A proposal to set up a joint equity liquidity pool between Deutsche Börse and Euronext has been rejected by the Paris-headquartered exchange, according to Theodor Weimer, CEO of Deutsche Börse.
“We would like to do more IPOs on the startup side,” Weimer said in a Nov. 8 call to reporters. “What we need to do is create a deeper liquidity pool in Europe. We tried, I contacted Euronext, but they decided to go their own way.”
Weimer said talks about a joint venture were only preliminary, but the idea of the proposal was to create a larger pool of liquidity to make Europe a more attractive stock market destination.
“I made the suggestion and the other side wasn’t interested, which is a fair statement,” Weimer said. “It is not clear whether a joint venture would be the solution, but it would at least be an interesting alternative.”
He estimated that investments in the tens of millions would have been required to get the platform off the ground.
A spokesman for Deutsche Börse said the planned joint venture aims to help attract technology IPOs to Europe. They did not give a date for the talks with Euronext, but said they were not “current”.
A Euronext spokesperson said the exchange’s operating model was already based on “a single pan-European liquidity pool, a single technology platform and a single order book for all Euronext countries under the same EU regulation.”
“This integrated European model is the framework for an integrated liquidity pool,” the spokesman said.
Both Euronext and Deutsche Börse, along with a dozen other European exchanges, are currently part of another joint venture seeking to become providers of a golden trading data source – a so-called consolidated tape.
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As the IPO drought continues this year, both the UK and Europe are looking at ways to make their markets more competitive for IPOs.
“It’s very hard to compete with the larger liquidity pools in the U.S.,” Weimer said. He added that some companies are not even talking to Deutsche Börse because a decision to list in New York has already been made.
A fresh start
On November 7th, Deutsche Börse presented a new strategy with which it wants to reduce its revenue dependence on trading and related services.
By 2026, Deutsche Börse wants to generate a quarter of its revenue from its data and software business.
In 2017, the data and analytics division accounted for 5% of the exchange’s revenue. With the acquisition of Axioma in 2019 and SimCorp this year, the unit – renamed the Investment Management Solutions Business – has grown to 17% and the exchange expects that share to reach 25% by 2026.
“We are now able to offer comprehensive end-to-end tools for the asset management industry,” said Weimer.
For 2023, Deutsche Börse expects total sales of around 5 billion euros, which will reach 6.4 billion euros by 2026.
Diversification away from trading fees is an industry-wide trend. Earlier this year, the London Stock Exchange said more than three-quarters of its revenue came from subscription services such as its data terminals.
Euronext said in its first-half 2023 earnings release that 61% of its revenue came from non-volume business.
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