EURONEXT_Registration_Document_2017

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OPERATING AND FINANCIAL REVIEW

Overview

5.1.4 COMPONENTS OF EXPENSES Euronext’s operating expenses include salaries and employee benefits, depreciation and amortisation, and other operational expenses, which include systems and communications, professional services, accommodation and other expenses. Salaries and Employee Benefits Salaries and employee benefits expenses include employee salaries, incentive compensation (including stock-based compensation) and related benefits expenses, including pension and medical charges. Depreciation and Amortisation Depreciation and amortisation expenses consist of costs from depreciating fixed assets (including computer hardware and capitalised software) and amortising intangible assets over their estimated useful lives. Systems and Communications Systems and communications expenses include costs for development, operation and maintenance of trading, regulatory and administrative systems; investments in system capacity, reliability and security; and cost of network connectivity between customers and data centres, as well as connectivity to various other market centres. Systems and communications expenses also include fees paid to third-party providers of networks and information technology resources, including fees for consulting, research and development services, software rental costs and licenses, hardware rental and related fees paid to third-party maintenance providers. Professional Services Professional services expenses include consulting charges related to various technological and operational initiatives as well as legal and audit fees. 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.

Trading Activity A large proportion of Euronext’s business is transaction-based. For the year ended 31 December 2017, Euronext derived 45% 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 tomarket 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. 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. 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 €2.2 million in 2017. This expense is included in the total amount of exceptional items (€14.8 million in 2017), 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 S.A. 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 S.A. to share revenues. Euronext receives a share of clearing income based on treasury services and the number of cleared derivatives trades cleared through LCH

5.1.5

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.

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www.euronext.com

2017 REGISTRATION DOCUMENT