EURONEXT PARIS REFORMS ITS OFFERINGS, GOING FOR

UNCLAS SECTION 01 OF 02 PARIS 001822 SIPDIS PASS FEDERAL RESERVE PASS CEA STATE FOR EB and EUR TREASURY FOR DO/IM TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER USDOC FOR 4212/MAC/EUR/OEURA E.O. 12958: N/A TAGS: EFIN ECON PGOV FR SUBJECT: EURONEXT PARIS REFORMS ITS OFFERINGS, GOING FOR SMALL AND MID CAPITALIZATIONS ¶1. SUMMARY. Euronext, the stock market operator based in Paris, has initiated major changes in its offerings, to stimulate small and mid capitalizations. It now has a single well-organized list ("Eurolist"),and has created new indices along with a new small and mid cap expert status for analysts. These changes respond to the GOF's objective to help small and medium-sized enterprises (SMEs) gain easier access to the financial markets. Euronext Brussels, Amsterdam and Lisbon are in the process of making similar changes. END SUMMARY. -------------- -------------- EURONEXT Creates a Single List for Easier Reading -------------- -------------- ¶2. In June 2004, after consulting widely with issuers, intermediaries, investors and its shareholders, Euronext Paris announced it would make changes in the organization of its stock lists in January 2005. Changes became effective on February 18, 2005. Euronext Paris has merged the three regulated markets of the Paris stock exchange - the cash market of blue-chip companies ("Marche au Comptant"),the regulated market of medium-sized companies ("Second Marche") and the "Nouveau Marche" (growth segment) on which new companies, especially smaller ones with an emphasis on growth and technology, could raise start-up capital. The merger results in a single list called "Eurolist", which is organized by alphabetical order and is split in three segments based on the capitalization of French companies: small caps (up to 150 million euros),mid caps (from 150 million to 1 billion euros),and large caps (over 1 billion euros). -------------- Changes Aim to Stimulate Small and Mid Caps -------------- ¶3. The Eurolist essentially aims to benefit small and medium-sized caps by improving their visibility and liquidity, and thus their expansion. Andre Levy-Lang, co- chairman of the Euronext Steering Committee, stated "the Eurolist will serve SMEs well, raising their stock market profile." SMEs account for 85 percent of French listed companies. They play a key role in the French economy, and have significant growth potential, but often are limited by the lack of funds. ¶4. As part of the same program, Euronext created a special small and mid-cap expert status ("experts en valeurs moyennes") for brokers devoting specialists to the analysis of SME's financial results, and to marketing and sale of listed SMEs' stocks. Approved brokers will have to provide annual analytical reports, half-year updates, and material information messages as much as necessary. Each broker will have to commit to tracking 60 mid-caps stocks including 20 with caps below 150 million euros, and 10 with an annual volume of transactions smaller than 2,500 trades. Euronext has already selected ten brokers: Arkeon Finance, Aurel Leven Securities, Credit Agricole Cheuvreux, CM-CIC Securities, Gilber Dupont, Ixis Midcaps, Oddo & Cie, Potzamparc, Fideuram Wargny, and Euroland Finance (when Euroland gets final approval). Brokers have until March 31 to apply for the new status. Euronext will sponsor a marketing program, and support promotional campaigns to improve the visibility of mid-cap experts and help them in their commitments. -------------- New Indices Tracks Small and Medium Caps -------------- ¶5. Euronext also has introduced new indices that focus on SMEs: - The "CAC Next 20" consisting of the 20 stocks the most representative in terms of capitalization and liquidity after the CAC 40 stocks; the "CAC Mid 100" consisting of the top 100 stocks with caps within 4 billion euros and 250 billion euros; the "CAC Small 90" of the 90 stocks, with caps within 250 million euros and 50 million euros; the "CAC Mid et Small 190" regrouping the "CAC Mid 100" and the "CAC Small 90" stocks. - Many SMEs are active in the high technology sector. A new index, the "CAC IT20" represents the top 20 stocks of the "CACIT". (The "ITCAC 50", the index of the 50 stocks formerly listed on the "Nouveau Marche" will be replaced in June 2005.) - For stocks cross-listed in Amsterdam, Brussels, Lisbon and Paris, a new index, the "NextCAC 70" represents the top 70 stocks of each of them. ¶6. Euronext Paris will eliminate Second Market, New Market and Mid CAC indices by June 2005, but will continue to publish the blue-chip "CAC 40", the "SBF 80" (the top 80 caps),the "SBF 120" (the top 120 caps),the "SBF 250" (the top 250 caps),and the CAC IT (high-technology sector index). Euronext Paris will launch a comprehensive index of around 500 stocks, the "CAC All Shares", in June 2005. Despite its name, the new index will exclude 5% of listed stocks because of their poor liquidity. ¶7. A group of experts is responsible for handling and controlling reliability and representativeness of indices listed in Paris. Headed by Euronext Paris' chairman Jean- Francois Theodore, the group includes experts at Bank of France, National Statistical and Economic Studies Institute INSEE, SEC counterpart AMF, the French Association of Financial Analysts SFAF, and the think tank for economic growth and company expansion Rexecode. -------------- -------------- A new Market "Alternext" will Give Easier Access to European Companies -------------- -------------- ¶8. Euronext Paris is to set up a new market called "Alternext" to offer companies a new organized market (yet unregulated based on legal definition of the European Financial Services directive) with more consumer protection than the "Marche Libre", which will continue to operate. The new market will give European companies new opportunities for raising capital. Many companies have already expressed their interest in the new market. According to Poweo's CEO, "Alternext will attract new investors, notably "Anglo-Saxons" (French short-hand for persons of American, British, and Australian origin) that cannot participate in the "Marche Libre." -------------- Comment -------------- ¶9. By implementing these financial markets reforms, Euronext is putting into operation GOF policy to facilitate the access of SMEs to financial markets, which should help the SMEs expand, thus boosting economic growth. The new system also is in line with the EU goals of convergence and financial transparency, since all listed companies are subject to the same regulations. LEACH