LSE Group fights to stem the tide as share trading moves abroad

Some of the City’s share-trading business has moved to the EU and the US. But all is not lost for the London Stock Exchange.

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.

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”.

Recommended

Budget 2021: Here is what Chancellor Rishi Sunak announced
Budget

Budget 2021: Here is what Chancellor Rishi Sunak announced

Rishi Sunak delivered his much anticipated Budget today. David Prosser explains what it means for you.
27 Oct 2021
How to invest as oil prices keep heading higher
Commodities

How to invest as oil prices keep heading higher

Oil prices are soaring reversing a sharp meltdown seen at the depths of the Covid-19 crisis. Saloni Sardana explores how you can play the market.
27 Oct 2021
When investors get over-excited, it’s time to worry – but we’re not there yet
Sponsored

When investors get over-excited, it’s time to worry – but we’re not there yet

When investors are pouring money into markets, it can be a warning sign of impending disaster, writes Max King. So how are fund flows looking right no…
26 Oct 2021
An investment trust that gives exposure to frontier markets
Investment trusts

An investment trust that gives exposure to frontier markets

An investment trust investing in small, illiquid emerging markets has disappointed, but deserves another chance, says Max King
26 Oct 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021