UBS | Cash equity volumes were down sharply in August on a YoY and MoM basis across all the European exchanges we cover, driven by the typical seasonal summer slowdown. The August average daily volumes (ADVs) marked a 2 -year low for DB1 & LSE, a 3 -year low for Borsa Italiana and Euronext and a 14 -year low at BME . August ADVs were down 55% YoY for BME, 40- 44% for DB1, Euronext & Borsa Italiana and 24% for LSE.
Another difficult month for the exchanges from a Market Share perspective
The equity exchanges lost an av erage 60bp of market share to the alternative trading platforms in August. While this is an improvement from the 180bp of lost share in July, it represents the 3 rd worst month of share losses this year. Euronext Lisbon saw a 370bp decline MoM, the worst in the group while BME’s Madrid volumes fell 80bp MoM and are now down 760bp since the April changes to the post -trade environment in Spain.
Lowering 2016 EPS estimates for BME & ENXT to reflect the slower volumes
Given that both July and August cash equity volumes for BME and Euronext were disappointing, we are lowering their 2016 EPS estimates, by 4% for BME and 1% for Euronext as we cut their Q3 2016 volume expectations by 25% and 6% respectively.
Valuation: DB1 a Buy, ENXT a Neutral and BME a Sell
We continue to rate DB1 a Buy as they have the smallest exposure to cash equity volumes, accounting for just 8% of 2015 revenues. While BME & Euronext have similar exposure to cash equities (35 -40% of revenues) we prefer Euronext to BME as we expect Euronext’s co st-cutting opportunities to result in better share price and earnings performance in the coming 6 -12 months.
