Paris Stock Exchange (PAR)

What Is the Paris Stock Exchange (PAR)?

Now part of Euronext N.V., the Paris Stock Exchange, officially Euronext Paris, trades both equities and derivatives and posts the CAC 40 Index. The CAC 40 index is made up of 40 notable French companies with the highest market caps.

Understanding the Paris Stock Exchange (PAR)

The Paris Stock Exchange is part of a rich history of financial exchanges. 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 palatial 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 Exchange in Portugal followed later.

In order to trade on major exchanges, companies must complete listing agreements with the exchanges themselves and they must meet certain criteria. Depending on the specific market that a company intends to be listed, such as Euronext versus Euronext Access, different criteria must be met.

For Euronext, a company must have a free float that is greater than 25% of its market cap or 5 million euros, three years of audited financial statements, and follow IFRS accounting standards.

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 Euronext Paris.

The CAC 40 represents a capitalization-weighted measure of the 40 most significant values among the 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 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 1602 and was the first of its kind. It began when the shipping company Verenigde Oostindische Compagnie (Dutch East India Company) sold shares to finance its operations. After the major Euronext merger in 2000, one year later the Euronext group acquired the London International Financial Futures and Options Exchange. In 2006, NYSE Group entered a merger agreement with Euronext for $9.9 billion.

Further developments came in 2008 when NYSE Euronext developed its Universal Trading Platform, which was an electronic trading platform for bonds, 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 approximately $10 billion, in 2012, the European Union blocked the deal. The merger would have created 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 $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.