22 October 2020

FT: Stock exchanges prepare to activate their Brexit contingency plans

London’s biggest share trading venues are preparing to switch on their Brexit contingency plans, reflecting fears in the City that the UK’s departure from EU frameworks will trigger a radical reshuffle of where investors can buy and sell European stocks. The London Stock Exchange Group said last week that it planned to open the Amsterdam base of its Turquoise platform at the end of November, as a place to trade EU shares.

On November 11, rival Aquis Exchange will add stocks to its French platform that were previously available only in London. Before proceeding, they and their investment banks and high-frequency trading customers are hoping London and Brussels will come to an accord allowing Europe’s cross-border share trading market to remain intact beyond January. But to prevent a split, the EU needs to recognise the UK and its exchanges as operating under “equivalent” rules.

With fewer than 90 days to go, optimism is running out. “There will be no equivalence. People are living in a pipe dream if they think it’s going to happen,” said Alasdair Haynes, chief executive of Aquis Exchange, which has 5 per cent of the European market. “People are getting prepared to move business over.” London is the biggest share trading centre in Europe, handling as much as 30 per cent of the €40bn daily market but, without equivalence, some of that trading will move to cities such as Amsterdam and Paris because EU-based institutions will be barred from trading in London.

The biggest US and European investment banks are still lobbying policymakers to avert a rupture. London risks losing its trading dominance “We would prefer to have access to a global capital market,” said Edward Monrad, head of European cash market structure at Optiver, an Amsterdam-based market maker. “To some extent, people have a back-up but if you’re going to have a split, it will split liquidity and be bad for investors.” The issue is snagged on a part of EU markets rules known as the “share trading obligation”, a law that determines which venues investors can use to trade liquid stocks....

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