The consequences of Britain’s separation from the European Union were shown on the first trading day of the year, when a large part of the turnover in EU shares moved from London to locations located in Amsterdam, Paris and other financial centers on the continent .
Britain’s accession to the EU meant that banks and investors in the region could bypass stock exchanges such as luxury goods giant LVMH Moët Hennessy Louis Vuitton SE and Just Eat Takeaway.com NV, the major food distributor listed on Amsterdam. company and market them in London in alternative locations. These locations included Turquoise, a majority owned trading center of the London Stock Exchange Group PLC, and rival platforms Aquis Exchange PLC and Cboe Global Markets Inc. in the European market.
But with the Brexit trade agreement taking effect on January 1, that option is over.
The bloc pushed for greater control over EU stock trading during the Brexit negotiations as part of its efforts to compete better with London, historically Europe’s dominant financial center.
Trading venues were ready for the post-Brexit shift in EU stock trading volume. The LSE Turquoise, for example, in late November set up a European hub in Amsterdam to trade European shares. Cboe also has a hub in Amsterdam. Aquis operates a platform in Paris for the same reason. Although operations seem unlikely to suffer, at least in the short term, volumes leaving London send a signal that other city centers can compete effectively and support comparable services without hiccups.
LSE declined to comment on trading volume levels for its Turquoise platform in Amsterdam on Monday. For Cboe, around 90% of its European stock trading volumes were transferred to its platform in Amsterdam on Monday. Before that, all that volume was done in London. In the case of Aquis, around 100% of its European share volumes were transferred to the Paris operation. This is higher than the minimum when the United Kingdom was still part of the EU.
“It was a transition business overnight,” said Belinda Keheyan, head of marketing at Aquis.
The UK’s split with the EU has already triggered an outflow of £ 1.2 trillion, equivalent to about $ 1.6 trillion, of assets to Continental Europe since the 2016 Brexit vote and forced banks, foreign exchange operators and other financial institutions to transfer hundreds of employees and expand or open new offices in Frankfurt, Paris and other European cities.
A food delivery courier for Just Eat Takeaway.com in London
Photograph:
Hollie Adams / Bloomberg News
Officials at some exchanges say it is too early to determine whether Europe’s domestic stock markets will generate significant turnover gains on their respective exchanges as a result of shifting activity to the continent. This is reflected in the market share data for different operators. For example, turnover on the Deutsche Börse Xetra exchange currently represents about 14.4% of the total volume on European markets, according to Cboe, which tracks the data. This represents an increase compared to an average daily share of 13.9% in December. However, the market share of Spain’s Madrid Stock Exchange and Euronext NV’s European platforms, including those in Amsterdam and Paris, are currently below their December averages.
The change in trading volumes for EU shares coincided with the weakness of the pound, which was traded 1.5% lower against the euro.
Jane Foley, head of foreign exchange strategy at Rabobank, said that while the change in the trading location could weigh on the pound, news about the spread of Covid-19 and vaccines against it is obscuring any impact.
“Perhaps this year it will become a little more obvious,” said Foley. “We need a longer period to really look at the primary factors. It is very difficult to find out what factors are pulling in either direction. “
An agreement between the UK and the European Union was struck in late December, days before the year’s deadline, giving Britain significant freedom to deviate from EU regulations and sign free trade agreements with other countries. Photo: Paul Grover / Press Pool (originally published on December 24, 2020)
—Caitlin Ostroff contributed to this article.
Write to Ben Dummett at [email protected]
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Published in the January 5, 2021 print edition as ‘EU stock trading changes from the UK after the Brexit deal’.