Trading of ISEQ Titans returns to Dublin

One year ago this month, the trading activity of Irish listed companies was migrated to Optiq, Euronext’s flagship trading system.

The transition marked the completion of the integration of the Irish Stock Exchange into the Euronext ecosystem — as well as a new beginning for Irish investors and companies.

Almost overnight, the number of investment firms trading Irish equities doubled; Dublin now has 47 member firms, and this increased exposure, visibility, and access to European investor capital has fundamentally transformed the way Irish plcs are traded and funded.

In fact, since migrating to Optiq, we have seen the ISEQ market share increase relative to all other European markets (at the expense of market share on the London Stock Exchange and on Multilateral Trading Venues).

To bring these changes to life, we have outlined two case studies below that capture the evolving landscape of European equities at an individual company level:

CRH plc

CRH has long been a darling of the Irish equity markets. And in the past year, the trading activity of the CRH stock has undergone a quiet transformation.

Prior to the past year, the London Stock Exchange was the dominant centre of liquidity. As illustrated in the chart below, however, since joining Euronext’s Optiq, CRH’s liquidity profile has completely flipped, and Dublin is again the home of CRH liquidity.

When we look at the displayed trading volume (that which contributes to price formation and price discovery) the market share on Euronext Dublin has increased from 30% to 44%.

And crucially, this divergence in volume distribution has held steady since the middle of the year.

Smurfit Kappa Group plc (SKG)

A similar story can be said for another of the ISEQ titans, SKG. A year ago, the majority of Smurfit’s liquidity was distributed evenly between London and Dublin. Again, we see a steady and dramatic divergence of liquidity distribution since the middle of the year, and again in Dublin’s favour.

In the SKG case, the percentage of displayed turnover on the Dublin market has more than doubled, growing from 23% to 53%.

How have we done this?

There are a multitude of factors for these changes, such as the evolving membership profile of trading firms, Brexit, pricing structures etc. but perhaps the most dominant factor is the fact that CRH and SKG were two of the first firms to be rolled into our SLP (Supplementary Liquidity Provider) scheme.

Our SLP scheme is Euronext’s flagship liquidity supply programme for large cap stocks. Launched in 2009, the programme is designed to attract and defend liquidity in Euronext stocks, with a particular focus on Blue chip securities.

In each of the 113 stocks currently in the programme, we have offered 5–10 electronic liquidity providers discounted fees and rebates to encourage certain types of trading behaviours. The behaviours include:

• Presence requirements (measuring the time during which an SLP participant is present in the order book with a minimum quantity threshold — to guarantee uninterrupted provision of liquidity)
• Market Quality Requirements (to guarantee that Euronext offers the best prices and is the venue of choice for best execution.)
• Volume Requirements (both in terms of passive and total European market share — to guarantee a stable amount of liquidity provided by each of the electronic liquidity providers)

What’s next?

Of course, we are just 12 months into trading on Euronext’s Optiq, and these initiatives represent the first steps of progress for the Dublin market.

In addition to adding more ISEQ companies into the SLP scheme, we are working on multiple large-scale innovations for the Debt, Funds and ETFs business — for which Dublin serves as Euronext’s group centre of excellence. We plan to launch these later this year.

Lastly, to encourage more IPOs, we are scaling up our market-leading work with private companies and expanding the Dublin #IPOready programme to other European markets. Our 2020/21 programme will be open for applications in April — keep an eye out at www.euronext.com/ipoready. And we are also excited to announce that we will be increasing our local advocacy efforts with a partnership with the fantastic Scale Ireland team.