Investor’s Guide to the Paris Stock Exchange – Euronext Paris
Known through history as the Bourse de Paris or simply the Paris Bourse, the Paris Stock Exchange is France’s largest stock exchange and since the turn of the Millennium it has been known as Euronext Paris, one of several consolidated exchanges that are included in the pan-European marketplace under the Euronext banner. There are several financial instruments that are traded actively on the Euronext Paris marketplace, which include indices, equities, commodities, bonds and derivatives. The exchanges that are part of Euronext, as well as the Paris Stock Exchange, are based in London, Lisbon, Amsterdam and Brussels. There are over 1300 companies which are listed on this integrated electronic exchange, and this makes it Europe’s biggest capital market. The Paris marketplace’s vitality is usually measured by the way the CAC 40 equities index is performing. Under the management of Euronext Paris, this index is representative of the forty biggest equities which are listed on the exchange in term of their market capitalisation and liquidity. All trading and investment operations that are conducted by Euronext Paris are under the domestic regulation of le Comite des Etablissements de Credit et des Entreprises d’Investissement (CECEI), the Autorite des Marches Financiers (AMF), the French Ministry of Economics and the banking commission. The Euronext exchange is enormous in size, and by consolidating the European independent markets in a single universal marketplace, Euronext has managed to become one of the strongest global trade leaders. The Paris Stock Exchange always seeks to offer traders the latest cutting edge trading platforms and services to its investors and is part of a pan-European exchange which is acting as a gateway for international companies to access European investment communities as well as a support base for the European economy as a whole.
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The History of the Paris Stock Exchange
The start of the 19th century saw the inception of the Paris Bourse and also the beginning of a new era in the French financial market. While there were some similarities to the monopolistic, old style Parisian marketplace, the Paris Bourse was considered a public place where securities trading could take place. While its inception did not give the French people access to unfettered free trade, it was representative of a financial reform movement taking place through the country. The Paris Bourse was based in an elaborate building called the Palais Brongniart which was finished in 1826 and which housed trading activities on the exchange for a century and a half. During the 1980s, the Paris Bourse underwent a period of reform, with computer systems being integrated into its trading operations in an attempt to gain back business which had been lost to London’s stock exchange. While the Paris Bourse’s trading system had been the open outcry method, in 1989 this system only remained in a very limited capacity, with the exchange becoming entirely electronic in 1998. The four major French financial institutions underwent a merger and comprehensive restructuring in 1999, with the MATIF SA, the SBF, the Societe du Nouveau Marche and the MONEP SA being consolidated in a single new company, known as the Paris Bourse SBF SA. This new formation allowed all kinds of trading activities that encompassed bonds, derivatives, stocks and commodities to be available at a single exchange. In 2000, the Paris Bourse officially ended its role as the country’s independent marketplace, with the new Paris Bourse SBF SA merging with the Brussels and Amsterdam exchanges to form the very first pan-European stock exchange. This eventually became known as the Euronext N.V. The Euronext exchange offered completely integrated electronic trading for traders as well as giving access to various markets including commodities, derivatives, debt and equities. 2007 saw the merger of the New York Stock Exchange (NYSE) with the Euronext exchange forming an entity called NYSE Euronext which was widely regarded as a way of creating a global marketplace to promote international trading of debt instruments, derivatives and equities.
The Indices and Structure of the Paris Stock Exchange
There are three distinct sections of the French equities market. These include:
- The Premier Marche – once known as the Official List, this section includes big foreign and French national companies as well as the majority of Bond issues.
- The Second Marche – this section lists mid-sized companies.
- Nouveau Marche – this list features rapidly expanding start up companies which are looking for more capital in order to finance their expansion and which are linked to the European equity growth market Euro.nm.
- There is also a 4th market, called Marche Libre, however this is not regulated and is administered by Euronext Paris to handle transactions in securities that are not listed on any of the other 3 markets.
There is also a family of different indices that are calculated by Euronext Paris:
- CAC 40 – The benchmark index of the Paris Stock Exchange is the CAC 40, which is in real time. This index is representative of a capitalisation weighted measure of the top 40 significant values from the highest 100 market caps on the Euronext Paris exchange.
- SBF 120 – All of the components of the CAC 40 are also included in the SBF 120 Index which is rather broader and is recognised as an investment funds benchmark.
- SBF 250 Index – this is a long term performance benchmark for equity portfolios and which includes the entirety of the SBF 120 index in a structure which is determined by sector.
- The MIDCAC Index – this is another important index which includes one hundred of the Premier Marche and Nouveau Marche’s most liquid mid-sized stocks, and this index is calculated on the basis of closing and opening prices, standing as a benchmark for funds.
- The Second Marche Index – like the MIDCAC, this index is also a benchmark for funds.
- The Nouveau Marche Index – this represents stocks which are in the growth market
- SBF-FCI – an index which has its basis on a convertible bond selection representing a minimum of 70% of this market’s total capitalisation, calculated twice per day.
Other educational materials
- Dow Jones Industrial Average
- FTSE 100 Index
- FTSE AIM All-Share Index
- FTSE All-Share Index
- Japanese Exchange Group (JPX)
Recommended further readings
- A blue chips index for the Paris stock exchange, 1854–2007.” Le Bris, David, and Pierre-Cyrille Hautcoeur. “A challenge to triumphant optimists? Financial History Review 17.02 (2010): 141-183.
- “Centralised order books versus hybrid order books: A paired comparison of trading costs on NSC (Euronext Paris) and SETS (London Stock Exchange).” Gajewski, Jean-François, and Carole Gresse. Journal of Banking & Finance 31, no. 9 (2007): 2906-2924.