Euronext reports poor Q1 metrics for FX business

abdelaziz Fathi

Euronext, which operates the biggest pan-European exchange, has published its results for the first quarter of 2023.

Q1 2023 underlying revenue came in at €372.3 million, down 6 percent from €397 million the previous year, illustrating the weak performance of non-volume related business and lower revenue capture.

Trading revenue in 2022 was down by 23 percent on a yearly basis at €72 million, primarily driven by softened volumes against the exceptionally strong Q1 2022. Equity market share was sustained at 63.8%. Cash revenue capture averaged 0.48bps, negatively impacted by larger average order size.

Euronext confirms its floor of cash equity trading average market share greater or equal to 63%, and revenue capture around 0.52bps following the migration of Borsa Italiana cash markets to Optiq®.

During the first quarter of 2023, derivatives trading volumes decreased across the offering with average daily volume on financial derivatives at 595,702 lots, down -20.0% from Q1 2022. The exchange operator attributed the poor performance primarily to a decrease in equity individual derivatives trading reflecting the exceptionally strong volumes in Q1 2022 and uncertainties around fiscal treatment of dividend in France.

However, Euronext revenue capture on derivatives trading was €0.34 per lot for the first quarter of 2023, reflecting a positively geared volume mix and solid revenue capture.

Meanwhile, post-trade revenue fell by two percent to €94 million due to lower clearing activities of its Italian units and Euronext’s diversified business model. In a different vein, custody and settlement revenue scored the best quarter in Euronext’s history with revenue of €64.0 million (+0.1%) supported by new fee schemes.

Also on the positive side, Euronext’s fixed income trading revenue grew by +7.0% to €26.2 million in Q1 2023, supported by market volatility and elevated interest rates, as well as continued client adoption of MTS’ electronic trading solutions. For the first quarter of 2023, MTS Cash reported €16.0 million of revenue and MTS Repo reported €6.4 million of revenue.

Euronext said the transaction with the Milan-based stock exchange helped diversify its business mix into new asset classes, and strengthened its post-trade activities. In addition, it gave the exchange a clearinghouse for the first time, as well as a securities depository and bond platform.

Other business highlights show that non-volume related revenue accounted for 58 percent of the group’s total revenue in 2022, and covered 141% of underlying operating expenses, reflecting a solid year for non-volume related business.

The pan-European exchange posted €218 million in adjusted EBITDA, helping it earn €96 million in profit for the period, which was lower by 33 percent YoY.

On the FX business front, Euronext reported an average daily volume on its spot foreign exchange market at $21.0 billion for Q1 2023, down 14.4 percent compared to a year ago. The spot foreign exchange division yielded €6.3 million in revenues, down 12 percent from €7.2 million in Q1 2022. On a like-for-like basis at constant currencies, FX trading revenue was down -15.6% in Q1 2023 compared to the prior year.

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