30 November 2020

Bloomberg: London ‘Thrown to the Lions’ as Brexit Finance Deal Unlikely

Growing signs of trading, assets and people moving to Europe; London’s long-standing advantages may help soften Brexit. The golden age of the City of London began with a big bang. It’s ending with a whimper.

Fears that the finance powerhouse that emerged from Margaret Thatcher’s 1986 deregulation -- known as the Big Bang -- will gradually be dismantled have deepened with a recent flurry of announcements about some business heading to the European Union as Britain enters the last month of the Brexit transition period without a financial-services deal in sight.

The latest shift came Monday at 8 a.m., when London Stock Exchange Group Plc’s stock trading platform Turquoise Europe went live in Amsterdam. It joins other trading venues like Cboe Europe and Aquis Exchange Plc setting up shop on the continent as part of their no-deal Brexit plans, a contrast with the late 1980s, which ushered in a period where London became the place to be for equities trading.

“The City of London has been thrown to the lions,” said Alasdair Haynes, chief executive officer at Aquis, adding that the U.K. could lose even more stock trading than it expects if giant U.S. asset managers like BlackRock Inc. decide to trade in Paris and Amsterdam.

Last week, Goldman Sachs Group Inc., said it had applied to French regulators to open its SIGMA X Europe stock platform in Paris from Jan 4. Goldman partner Elizabeth Martin said that she expects most of the 8.6 billion euros ($10 billion) a day in London-based European share trading to shift to the bloc.

Europe Calling

Aquis has already established a platform in the French capital. It went live with more than 1,700 European shares earlier this month. Other trading venues like Liquidnet have outposts in Dublin to ensure they can service clients.

“We are expecting a big bang on Jan. 4,” said David Howson president of Cboe Europe, the largest of London’s stock trading platforms, which opened its own venue in the Dutch capital last year. “The industry has never had to move this much flow overnight.”

It’s not just stock dealing that’s shifting. Brussels disappointed London swap traders last week when its markets regulator said that derivatives need to change hands on EU-based platforms from January. That means trillions of dollars of trades are at risk of being transacted outside of the U.K.

Land Grab

The bloc has already made a land grab for London’s euro swaps clearing business, urging its banks to accelerate a shift to Europe. Deutsche Boerse AG’s Eurex Clearing has built up a 19% share of the business over recent years although it is dwarfed by London’s market share....

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