04 February 2019

Financial Times: Investors fret about dual-listed shares under a hard Brexit

European investors are urging regulators to protect their ability to buy the London-listed shares of several major companies, including Royal Dutch Shell, Unilever and Ryanair, should the UK leave the EU abruptly at the end of next month.

The concern of asset managers is focused on the dozens of companies whose shares trade both in London, which is typically a bigger and more liquid market, and at another stock exchange elsewhere in the EU.

Britain’s departure from the EU on March 29 without a deal would mean European fund managers could no longer buy and sell the London-traded shares of companies with dual listings. It has left institutional investors lobbying the European Securities and Markets Authority, a Paris-based regulator, to find a way to give share trading in London an “equivalent” status to that in the rest of the EU.

The tussle is the latest flashpoint for investors over Brexit, which has dominated UK markets since the 2016 referendum. Investors’ anxiety over dual listings has intensified given the near paralysis in parliament has kept alive the possibility of the UK leaving the EU without a deal.

“There is a fair amount of industry engagement regarding this topic with more to come in the next few weeks,” said Monica Gogna, a partner with the law firm Dechert, which represents asset managers.

Esma is under political pressure from within the EU to resist granting London-listed shares equal billing in the event of a hard Brexit, according to two people involved in the discussions. In a statement, Esma said that it was “aware of this issue in relation to the trading obligation for shares and are currently looking into it”.

About 90 companies could potentially be ensnared by the problem, with the majority of those having shares that trade both in London and Dublin. Some Amsterdam-listed companies are also affected. The London Stock Exchange has said that EU investors would be forced to use the local listings to buy and sell such shares even if “liquidity is thin and the price is less favourable”.

Shell, Unilever and Ryanair declined to comment.

The picture is further complicated because any restrictions on the ability of EU-based investors to access the London listings could put them in breach of Mifid II regulations that require them to secure the best price for their transactions. The London-listed shares are often the more active and liquid markets.

In a no-deal scenario, the LSE said that EU fund managers would still be able to access stocks that were only listed in London. [...]

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