Capital Markets

NYSE’s London Arm Digs up First Win

English Channel tunnel operator Eurotunnel switches its U.K. share listing from the London Stock Exchange.
Andrew SawersJune 27, 2012

In what may be just the first major challenge to the long-established London Stock Exchange on its home turf, Groupe Eurotunnel, the English Channel tunnel operator, will move its U.K. share listing from the LSE to NYSE Euronext London starting July 19. The move gives NYSE Euronext its first listing for its new London market. Announced in 2010, the exchange had, until now, failed to win over any companies.

NYSE Euronext operates stock exchanges in Amsterdam, Brussels, Paris, and Lisbon, as well the New York Stock Exchange. All those markets use what’s known as the Universal Trading Platform (UTP), thereby, the exchange claims, consolidating and increasing liquidity for listed companies. The UTP accounts for a third of all stock market trades in the world, though that figure includes the huge volume of trading on the NYSE.

Shares in Eurotunnel have been listed on the Paris and London stock markets since 1985, even before digging for the tunnels was begun. The London switch takes the company from a quote-driven market where market-makers publish two-way prices at which they are prepared to buy and sell, to an order-driven market. In the latter, buyers and sellers post their orders and the prices at which they are prepared to deal. Those orders are then matched against one another centrally.

The move also means the company’s London share price will now be listed in euros rather than pounds. A spokesman for Eurotunnel told CFO European Briefing that the current arrangement “makes trading across the whole market quite difficult, so it’s really a simplification: by putting the shares on NYSE Euronext they’ll be quoted at a single price across the whole of the European market. It makes it easier for shareholders. It brings greater liquidity.”

It seems likely that the same players and investors will be trading Eurotunnel shares whether its London listing is with the LSE or NYSE Euronext. It’s not immediately obvious, therefore, why liquidity will be increased.

One institutional investor wasn’t convinced. “There isn’t much difference between the two markets [LSE and NYSE Euronext London]. International investors really won’t care. Liquidity will be similar on either exchange so I can only think that it is a cost issue,” Gavin Launder, head of European equities at Legal & General Investment Management, said in an e-mail.

A Eurotunnel spokesperson said the cost savings are fairly small: “tens of thousands of pounds, not millions.”

The Eurotunnel representative added that the shareholder reaction to the move has been positive: “It comforted investors and individual shareholders to know that there is a simplification in the process and they can combine all of their activity rather than having to split it over two markets.” The company still has about 300,000 private shareholders.

Bothering with London
But why bother with a London listing at all? Why not drop it altogether and just list in Paris? “The roots of the company are still very strongly in the two countries, and it’s important on that structural heritage that we remain in the two countries with a clear listing in each one,” the Eurotunnel spokesperson said.

It was more than a symbolic move, he insisted. “It’s important to our shareholders in two different countries. They feel that their company belongs to them in that location. It’s a binational company and that’s been a very strong part of the creation, the growth, and the future of the company, that its roots are very much on either side of the Channel.”

For its part, NYSE Euronext is glad to crow about its first London win. “Attracting the first company to a new market always takes some time,” says Marc Lefèvre, a NYSE Euronext director and head of European client coverage and business development. “You don’t launch a new market every year. Also, we have seen [a] very tough capital markets environment, which has resulted in a great deal of uncertainty in the global markets in particular within the euro zone.”

The other way of looking at it is that this should have been an easy win for NYSE Euronext. It will be hoping its next listing won’t take another two years.

The London Stock Exchange declined to comment on the loss of Eurotunnel. At the end of May, the LSE had 1,372 companies listed on its main market with a combined market capitalization of £3.6 trillion (€4.5 trillion; $5.6 trillion). Across its five European markets, NYSE Euronext had 797 issuers with a market value of €1.84 trillion ($2.3 trillion).

Andrew Sawers is editor of CFO European Briefing, a CFO online publication.


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