next is trying to serve so many different segments of investors across European markets, four languages of podcasts, maybe five. I got to see I'm jealous of that. Some people say I struggle to do a podcast in one language. So tell me a little bit more about what you and the team at Euronext are seeing. You know what's next? What's coming around the road? Any any new products you're offering? You mentioned a couple that you've just put to market, and maybe one coming out next week. But you know, what else are we looking at, maybe a few months away? 

Charlotte Aliott 6:15  
Well, we are transforming. So it's important to say that, you know, we we acquired the group, or say, italiana recently, a few years ago, and we have internalized clearing. So this gives us way more agility to look to some other asset classes. But we have also acquired some markets which are booming. It's the markets of MTS and mots market the cash bonds markets. So it made us thanks to clearings, thanks to that, it makes us very credible to develop into the fixed income derivative space. And we are going to launch in September, a range of products which doesn't which don't exist. They don't even exist in the US. We're going to put mini futures on govis So a mini Oh 80, the French debt, mini BTP, the Italian debt, mini Bund, the German debt and mini bonus, the Spanish debt. And we are going to put this contract in retail size. So it's 25k cash settlement, to make it easy, you know, to integrate. And we are going to connect at day one six retail brokers. We have market makers ready, and this is very important, because we are growing the pie. We're putting a new product on the market. We're just not attacking this segment, doing what our competitor is doing, and copy paste and do it less expensive. Now we're bringing really something new. And it's not only a retail story, it's going to be a buy side story. Because, you know, a lot of the buy side firms, they don't only manage large funds. Sometimes they have lower exposure to manage, and they need to wait to pile up the interest so that they can, they can, after access the market with our products, they will be able to trade straight away. So we extreme. We believe in this innovation. We are leveraging retail to initiate liquidity, but it goes way beyond retail, and very excited about this diversification. 

Sean McMahon  8:03  
So... Mini govies, yes, wow, there's, there's people on, on the US side of the pond that believe in, you know, smaller government. I guess that's another way. Mini govy contracts. I like that. Well, hey, listen, Charlotte, I know this is a busy couple of days for you, and I really appreciate you taking the time, especially ahead of your panel. So thank you very much.

Charlotte Aliott  8:20  
 Huge thanks. Thank you for having me. 

Sean McMahon  8:23  
Okay, well, that's all for now. Be sure to follow this podcast feed for more episodes from the International Derivatives Expo hosted by the Futures Industry Association.