* Negotiations continue in battle to attract French partners
* French FTT plus prospect of EU levy sour mood
* European bourse operators already see market share down
By Matthieu Protard
PARIS, Dec 20 France's unloved financial
transaction tax is hampering its efforts to persuade local
institutions to buy stakes in Paris stock exchange operator
Euronext and keep it under French influence after its expected
spin-off next year.
Battling to halt a long-term drift of business away from
Paris to rival financial centres such as London and Frankfurt,
President Francois Hollande's government is urging local market
players to signal their interest in Euronext, which also runs
the Amsterdam, Brussels and Lisbon bourses.
But while Finance Minister Pierre Moscovici said last week
he was confident negotiations would result in a deal, others do
not share his optimism.
"If Paris's political and business communities do nothing,
then, even with an IPO, a takeover of Euronext by one of the
three big contenders is unavoidable," Gérard Rameix, president
of French market regulator AMF told Reuters, citing U.S.-based
Nasdaq OMX, Germany's Deutsche Boerse and
the London Stock Exchange (LSE) as potential predators.
Nasdaq, LSE and Deutsche Boerse declined to comment.
Earlier this year Nasdaq OMX Chief Executive Robert Greifeld
had said the company would consider a bid for Euronext if the
Atlanta-based IntercontinentalExchange Inc, which
owns a network of exchanges and clearing houses, has made clear
that it plans to spin off Euronext following this year's
$10-billion-plus merger with NYSE Euronext.
Once based in Paris and Amsterdam, Euronext saw
decision-making shift from the French capital to New York in
2006 when it was bought by NYSE, a move that had already
prompted some market participants to leave Paris for London and
French banks, such as Societe Generale, Credit
Agricole and BNP Paribas SA, as well as
insurer AXA have been approached to take a stake in
Euronext, whose IPO is expected to be worth between 1 billion
and 1.5 billion euros ($1.4-2.1 billion)
BNP Paribas, Credit Agricole and Axa declined to comment.
Officials from Societe Generale were not immediately available
to comment. The chief executive of Axa, Henri de Castries, told
Reuters in April that he was not interested in buying Euronext.
Euronext Chief Executive Dominique Cerutti told Les Echos
newspaper recently that ICE wanted to put together a stable core
group of shareholders and hold onto a 25 percent equity interest
alongside other shareholders - for example banks.
But sources close to the discussions say negotiations are
proving difficult because of anger among France's financial
sector players over a domestic tax on financial transactions
introduced last year, and the prospect that euro zone will also
Moreover, French financial institutions are reluctant to buy
into a market operator that has already moved virtually all its
data centres to London.
"The government wants to ensure Euronext remains anchored in
Paris, but bankers wonder if Euronext still has a French soul.
Isn't it too late?" said one Paris-based banker.
EURO BOURSES ALREADY SUFFERING
The French financial transaction tax is a 0.2 percent levy
on stock purchases of French publicly traded companies with a
market capitalisation of 1 billion euros or more.
Annual proceeds from the tax were originally seen at around
1.6 billion euros, but Socialist lawmaker Christian Eckert
recently said it's currently estimated at 600 million euros.
Market players fear that an EU trading tax across the euro
zone could kill off Euronext and other market operators in the
"If governments avoid this madness, then we could look at
Euronext," Vivien Lévy-Garboua, senior advisor at BNP Paribas
, wrote on a blog on French newspaper Agefi website.
The French tax and a similar levy in Italy this year have
been linked to lower trading volumes on their bourses, an early
glimpse of the potential impact of a pan-European levy.
According to Euronext, volumes on shares hit by the French
tax are 20 percent lower than those on other shares.
The European Union has also been considering a tax on stock,
bond and derivatives trades as a way of raising about 35 billion
euros a year from banks starting in 2014 to claw back the
taxpayer aid they received in the financial crisis.
Britain and 15 other EU countries have refused to support
the proposed tax, which has been backed by Germany, France,
Italy, Spain, Austria, Portugal, Belgium, Estonia, Greece,
Slovakia and Slovenia.
But worries over unintended consequences have mounted among
some of the countries taking part, and the 11 EU countries that
have pledged to implement the tax are now considering narrowing
the levy's scope to shield pensions, government debt and markets
that help to grease the economy.
"The danger is that it destroys Euronext's business: the
trading flows," warned Edouard-François de Lencquesaing, adviser
to the Paris Europlace grouping that represents the French
financial market sector.
Henri de Castries, chief executive of AXA,
Europe's no. 2 insurer, whose asset management arm AXA IM has
536 billion euros ($738 billion) under management, has already
ruled out buying into Euronext, saying Hollande's tax policies
had endangered France's financial sector.
European market operators such as Euronext and Deutsche
Boerse have already seen their share of the market fall in the
past five years while alternative platforms such as the
London-based order-driven BATS Chi-X equities exchange have
Euronext's share in its core French market, home to
multinationals such as Louis Vuitton owner LVMH and
Airbus parent EADS, has dropped from 97.7 percent in
early 2008 to 60.7 percent currently, according to Thomson
Reuters Equity Market Share Reporter data.
Across Europe, its market share has fallen from 22.4 percent
in 2008 to 13.8 percent.
New listings volumes also show the once buoyant Euronext is
well off the pace; its share of European IPOs is just 12.5
percent, while the LSE has 45 percent, a French government