What Is Paris Stock Exchange?
Now part of the NYSE Euronext group, the Paris Stock Exchange trades both equities and derivatives and posts the Consumer Advisory Council or CAC 40 Index. The CAC 40 index is made up of notable French companies although nearly half of these are now owned by foreign entities. NYSE Euronext boasts the most modern and advanced trading platform and services available to traders in France.
- The Paris stock exchange, or bourse, dates back to the 18th century where French stocks are publicly traded.
- In the 2000s, the Paris bourse became a founding member of Euronext along with exchanges in Amsterdam and Brussels.
- Euronext subsequently merged with NYSE, the parent company of the New York Stock Exchange.
Understanding the Paris Stock Exchange
The Paris Stock Exchange is part of a rich history. Indeed, it is considered by many to be the first continental European integrated stock exchange. The exchange was first incorporated in 1724 as the Paris Bourse. In 1826, the open-outcry exchange moved to a palacial building known as the Palais Brongniart, where it remained for the next 150+ years. In the 1980s, the exchange began plans to integrate electronic trading in a bid to compete with the London stock exchange in the U.K.
Euronext was subsequently created in 2000 when the Paris, Brussels and Amsterdam exchanges all merged. The addition of the Lisbon Stock Exchangein Portugal followed later.
In order to trade on major exchanges, companies must compete listing agreements with the exchanges themselves. They must meet certain criteria; for example, in 2018 the NYSE has a key listing requirement that stipulated aggregate shareholders equity for last three fiscal years of greater than or equal to $10 million, a global market capitalization of $200 million, and a minimum share price of $4. In addition, for initial public offerings and secondaries issuers must have 400 shareholders. Other major exchanges include the Tokyo Stock Exchange or TSE, the New York Stock Exchange (NYSE), the Nasdaq, and the London Stock Exchange (LSE).
The CAC 40 Index
CAC 40 stands for Cotation Assistée en Continu, which translates to continuous assisted trading, and is used as a benchmark index for funds investing in the French stock market. The index also gives a general idea of the direction of the Euronext Paris, the largest stock exchange in France formerly known as the Paris Bourse. The CAC 40 represents a capitalization-weighted measure of the 40 most significant values among the 100 highest market caps on the exchange. The index is similar to the Dow Jones Industrial Average in that it is the most commonly used index that represents the overall level and direction of the market in France.
The CAC 40 index represents the 40 largest equities listed on the Euronext Paris in terms of liquidity, and includes such companies as L’Oreal, Renault, and Michelin.
An independent steering committee reviews the CAC 40 index composition quarterly. At each review date, the committee ranks companies listed on Euronext Paris according to free float market capitalization and share turnover in the previous year. Forty companies from the top 100 are chosen to enter the CAC 40, and If a company has more than one class of shares traded on the exchange, only the most actively traded of these will be accepted into the index.
Other Euronext Exchanges
The Amsterdam stock exchange was founded in 1611 and was the first of its kind. It began when the shipping company Verenigde Oostindische Compagnie sold shares to finance its operations. After the major merger in 2000, one year later the Euronext group acquired the London International Financial Futures and Options Exchange. In May 2006, NYSE Group entered a merger agreement with Euronext for $10 billion.
Further developments came in 2008, when NYSE Euronext developed its Universal Trading Platform, which was an electronic trading platform for bond, equities, options and futures. NYSE Euronext launched Euronext London in 2010; this was formed to attract international issuers. Although in 2010 Deutsche Börse obtained approval from U.S. antitrust authorities to acquire NYSE Euronext for US$9.53 billion; in December 2011, the European Union blocked the deal. The merger would have create the world’s largest multi-market trading exchange. Despite these antitrust concerns in 2013 Intercontinental Exchange (ICE) acquired NYSE Euronext for $8.2 billion. ICE then split NYSE Euronext operations into its London and continental European operations and launched a public offering of a newly formed Euronext N.V. in June 2014 with an initial price of €20 each to raise US$1.9 billion.
After the IPO a consortium of 11 investment groups (“reference shareholders”) took major stakes in the company in order to stabilize it. These were Euroclear, BNP Paribas, BNP Paribas Fortis, Société Générale, Caisse des Dépôts, BPI France, ABN Amro, and ASR. They owned 33.36% of Euronext’s capital and agreed to maintain a three-year lockup period during which they could not sell their holdings. Together, this group maintains three seats on the nine-member board.