European volumes are closer to the US than they appear.

A widely held belief in global finance is that the US equity market reigns supreme in terms of liquidity, surpassing other markets by a wide margin. By contrast, European markets are often viewed as secondary. However, upon closer examination of equity flows in both regions, and taking into account the complexity associated with the concept of liquidity, the presumed dominance of the US in equity liquidity is not as clearcut as it might seem.

Executive summary

• At aggregate level, the Average Daily Value Traded (ADVT) in US looks 4.4x higher than in Europe (€288bn vs €65bn in 2023) combining all companies above €250m market cap.
• However, the liquidity gap is driven mainly by the 79 Mega-Capitalisation stocks in the US which account for over 50% of US turnover, while Europe has only 20 Mega-Caps listed.
• When measuring the value traded relatively to the different market capitalisation segments, the ADVT per single company yields interesting results:
  
  - Average Large-Cap stock has ADVT of €146m in US vs €116m in Europe (only 1.3x gap)
  
  - Average Mid-Cap stock has ADVT of €23m in US vs €12m in Europe (only 2.0x gap)
• Turnover Velocity metrics (value traded divided by market capitalization) also confirm the robust liquidity in Europe compared to the US.

Methodology

•  Market capitalisation segments are categorised as follows:
  
  - Small-Caps: €250m ≤ market capitalisation < €1bn
  
  - Mid-Caps: €1bn ≤ market capitalisation < €5bn
  
  - Large-Caps: €5bn ≤ market capitalisation < €100bn
  
  - Mega-Caps: €100bn ≤ market capitalisation
• Market capitalisation data is sourced from independent data provider Bloomberg.
• Market capitalisation data is the average total market cap (not the free-float market cap) for the year 2023 from Bloomberg using the following formula: BDH (Company Ticker, "CUR_MKT_CAP", "1/1/2023", "12/31/2023", "Currency", "EUR", "Period", "CY").
• Turnover data is taken from 1 January 2023 to 31 December 2023.
• Turnover data is sourced from independent provider BMLL Technologies, and is aggregated to cover all value traded in 2023. This data includes On-Book, Off-book, On-exchange, OTC, SI, Dark and Auctions turnover.
• In this study, ‘Europe’ is understood to mean the companies listed on the following European markets: all Euronext Markets (Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo, Paris); Deutsche Börse; Bolsas y Mercados Españoles; Nasdaq Nordic (Stockholm, Helsinki, Copenhagen); London Stock Exchange. The ‘US’ is understood to mean the companies listed on the following US markets: Nasdaq; New York Stock Exchange.
• All data has been harmonised to € to provide a relevant comparison.

Download Equity Liquidity Analysis - Demystifying the liquidity gap between European and US equities

How can you find today's daily index options and their quotes, and what is the logic behind the rotation?

The daily index options available for trading rotate on a daily basis. With daily options each trading day becomes an expiry day. This means that the trading codes of expiring options also change on a daily basis.

Daily index options on the AEX and CAC 40 Index complement the weekly and monthly options

Index options are primarily listed and traded on a monthly basis, and sometimes on a weekly basis. The daily index options fill up the remaining trading days. The combination of monthly, weekly and daily options makes each trading day an expiration day.

For example: the weekly option expires on a Friday. Euronext will add daily options with expiry on Monday-Thursday to have full coverage on each day of the week.

A weekly or monthly option that is within one day from expiry will show the same characteristics and usage as a daily option that is listed on the day before its expiry. However, market conditions could differ slightly, as the number of traded contracts, open positions and active trading parties may be larger on monthly expiries. This is even more likely if the monthly option originates from a quarterly or annual rotation.

Covering all days of the month as expiry days using daily, weekly and monthly options

Each daily option has the corresponding number of the day inserted in its chain logic. Listed and traded dailies correspond with Euronext trading days whereby options are made available on the trading day before expiration. We do not issue daily options for the expiry dates of weekly and monthly options.

Provided that the day is a normal business day and that no other monthly or weekly index option expires on that day:

• the option class with symbol P1 expires on the first calendar day of a month;
• the option class with symbol P2 expires on the second calendar day of a month;
• the option class with symbol P3 expires on the third calendar day of a month, etc.

The codes return on a monthly basis, and will be used in each specific month if the corresponding day is a trading day. For example, the 28 March contract will use the code P28, the same code that was used for the 28 Feb contract. For the Paris CAC 40 daily index options, the full coverage of all trading days includes:

Monthly option

PXA expires third Friday of the month*

Weekly options

1PX expires first Friday of the month*

2PX expires second Friday of the month*

4PX expires fourth Friday of the month*

5PX expires fifth Friday of the month*

^{* In the event that the third Friday is not a business day, the Last Trading Day shall normally be the last business day preceding the third Friday.}

All other days

As explained, the remaining days in the month are filled with the daily options based on the calendar date.

The first day of trading of a daily option class is the first normal business day preceding the expiry day.

Exchange contract code

Available exchange codes for daily options are

P1, P2, P3, P4, P5, P6, P7, P8, P9, P10, P11, P12, P13, P14, P15, P16, P17, P18, P19, P20, P21, P22, P23, P24, P25, P26, P27, P28, P29, P30, P31.

Only the relevant calendar days will be released for trading. Calendar days that represent a day on a weekend, bank holiday, or are covered by a weekly or monthly option will not be activated for that month.

All trading codes and links to the related instrument pages for both the AEX index and CAC 40 index daily options can be found in the table below.

A few examples:

• For September 2024, the first calendar day is a Sunday. The first daily expiring option is therefore P2 on Monday 2  September. P2 is listed and starts trading on Friday 30 August. The rest of the first week of September is covered by P3, P4, P5, and on the Friday by 1PX (the weekly option).
• For October 2024, the P1 contact will expire on Tuesday 1 October. P1 is listed and starts trading on Monday 30 September. The rest of the week will be covered by P30 for the preceding Monday, P2, P3, and on the Friday by 1PX (the weekly option).
• For November 2024, the first calendar day is a Friday. This day is covered by 1PX (the weekly option).

Links to the instrument pages

Contract lists on our website

Paris      Amsterdam

Capital Market Union – the role of capital markets

The existence of strong and liquid capital markets supports the growth of the European 

economy. It provides access to capital markets for issuers, including SMEs, providing 

reliable price formation and risk management. Capital market financing also supports 

and adds discipline to the transformation to a green and digital economy. Public 

markets are one of the major transmission tools towards greater sustainability and 

digitalisation, encouraging best practices in corporate governance, the 

internationalisation of companies, transparency, and environmental stewardship.

Capital markets can also promote a broader investor culture and a more efficient 

pension system. By easing pressure on public finances through improved risk-sharing, 

public markets play a vital role in societal wealth creation and can complement public 

pension systems.

As a true pan-European financial markets infrastructure provider across trading, 

clearing and settlement, Euronext helps overcome issues of fragmentation, 

providing benefits to investors and issuers alike. After Euronext migrated the trading 

of Italian securities on its proprietary technology platform in 2023, investors and 

issuers can now benefit from a single liquidity pool with an aggregated market 

capitalization of more than € 6.5 trillion. In 2023, c. 24% of European equity flows 

have been traded on the Euronext platform.

Addressing market fragmentation

Consolidation should be encouraged in Europe across the value chain and across asset 

classes. Financing the European economies is a critical industrial capability, and the 

next Commission must focus on creating a favorable environment for further 

consolidation opportunities to emerge.

Exchanges and post-trade infrastructures have played a large part in furthering the 

CMU. Euronext has spent considerable efforts in connecting capital markets by way of 

consolidating orderbooks, forming one single liquidity pool for markets and is 

promoting harmonization of its CSDs through its Euronext Securities projects. It is 

important to note that consolidation efforts are individual strategic business decisions 

that respond to economic realities and growth prospects. Any further consideration of 

consolidation steps should go hand in hand with a recognition of exchange groups and 

strengthening of the harmonised regulatory framework to allow exchanges to operate 

in a consolidated manner. This is a necessary precondition for companies to decide on 

consolidation steps in a commercially reasonable manner and to respect their 

shareholders’ interests.

It should furthermore not be forgotten that consolidation alone is not the silver bullet. 

Divergent applications of European rules across its European markets must be 

addressed. We must progress towards a single set of rules, enforced by a single 

supervision authority which will reduce complexity. This requires the phasing-out of 

national exemptions and domestic ‘goldplating’ of EU regulations, and an empowered, 

and necessarily reformed, European Securities and Markets Authority.

Priorities for the next mandate

The next mandate should focus on:

1. Implementation and assessments of the result: It is critical to advocate for a legislative pause and focus on implementation, especially where it regards recently agreed packages on the ESG front and the digital area.
2. As a general principle, newly proposed regulation and supervision of financial services should incorporate the following key elements:
   1. A systematic "competitiveness test" with a clear assessment, before introducing new rules, whether such new rules will weaken or strengthen European companies and beyond the European strategic autonomy.
   2. Simplification as an overarching approach encompassing simple access to markets, simple listing rules, convergence in supervision.
   3. Maximum harmonization.
3. Regulatory and supervisory simplification. A focus is needed on necessary adjustments to facilitate the ability of European financial market infrastructure to deliver positive and harmonised outcomes for the real economy and citizens. The current complexity prevents value creation commensurate with the potential of European economies. In this respect we see two options:
   1. We believe we should work towards ESMA supervision as the single regulator. Pan-European groups should transition under a single supervision authority to ensure a true level- playing field with subsidiaries of global financial firms operating from a single country
   2. In the interim, whilst taking steps towards this goal, we need to tailor the regulatory regime applying to exchanges taking steps to acknowledge the concept of a group of exchanges operating in more than one country in the EU. The condition for these exchange groups to fully operate on a consolidated basis is the need for a true single rulebook, no local gold-plating and fully harmonized supervision. The consolidated groups should be allowed to organise the group and its functions as if it were one legal entity. Only then can financial market infrastructures create full value and efficiency. This requires a mindset change where national supervisors look for the interests of the total markets across the borders of their own jurisdiction.
4. Incentivize public and private savings into equity markets. Europe has a prevailing culture of risk aversion and overall lacks a vibrant equity culture. The bias towards debt and bank financing, coupled with an abundance of retail bank savings, creates a climate of cautious investment. European households hold €10 trillion in cash within their bank accounts, and fewer than 10% of them are actively engaged in direct equity holdings¹. This risk aversion not only limits the diversity of investment portfolios and the resilience of pension systems but also contributes to a scarcity of early-stage funding for innovative ventures, hindering the growth of startups. Measures like a revamped equity fund or debt-equity bias reduction allowance would help channel these savings into listed equity and provide solid returns for citizens.
5. Learning from experience and best practices will be key to encourage retail investor participation. In this sense, the Retail Investment Strategy (RIS) proposal could offer a unique opportunity to increase retail investors’ participation in EU capital markets. We suggest reconsidering the current proposals moving beyond discussion on costs and risks and consider the true  purpose here: provide and promote retail access to capital markets and focus  on a more investor-centric approach that looks into the goals and strategies of retail investors, their behaviour, risk appetite and their investment priorities. 
   
   We need to take a balanced approach that takes into account investor protection concerns while incentivise retail investor participation in capital markets and their access to a diversified product offering, through (i) a  harmonized treatment of retail investors across Member States, (ii) a roll-out of systematic financial literacy training and (iii) measures to incentivise research coverage to improve transparency on listed companies.
6. Tap into long-term saving plans through tax-efficient saving schemes – including capital gains, income, and inheritance tax exemptions – which promote investment in European companies and a diversification of assets to balance risk with their time horizon. These plans should have simple eligibility criteria and include a proportion of investment in European public equities, to address the global mandate of investors and the rise of passive investments.
7. Supporting cross-border investments: the EU needs to prioritize crossborder investments as a key objective and facilitate financial market infrastructure in their consolidation. Challenging areas that require regulatory harmonization should finally be addressed, notably insolvency laws and remaining required adjustments to the post-trading regime.

Download memo CMU 2.0 priorities

¹ <sub>ECB,

https://www.ecb.europa.eu/pub/pdf/scpsps/ecb.sps46~3563bc9f03.en.pdf?0a…</sub>