London’s hope of market dominance after Brexit is waning | Regulation | 01/12/2021

The City of London realizes that Brexit will hit the office harder in some places than many expected. Since the beginning of the year, trading in certain stocks has largely shifted from the island to the continent. Now ways out and new business fields are being sought.

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A little more than a week after the end of the transition period, a realization is solidifying in the City of London about its future after Brexit: A financial services agreement with the European Union could be too lean and too late to maintain its dominant position in the industry. About it reports Bloomberg.

Lots of open questions
Negotiations are expected to start soon to set the framework for regulatory cooperation between the UK and the EU. The industry was largely ignored in the trade deal that marked the UK’s separation from the EU on December 31, 2020. A deadline of March has been set, but so far there are few details – including who will lead the negotiations.

The first days of Brexit have shown what is at stake: On January 4th, the first business day after the transition period, London lost 6.3 billion euros in daily share trading on EU trading venues. The overnight loss fueled demands from financial firms and the London Stock Exchange that politicians should relax the rules and give the City a competitive advantage over European rivals.

EU trade will not return
Such a move became known over the weekend when the UK Treasury announced that it would allow trading in Swiss stocks. A corresponding EU ban would thus be lifted. Trading shares in companies like Nestle SA and Roche Holding AG in London could offset some of the loss in EU shares. At the same time, however, the move would deepen the division between Great Britain and the EU and make market access less likely for the city.

There is little incentive for Europe’s negotiator to reach an agreement as financial centers from Frankfurt and Paris to Amsterdam win business at the expense of London.

“EU stocks trading is gone, it will not return,” said David Howson, President of Cboe Europe, the largest EU equities trading venue in London. The company saw nearly 95 percent of its business churn, Howson told Bloomberg Television on Thursday.

“I don’t think this is the death knell for London’s prominence in global capital markets,” said Philip Hampton, former chairman of NatWest Group. “Some of the advantages of London – history, law, language – are not easily replicated by other centers.” (aa)

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