Euronext announces September 2022 quarterly review results of the AEX® Family
Sustainable Finance: The Italian Sustainability Week of Borsa Italiana kicks off today
The Settlement Discipline Regime (SDR), a key requirement of the CSDR
The Settlement Discipline Regime (SDR), a key requirement of the CSDR, came into force on February 1, 2022.
During the time preceding this date, Euronext Securities Porto provided information to their clients, promoted the dialogue and sharing with the Market and implemented, in its systems, the essential functionalities for the entry into force of this new regime.
The SDR will promote the operational efficiency of CSDs and thereby contribute to a timely and efficient settlement within the EU.
Under this regime, INTERBOLSA has been:
- Introducing a set of rules and procedures in order to encourage the settlement of transactions on the intended settlement date;
- Adopting a range of measures to prevent settlement fails;
- Analysing the measures foreseen in the CSDR to address settlement fails;
- Promote the dialogue and sharing of relevant information on the subject, with the Market;
- To provide its Participants with the essential functionalities for the entry into force of this new regime in February 1, 2022.
From Basildon to Bergamo: completing the Euronext Data Centre migration
On 6 June 2022, Euronext completed one of the most ambitious projects in its history – relocating its Data Centre from Basildon, UK to Bergamo, Italy in just 14 months. In this article, we look at the key drivers behind the Euronext Data Centre migration project and how the new Core Data Centre will benefit Euronext clients and the environment.
The Euronext Data Centre is Euronext’s core markets system, so moving it to a new location, let alone a new continent, is not a decision that’s taken lightly, as Nicole Agopian, IT Relationship Manager at Euronext, explains. “The Data Centre is the most important system for an exchange. It’s where all the trading happens. It also houses the matching engine, which is where we match all the buy and sell orders we handle as an exchange, plus all the supporting applications.”
And the move had implications beyond Euronext’s trading operations. “We offer colocation to major clients. So, moving our data centre meant they had to move their systems and hardware as well,” Nicole Agopian says.
Partnering with clients to make the move happen
To make the Core Data Centre relocation happen, with as minimal disruption as possible, Euronext worked closely with clients throughout the 14-month period. “This was a very complex, technical migration, and it involved a lot of work for our internal teams and our clients. We had over 800 calls with our clients, dozens of webinars, three dress rehearsals and a migration weekend,” relates Nicole Agopian. “We needed to test every inch of the installation, and all of this happened in parallel to running day-to-day trading.”
While the move required a significant investment of time and resources, it also afforded Euronext clients an opportunity to re-evaluate their own technical infrastructure. “Our clients choose colocation because they want to trade as quickly as possible. By placing their servers close to ours, they can shave nanoseconds off transmission time and get market data as quickly as possible,” Nicole Agopian explains. “Moving the Data Centre prompted clients to think about their equipment and presence and see if their current set-up still met their needs, or if there was room for improvement.”
The move’s timing was also designed to make things easier for clients. “We’re migrating the Borsa Italiana equity and derivatives markets to Optiq®, our trading platform, in 2023[1]. Now that we’ve already migrated the Data Centre, this saves our clients from having to migrate both to the new technology and our Data Centre at the same time.”
Future-fitting Euronext’s trading operations
With so much work involved, the reasons for the Data Centre migration would have to be compelling. And they were, as Nicole Agopian explains. “There were several drivers behind this decision. One was Brexit. While the EU hasn’t yet stipulated that exchanges must have their Data Centres within the Union, we knew it was a distinct possibility. And when we acquired Borsa Italiana in 2021, we had a unique opportunity to benefit from their existing infrastructure and relocate our Data Centre to within the European Union.”
The move now means that Euronext has insourced its entire infrastructure, including colocation services. “Now that we’re no longer dependent on other providers, we can really take control of our processes and drive innovation throughout our organisation,” Nicole Agopian says. This independence benefits Euronext’s clients as well. “We’re also free to develop our own colocation offering, so we can work with our clients to develop a service that meets their needs.”
Putting sustainability first – for Euronext and its clients
Another driver behind the decision was the location itself – the Aruba Global Cloud Data Centre. The facility’s buildings are powered entirely by renewable energy and produce renewable energy through hydroelectric plants and photovoltaic systems. This makes them the perfect fit for Euronext’s ambitious “Fit for 1.5°” commitment and benefits clients’ ESG performance as well. “Many of our clients are focused on reducing their operations’ environmental impact. For those who choose to co-locate within the centre, they will be running operations from a facility that uses green energy, which will be a major step towards improving their non-financial metrics.”
Clients can also have peace of mind in knowing that their data is housed in a secure, resilient facility. “When we were selecting a new location, we wanted a facility that matched the high standards of the Basildon centre. Our new Data Centre is also a Tier 4 facility, meaning it’s a secure technology ecosystem with a low environmental impact.”
Staying ahead of regulatory initiatives
When designing the new Data Centre, Euronext made sure it was compliant with current and future regulations, such as the MiFID II regulatory technical standards (RTS 10). Previously, the colocation clients with equipment closest to the matching engine could have an advantage because they could receive data nanoseconds before competitors whose equipment was located farther away. RTS 10 requires Data Centres to equalise the process and make sure all clients receive information at the same time.
“When we designed the Data Centre, we wanted to make sure it was compliant with RTS 10,” Nicole Agopian explains. “We commissioned an external audit of the Data Centre cables that link our clients’ cabinets with the matching engine to make sure they all had the same transmission speed. We also went one step further and made sure all cables are equalised. In this way, we make sure all clients have equal access to the same information at the same time.”
One single data centre in 2023
While the Euronext Core Data Centre relocation represents a milestone in meeting Euronext’s ESG strategy and Growth for Impact 2024 strategic plan, the benefits of the new Data Centre are even more far reaching.
“With this migration, we have brought our Core Data Centre, that handles 25% of European trading volumes, back to the EU. We now operate a state-of-the-art colocation facility that’s available to both members and non-members, which will pave the way to develop and offer new services to the financial markets. And we’ve located it in a facility that will help our clients reduce their own carbon footprints,” says Nicole Agopian.
Now that the migration is complete, Euronext is well poised to meet the next goal, which is to have all markets operating from one single Data Centre in 2023 – meaning a simpler set-up for clients across the Euronext markets.
[1] Subject to regulatory approval.
Guide to the latest ESG EU regulatory initiatives
The European Commission published its action plan on sustainable finance in 2018, with the aim of creating a roadmap for sustainable finance across three categories:
- reorienting capital flows toward a more sustainable economy
- integrating sustainability into risk management
- fostering transparency and long-termism.
The European Union has now successfully implemented three major related regulations:
- Climate Benchmarks Regulation (EU 2019/2089) to enhance the transparency and comparability of benchmark methodologies relating to environmental, social and corporate governance (ESG) metrics, providing investors with clarity on the environmental sustainability of their investments.
- Sustainable Finance Disclosure Regulation (EU 2019/2088) to re-orient capital flows towards sustainable investments by increasing transparency by financial market participants and advisers on sustainability risks, whilst ensuring a more uniform protection of end investors.
- Taxonomy Regulation (EU 2020/852) which establishes a harmonised taxonomy to classify financial products as sustainable at EU level, further promoting investments in sustainable activities whilst addressing “greenwashing” concerns.
A range of ESG-related regulatory measures have since been introduced or announced that affect the manner in which companies operate within the European Union. Keeping up with these can pose challenges for companies that must be compliant with the necessary regulations.
Overview of the current and upcoming ESG-related legislation in the EU
|
Legislation |
Overview |
Status |
|
Corporate Sustainability Reporting Directive (CSRD)
|
Amends the reporting requirements of the Non-Financial Reporting Directive (NFRD):
The proposal is not limited to climate and environmental issues, but also to factors related to social and corporate governance, such as equality, human rights and freedom, fair working conditions, business ethics, etc. |
Close to finalisation. Final text subject to European Parliament plenary vote. Application of the CSRD will take place in three stages, depending on type of company. |
|
Aims to set an EU standard for how companies and public authorities can use green bonds to raise funds on capital markets and includes proposals to:
The proposal should improve the ability of investors to identify and trust high-quality green bonds. |
Ongoing. Final stages of discussion between the Commission, Council and European Parliament. Current expectations are that market application would start in either 2024 or 2025, depending on the final compromise text. |
|
|
Proposes a horizontal framework to foster the contribution of businesses operating in the single market to respect human rights and the environment by:
Will affect large EU companies or non-EU companies active in the EU (full scope or targeted scope depending on turnover and number of employees). Small and medium-sized enterprises, including micro-enterprises, are not in scope, but may be impacted as contractors or subcontractors to companies in scope. Companies that have an SME business partner are required to support them to comply with the due diligence measures. |
Ongoing. First discussions in Council and European Parliament on the Commission’s proposals. Application dates will depend on whether a company is in full scope or targeted scope. |
Timeline: Expected EU ESG reporting requirements in currently agreed texts (SFDR, Taxonomy and CSRD)[1].
|
Date |
Action |
|
Q3 2022 |
SFDR: reporting on principal adverse key performance indicators (KPIs) for asset management, insurance and financial advice. |
|
Q1 2023 |
Taxonomy: transitional KPIs on exercise 2022 – NFRD incorporates information on activities listed for public-interest companies’ reporting of their: i) share of turnover deriving from taxonomy-aligned activities and ii) share of CAPEX and OPEX directed to taxonomy-aligned activities. |
|
Q3 2023 |
SFDR: reporting on principal adverse KPIs |
|
Q1 2024 |
CSRD: public-interest companies will have to report KPIs for all 6 environmental objectives (based on 2023 exercise): turnover + CAPEX and OPEX |
|
Q3 2024 |
SFDR: reporting on principal adverse KPIs (with data coming from CSRD) |
|
Q1 2025 |
CSRD: large undertakings will have to report KPIs for all 6 environmental objectives (based on 2024 exercise): turnover + CAPEX and OPEX |
|
Q1 2026/ Q1 2028 |
CSRD: SMEs listed in Regulated Markets will have to report KPIs for all 6 environmental objectives (based on 2024 exercise): turnover + CAPEX and OPEX |
Facing the challenge of keeping up with the regulations
As can be expected when new rules are implemented, there are a number of challenges that firms are encountering when looking to keep up with the EU ESG regulations. These include finding the significant resources needed to compile and report the relevant information and metrics to monitor sustainability and control measures both at firm level and at product level, as well as the difficulties related to product classification.
For example, with fund flows from ESG-conscious investors at stake, there may be internal pressure to classify a product as Article 8 (funds that promote an environmental or social characteristic), or Article 9 (funds that target bespoke sustainable investments), when in fact it should be labelled as Article 6 (funds that do not integrate any kind of sustainability into the investment process). This creates a compliance risk for the business.
On the other hand, other asset managers fear being accused of mis-selling or greenwashing and are cautiously categorising products that could be classified as Article 8 or 9 as Article 6 instead.
This is not helped by a certain lack of clarity about the terms utilised within the SFDR. For example, the definition of an Article 8 product is: “A fund which promotes, among other characteristics, environmental or social characteristics, or a combination of those characteristics, provided that the companies in which the investments are made follow good governance practices.” However, the definition of “good governance practices” is unspecific and open to interpretation, making it difficult to accurately designate a product with complete confidence.
Planning your next steps
With a swiftly changing regulatory environment, seeking professional guidance on remaining compliant is essential. To facilitate this process, Euronext has published its ESG Reporting Guide (Target 1.5°C) for listed companies to help ensure better communication between issuers and investors on all matters related to sustainability.
Conclusion
Not only are organisations facing a number of new or updated pieces of legislation, but they also have to decipher what are often unclear or ambiguous definitions in order to make decisions that they hope will maintain their compliance. While this is a significant time in terms of the EU tackling the issues of climate change through sustainable finance, it is also a challenging period for issuers.
As a company, Euronext is committed to creating environmentally-friendly services and products to help partners and clients contribute to reducing the increase in the planet’s temperature. This forms a key element of Euronext’s “Fit for 1.5°” initiative. Products include Euronext ESG Bonds, Euronext ESG Funds and Euronext ESG Derivatives.
Euronext’s ESG Advisory service helps you build your sustainability story and improve the market perception of your ESG activities. If you are an issuer or planning an IPO and need help creating or optimising your ESG strategy, you can connect with the ESG Advisory team here.
References and Further Reading
- Euronext’s “Fit for 1.5” initiative
- Information about Euronext’s ESG Advisory services
- Emerging trends in corporate governance
- The link between sustainability and good corporate governance
- How to deal with investors’ increased interest in ESG
- Euronext ESG Bonds Barometer
Note that EU regulations are continuously being updated; please be sure to check the latest information.
Did you know?Under the SFDR, funds are classified into three categories:
|
[1] The timelines for the CSRD are indicative and subject to change.
Euronext launches new Eurozone Banks Dividend Index Future today
Euronext today extends the scope of derivatives contracts available on the Euronext Eurozone Banks Index. Market participants can now take positions on the Euronext Eurozone Banks Dividend Index Futures Contract, in addition to the existing Futures and Options contracts.
On-screen liquidity will be provided by BNP Paribas and Optiver, and off-screen liquidity will be offered by all the main counterparties.
The Euronext Eurozone Banks Dividend Index Future has been co-designed with market players to offer easy access to block trades while ensuring users benefit from fair transaction fees.
Advantages of the new Eurozone Banks Dividend Index Futures Contract for investors
In line with Euronext's existing high-quality offering for trading the Eurozone banking sector, the Euronext Eurozone Banks Dividend Index Future contract offers strong advantages to investors.
- Higher nominal value (6x bigger) to generate economies of scale at the clearing level
- Fair cost structure with lower fees (approx. -75%)
- Smaller block sizes for easier access (3 lots for approx. €45k).
Read more about Euronext's offer for trading the Eurozone banking sector:
Eurozone Banks Index Derivatives
YOLO Group S.p.A. lists on Euronext Growth Milan
Siav S.p.A. lists on Euronext Growth Milan
Business Sustainability Certification Programme
Academy – Euronext Group launches its first certification programme in Business Sustainability.
Business Sustainability
Becoming a sustainable business is a central topic for many corporations nowadays. It requires a broader-based “systemic perspective” that highlights the inter-relationships among the key players of a sustainable finance eco-system.
As such, business leaders are expected to possess the necessary knowledge and expertise to better understand and navigate the “sustainability” paradigm.
Getting certified with industry experts
This course, brought to you by Academy – Euronext Group, in collaboration with Leonardo Centre, a research centre based in Imperial College Business School, enables participants to drive the implementation of sustainable strategies in their organisation. The programme offers great value not only to participants but also to the businesses they work for. Delegates benefit from receiving a renowned certification and having the opportunity to engage with long-standing industry experts and thought leaders. Moreover, the acquired knowledge, best practices and exposure to industry trends, are a long-term investment from the organisational perspective.
Besides academics from across Imperial College London,, renowned experts from Euronext, industry professionals, ESG advisors and responsible investors will be guiding the participants throughout the course and the final project work.
Course format
The blended format of this Mastercourse provides an ideal learning setting with interactive sessions, engaging presentations and active participation.
Participants are invited to conduct a pre-course assessment to identify potential knowledge gaps, as well as to determine the progress of their sustainability mindset. The core course is divided into modules, with the first one being taught in person in Milan, building up to the topic of the final project work: developing a Corporate Sustainable Transition Plan. Its presentation, as well as the certification ceremony, will be held in London.
With this first edition of the Business Sustainability Certification Programme, we strive to support Corporate Responsibility and Business Sustainability professionals in taking their careers to the next level.
For more information about the certification programme, visit our website.