The City has been dealt a “symbolic blow” after the latest data revealed that Amsterdam eclipsed London as Europe’s largest share-trading centre in January, says Kalyeena Makortoff in The Guardian. Amsterdam, “previously the sixth-largest exchange centre in Europe”, saw average daily trading surge from €2.6bn to €9.2bn in January as exchanges “shifted order books abroad after Brexit”. London is now in second place, “with average daily trading halving from €17.5bn to €8.6bn last month”, according to the Chicago Board Options Exchange.
The figures aren’t as bad as they look for the LSE Group (which owns the London Stock Exchange), says Jill Treanor in The Sunday Times. After all, much of the additional volume hasn’t gone to Amsterdam’s main exchange, but to the Turquoise platform, which is part owned by the LSE Group. Still, there are signs that “more business is moving”, with London’s share of euro-denominated swap activity falling from “40% in July to 10% last month”. The lost business is going to the US as well as the EU.
The problem could get worse if the EU continues to play “hardball” with the UK on access to its financial markets, say Peter Thal Larsen and Dasha Afanasieva on Breakingviews. When the transitional arrangements between Britain and the EU expired at the end of the year, Brussels declined to grant the United Kingdom approval as an “equivalent” country in most areas, including those related to trading shares and interest-rate swaps. Even where it did grant equivalence, it also signalled that it expects EU investors and companies to reduce their exposure to UK counterparties over time, which could reduce trading volumes further. Given the pressure London is under, it’s no surprise that the LSE Group is pressing the government to “move quickly” to “overhaul the UK’s listing rules”, says Philip Stafford in the Financial Times. CEO David Schwimmer wants the government to relax the rules that require start-ups “to sell a minimum of 25% of their company” when they go public. Schwimmer argues that this requirement is a “deterrent to potential IPO [initial public offering] candidates”. The purchase of data provider Refinitiv, completed last month, should also help diversify LSE Group’s sales.
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Too soon to panic
It is important to remember, that London “is not just captured in the LSE”, says Gerard Lyons in The Spectator. After all, not only does the “vast bulk” of trading take place outside the public markets (banks and other financial institutions match up trades internally), but even when trades are technically booked in Amsterdam “the value in the trade for an economy remains in London”, thanks to “activities such as settlement, clearing and risk management”. The City also benefits from “Brexit-proof” competitive advantages, including “English common law, time-zone, language, flexible workforce” and the “skills, knowledge and experience based here”.
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