Fostering the right environment for retail investors
Amidst the current macroeconomic landscape characterised by inflation and high interest rates, financial literacy remains a significant issue, also in Europe. According to a study published by the European Commission (EC) in July 2023, less than 20% of citizens in the European Union (EU) display a high level of financial literacy, with only four out of 27 Member States – the Netherlands, Sweden, Denmark and Slovenia – having more than one quarter of respondents score highly in overall financial literacy.
And while a 2024 report published by the EC’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, indicates that there are an estimated EUR 33 trillion held in private savings across the EU, unlike in other regions, this wealth is not being leveraged to meet the EU's strategic needs, with a large part of it – approximately EUR 300 billion each year according to that same report – redirected towards the US economy and asset managers across the pond. This is detrimental to the Capital Markets Union (CMU) and to the European economy overall.
But with the EC’s aforementioned study highlighting that 45% of EU citizens do not trust the investment advice they receive from their bank, insurer or financial advisor, how can we turn the tide and ensure that European savings are being leveraged regionally, benefitting both EU citizens and the wider European economy?
In order to do so, governments, educational and financial institutions across Europe should join forces by providing accessible resources, workshops and courses tailored to promote financial literacy for all age groups – only then will we empower European citizens to manage their finances effectively and inspire the next generation to foster a more resilient and prosperous European economy. But driving the development of financial literacy alone is not enough.
With this in mind, in 2019, the Luxembourg Stock Exchange (LuxSE) established LuxXPrime in collaboration with EUWAX AG, a subsidiary of Börse Stuttgart, which acts as the primary liquidity provider. LuxXPrime is a segment on the trading platform of LuxSE dedicated to retail-sized bond trading.
What started as a selection of 250 bonds, now, five years later, offers 1,500 carefully-selected securities from 370 issuers in over 40 countries. Thanks to the collaboration with EUWAX, LuxXPrime offers firm prices on a range of frequently traded bonds, in real time, making it possible to trade as little as EUR 1,000 in certain cases.
One of LuxXPrime's standout commitments lies in making bond trading more accessible. In a bond market traditionally dominated by institutional investors, LuxXPrime has broadened access for individual investors, helping to create a more inclusive playing field and marking a transformative step towards democratising financial opportunities. Exchanges are regulated entities operating public markets, and by nature provide more transparency and oversight than other trading venues, thus strengthening investor protection.
LuxXPrime exemplifies this commitment by featuring over 300 sustainable bonds in its selection of securities, providing investors with options that align with their values and support sustainable development. Generally speaking, trading in green bonds has so far been limited to institutional investors, but with LuxXPrime, retail investors now have the opportunity to trade in green and other sustainable bonds. Additionally, LuxSE's retail-sized trading segment also offers over 100 sovereign bonds.
As one of Europe’s main financial hubs and the world’s leading listing destination for international debt securities, Luxembourg benefits from a dynamic financial ecosystem for primary capital market activities. The numbers speak for themselves, with LuxSE currently encompassing more than 43,000 securities – including 39,000 debt instruments – and serving 1,800 issuers across 100 countries. The range of bonds available for trading puts LuxSE in a unique position, and with LuxXPrime, our goal is to lower the entry bar especially for retail investors.
Europe’s capital markets provide retail investors with opportunities to grow their wealth and secure their pensions, while putting their money to work for the European economy.
Ultimately, by aligning efforts and fostering a collaborative and inclusive environment for retail investors, Luxembourg and other financial centres across the EU can and should contribute to unlocking the potential of Europe’s capital markets, paving the way for sustainable growth and prosperity for generations to come.
This article was originally published in German by Börsen-Zeitung in July 2024.
And while a 2024 report published by the EC’s Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs, indicates that there are an estimated EUR 33 trillion held in private savings across the EU, unlike in other regions, this wealth is not being leveraged to meet the EU's strategic needs, with a large part of it – approximately EUR 300 billion each year according to that same report – redirected towards the US economy and asset managers across the pond. This is detrimental to the Capital Markets Union (CMU) and to the European economy overall.
Implementing the retail investment strategy
In May 2023, the EC adopted a retail investment strategy designed to empower European savers to make investments that are aligned with their needs, preferences and values, while ensuring fair treatment and adequate investor protection. The strategy aims to encourage greater participation in EU capital markets by citizens across the bloc, strengthen the CMU and direct private funding into the European economy while supporting the ongoing green and digital transitions.But with the EC’s aforementioned study highlighting that 45% of EU citizens do not trust the investment advice they receive from their bank, insurer or financial advisor, how can we turn the tide and ensure that European savings are being leveraged regionally, benefitting both EU citizens and the wider European economy?
Strengthening financial literacy across Member States
The first priority is to support the development of financial literacy in Europe. This is crucial to fostering economic stability and individual prosperity, as financially literate individuals are ultimately better equipped to make informed financial decisions, manage their savings and plan their retirements appropriately.In order to do so, governments, educational and financial institutions across Europe should join forces by providing accessible resources, workshops and courses tailored to promote financial literacy for all age groups – only then will we empower European citizens to manage their finances effectively and inspire the next generation to foster a more resilient and prosperous European economy. But driving the development of financial literacy alone is not enough.
Democratising bond trading practices
To increase investments among European savers, we also need to provide them with the necessary financial infrastructure. This involves offering affordable, tailored, and inclusive trading solutions that can serve as gateways to capital markets for retail investors.With this in mind, in 2019, the Luxembourg Stock Exchange (LuxSE) established LuxXPrime in collaboration with EUWAX AG, a subsidiary of Börse Stuttgart, which acts as the primary liquidity provider. LuxXPrime is a segment on the trading platform of LuxSE dedicated to retail-sized bond trading.
What started as a selection of 250 bonds, now, five years later, offers 1,500 carefully-selected securities from 370 issuers in over 40 countries. Thanks to the collaboration with EUWAX, LuxXPrime offers firm prices on a range of frequently traded bonds, in real time, making it possible to trade as little as EUR 1,000 in certain cases.
Broadening access and opportunities for retail investors
By providing a window exclusively dedicated to smaller-sized bond trades, LuxXPrime gives banks and brokers the opportunity to offer their retail clients a wider range of options to choose from and the opportunity to diversify their portfolios.One of LuxXPrime's standout commitments lies in making bond trading more accessible. In a bond market traditionally dominated by institutional investors, LuxXPrime has broadened access for individual investors, helping to create a more inclusive playing field and marking a transformative step towards democratising financial opportunities. Exchanges are regulated entities operating public markets, and by nature provide more transparency and oversight than other trading venues, thus strengthening investor protection.
Keeping up with the demand for sustainable bonds
Democratising financial opportunities also means staying abreast of current market trends and embracing the growing emphasis on environmental, social, and governance (ESG) principles.LuxXPrime exemplifies this commitment by featuring over 300 sustainable bonds in its selection of securities, providing investors with options that align with their values and support sustainable development. Generally speaking, trading in green bonds has so far been limited to institutional investors, but with LuxXPrime, retail investors now have the opportunity to trade in green and other sustainable bonds. Additionally, LuxSE's retail-sized trading segment also offers over 100 sovereign bonds.
Retail investment is key to the CMU
If EU citizens are to start investing their savings, we, as market participants and financial intermediaries, need to better explain the benefits of investing in financial securities, and facilitate these transactions. In other words, Europe’s leading financial centres need to create a robust regional ecosystem capable of fostering trust, and the right environment for retail investors to be actively involved in capital markets.As one of Europe’s main financial hubs and the world’s leading listing destination for international debt securities, Luxembourg benefits from a dynamic financial ecosystem for primary capital market activities. The numbers speak for themselves, with LuxSE currently encompassing more than 43,000 securities – including 39,000 debt instruments – and serving 1,800 issuers across 100 countries. The range of bonds available for trading puts LuxSE in a unique position, and with LuxXPrime, our goal is to lower the entry bar especially for retail investors.
Europe’s capital markets provide retail investors with opportunities to grow their wealth and secure their pensions, while putting their money to work for the European economy.
Ultimately, by aligning efforts and fostering a collaborative and inclusive environment for retail investors, Luxembourg and other financial centres across the EU can and should contribute to unlocking the potential of Europe’s capital markets, paving the way for sustainable growth and prosperity for generations to come.
This article was originally published in German by Börsen-Zeitung in July 2024.
