The ramifications of Britain’s split from the European Union were reflected on the first trading day of the year when much of the trading volume in EU shares was moved from London to locations in Amsterdam, Paris and the other financial centers of the continent.
UK membership in the EU meant that the region’s banks and investors could bypass the stock housing markets, such as Paris-listed luxury goods giant LVMH Moët Hennessy Louis Vuitton SE and Amsterdam-listed Just Eat Takeaway.com NV, the major food supplier. company, and trade them in London through alternative locations. Those locations included Turquoise, a trading facility majority owned by the London Stock Exchange Group PLC, and rival platforms Aquis Exchange PLC and the Europe-based marketplace of Cboe Global Markets Inc.
But with the Brexit trade deal that went into effect January 1, that option ended.
The bloc pushed for greater control over EU stock trading during Brexit negotiations as part of its efforts to better compete with London, historically the dominant financial center of Europe.
Trading venues were poised for the shift in the EU’s trading volume after Brexit. For example, the LSE’s Turquoise set up a European hub in Amsterdam at the end of November to trade European shares. Cboe also has a hub in Amsterdam. Aquis operates a platform in Paris for the same reason. While operations are therefore unlikely to suffer, at least in the short term, the volumes leaving London are sending a signal that other city centers can compete effectively and support similar services without a hitch.
The LSE declined to comment on the trading volume of its Turquoise platform in Amsterdam on Monday. For Cboe, about 90% of its trading volume of European equities was moved to its platform in Amsterdam on Monday. Before that, all that volume had been handled in London. In the case of Aquis, almost 100% of its European inventory volumes had been moved to its Paris facility. That’s up from a minimal amount when the UK was still part of the EU.
“It’s been an overnight transition company,” said Belinda Keheyan, Aquis’s chief of marketing.
The UK’s split with the EU has already resulted in an outflow of £ 1.2 trillion, equivalent to about $ 1.6 trillion, in assets to continental Europe since the 2016 Brexit vote, forcing banks, exchange managers and other financial institutions move and expand hundreds of employees. or setting up new offices in Frankfurt, Paris and other European cities.
A food delivery courier for Just Eat Takeaway.com in London
Photo:
Hollie Adams / Bloomberg News
Officials at some exchanges say it is too early to determine whether Europe’s domestic stock markets will generate significant gains in trading volume on their respective exchanges as a result of the shift in activity to the continent. This is reflected in the market share data of various operators. For example, trading volume on Deutsche Börse’s Xetra exchange currently represents about 14.4% of the total volume in European markets, according to Cboe, who keeps the data. That’s up from about an average daily share of 13.9% in December. However, the market share of the Spanish Bolsa de Madrid and that of the European platforms of Euronext NV, including those in Amsterdam and Paris, are currently lower than the December average.
The shift in trading volumes of EU equities coincided with the weakness of the pound, which traded 1.5% lower against the euro.
Jane Foley, head of currency strategy at Rabobank, said that while the change in trading platform could weigh on the pound, news of the spread of Covid-19 and vaccinations against it obscure any impact.
“Perhaps that will become clearer in the course of this year,” said Ms Foley. “We need a longer period of time to really go through the decisive factors. It’s pretty hard to figure out what factors are pulling in any direction. “
A deal was reached between the UK and the European Union in late December, days before the end date, giving Britain significant freedom to deviate from EU regulations and sign free trade agreements with other countries. Photo: Paul Grover / Press Pool (Originally published December 24, 2020)
—Caitlin Ostroff contributed to this article.
Write to Ben Dummett at [email protected]
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Appeared in the print edition of January 5, 2021 as ‘Trading of EU Stocks Shifts From UK After Brexit Deal’.