Euronext - 2019 Universal Registration Document

Operating and financial review

Overview

Accommodation Accommodation expenses include costs of leasing the properties used by the Group, as well as utilities, maintenance and security costs to maintain the properties used by the Group. Other Expenses Other expenses include marketing, taxes, insurance, travel, professional membership fees and other expenses.

As part of the Agility for Growth strategic plan released in May 2016, an additional cost reduction program was announced, aiming to deliver €22 million additional savings (€15 million, net of inflation) by the end of 2019, through infrastructure optimisation and further streamlining of the organisation. In February 2019, Euronext announced it achieved €23.8 million of savings, against the €22 million previously expected. As part of its Let’s Grow Together 2022 strategic plan, Euronext aims at pursuing operating efficiency while maintaining a best-in-class cost discipline and investing in operational excellence. Infrastructure optimisation: Euronext makes continuous efforts to improve its asset utilisation. Together with a rationalisation of the number of sites and the set-up of Euronext’s IT team in Porto, it continues its effort to reinforce the culture of efficiency. Expenses incurred to realise the efficiencies described above are classified as “Exceptional items” in the Income statement, for a total of €5.7 million in 2019 (2018: €8.1 million). This expense is included in the total amount of exceptional items of €21.9 million in 2019 (2018: €21.5 million), disclosed in Note 12 of the Consolidated Financial Statements. Derivatives Clearing Agreement On 14 October 2013, Euronext entered into the Derivatives Clearing Agreement with LCH SA in respect of the clearing of trades on its continental Europe derivatives markets. Under the terms of the Derivatives Clearing Agreement, effective starting 1 April 2014, Euronext has agreed with LCH SA to share revenues. Euronext receives a share of clearing income based on treasury services and the number of derivatives trades cleared through LCH SA, in exchange for which Euronext pays LCH SA a fixed fee plus a variable fee based on derivatives trading volume. The term of the existing Derivatives Clearing Agreement was through 31 December 2018. On November 2017, Euronext announced the signing of the renewal of its agreement with LCH SA on the continued provision of derivatives and commodities clearing services for a period of 10 years. For the year ended 31 December 2017, revenues derived from the Derivatives Clearing agreement are €51.1million and the associated expense is €27.2 million. For the year ended 31 December 2018, those revenue are €55.3 million and the associated expense is €28.3 million. For the year ended 31 December 2019, those revenue are €55.2 million and the associated expense is €28.1 million. Facilities Agreements and Bonds On 6 May 2014, Euronext entered into a syndicated bank loan facilities agreement (“the Facilities Agreement”), with BNP Paribas and ING Bank N.V. as Lead Arrangers, providing for a (i) a €250 million term loan facility and (ii) a €250 million revolving credit facility, both maturing or expiring in three years. On 20 February 2015, Euronext entered into the amended and extended facilities agreement. Based on this agreement, effectively on 23 March 2015 (i) the undrawn revolving credit facility has been increased with €140 million to €390 million and (ii) €140 million has been repaid as an early redemption of the €250 million term loan facility. The facilities agreement mature in

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KEY FACTORS AFFECTING BUSINESSES AND RESULTS OF OPERATIONS

The economic and business environment in which Euronext operates directly affects Euronext’s results of operations. The results have been and will continue to be affected by many factors, including the factors set out below. Euronext continues to focus its strategy to broaden and diversify its revenue streams, as well as on its company-wide expense reduction initiatives in order to mitigate these uncertainties. Trading Activity A large proportion of Euronext’s business is transaction-based. For the year ended 31 December 2019, Euronext derived 40% of its revenue from its cash trading, derivatives and spot FX trading businesses. Accordingly, fluctuations in the trading volumes directly affect Euronext revenues. During any period, the level of trading activity in Euronext markets is significantly influenced by factors such as general market conditions, market volatility, competition, regulatory changes, capital maintenance requirements, market share and the pace of industry consolidation. A reduction in trading activity could make Euronext’s markets less attractive to market participants as a source of liquidity, which in turn could further discourage existing and potential market participants and thus accelerate a decline in the level of trading activity in these markets. Because Euronext’s cost structure is largely fixed, if the trading volumes and the resulting transaction fee revenues decline, Euronext may not be able to adjust its cost structure to counteract the associated decline in revenues, which would adversely affect its net income. Euronext’s largely fixed cost structure also provides operational leverage, such that an increase in its trading volumes and the resulting transaction fee revenues would have a positive effect on its margins. Targeted Operating Optimisation From its origination, Euronext has identified various ways to streamline its processes and enhance its operational efficiency. As such Euronext had identified the potential for pre-tax operating optimisation and net efficiencies of approximately €85 million by the end of 2016 on a run-rate basis, i.e. taking into account the full- year impact of any cost saving measure to be undertaken before the end of this period. This target was reached in a reduced timeline, by the end of Q1 of 2016.

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2019 UNIVERSAL REGISTRATION DOCUMENT