Euronext - 2019 Universal Registration Document

Operating and financial review 7

Material contracts and related party transactions

7.2.2 RELATED PARTY TRANSACTIONS Euronext has related party relationships with its associates and joint ventures, as disclosed in Note 31 of the Consolidated Financial Statements. The other related parties disclosure relates entirely to the key management of Euronext. For the transactions with its key management personnel, see section 4.4 Remuneration Report. From the IPO on 20 June 2014, the transactions with ICE do not qualify as “related party transactions” under IAS 24. Nevertheless the agreements between Euronext and ICE were in force after the IPO. Some of them are long term agreements. Some of these services have been progressively terminated and replaced over the period 2014–2016. Over the year 2019, services received from or rendered to ICE include the use of Data centre service, Colocation, Connectivity, UTP and other intellectual property rights as well as ancillary services. As at 31 December 2019, the following agreements remain active: n data Centre Services Agreement; n colocation Agreement; n connectivity Agreement; n UTP and Trading Technology Licence Deed; n intellectual Property Agreement; n Euronext Equity Index Trademark Licence Agreement. options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). If the Group concludes that the contract is enforceable beyond the notice period of a cancellable lease (or the initial period of a renewable lease), it then need to assess whether the Group is reasonably certain not to exercise the option to terminate the lease. However in general, the Group’s lease portfolio contains very limited leases that include renewal – or termination options. Estimating the incremental borrowing rate (IBR) The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using the observable inputs (such as market interest rates) when available and makes certain entity- specific estimates if needed.

The provision matrix is initially based on the Group’s historical observed default rates. The Group will calibrate the matrix to adjust the historical credit loss experience with forward-looking information. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. The assessment of the correlation between historical observed default rates, forecast economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The information about the ECLs on the Group’s trade and contract receivables is disclosed in Note 37.4 of the Consolidated Financial Statements included in this Registration Document.

Determining the lease term of contract with extension and termination options

In determining the lease term, management assesses the period for which the contract is enforceable. It considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension

7.2 Material contracts and related party transactions

7.2.1 MATERIAL CONTRACTS The major contracts for Euronext, entered into the ordinary course of business, but essential for its activity as a regulated markets operator, are: n the clearing agreements signed with LCH SA; n the clearing agreements signed with SIX following OB VPS acquisition; n the clearing agreements signed with NASDAQ following OB VPS acquisition; n the post-trade services agreement signed with EuroCCP following the acquisition of Euronext Dublin; n the clearing agreements signed with EuroCCP following OB VPS acquisition; n the clearing agreements signed with LCH Ltd following OB VPS acquisition; n the Technology Services agreement signed with London Stock Exchange plc following OB VPS acquisition; n the Data Centre Services agreement signed with ICE; n the Enterprise agreement signed with Amazon Web Services. The Clearing Agreements are referred to in section 1.3.6 “Description of the Business/Post Trade/LCH SA” and 5.1.5 “Key Factors Affecting Businesses and Results of Operation/Derivatives Clearing Agreement”.

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2019 UNIVERSAL REGISTRATION DOCUMENT