How Brexit May Affect The Stock Exchanges:

In recent months, it has been hard to talk about anything other than the repercussions of the pandemic. Yet, as 2021 dawned, the UK’s departure from the EU fast reclaimed the spotlight. This is largely due to growing concern amongst London’s biggest share trading venues over where they can (and can not!)  buy EU stock in a post-Brexit world. So, here’s a brief look at the situation, and how Brexit may affect the Stock Exchanges. 

The dilemma

Everyone wants trading is to continue as normal. Yet for that to happen, Britain needs to operate within rules and regulations the EU considers ‘equivalent’ to their own. It’s a contentious issue. After all Brexit is, in part, about putting the UK back in charge of its own affairs.

For this reason alone, there has been doubt from the start, that trade talks could ever bear any real fruit. Even the Chief Executive of Aquis Exchange, Alasdair Haynes (who hold 5 per cent of the European Market), has said ‘there will be no equivalence.’ And, if this is true, businesses need to start considering moving their companies over if they haven’t already done so. 

A declaration of no equivalence means that some EU based institutions will be banned from trading in London. By necessity, that trading will need to be moved to other European cities. Amsterdam and Paris are already proving popular choices. But, this leaves London vulnerable and may see the capital lose its dominance as a share trading centre. 

Currently, London handles up to 30 per cent of the European daily market. The daily market as a whole is €40billion, so that’s quite a feat. But it is inevitable that exchanges will opt to move their venues elsewhere in Europe to avoid the implications of share trading obligations. So, London’s grip on that 30 per cent will inevitably fall. 

Announced Plans

The London Stock Exchange Group’s share trading platform Turquoise has confirmed plans to open a base in Amsterdam. This will be the exchange’s new hub from which it will trade EU shares. Cboe Europe, the largest stock exchange in Europe has also announced plans to establish an entity in the Dutch capital. Meanwhile, TP ICAP, also headquartered in London at present, has entered into discussions with French regulators about setting up an EU base in Paris. 

All three exchanges say they intend to keep their London venues where they are. But, their new plans are indicative of the overriding sense of uncertainty over the shape that Europe’s cross-border share trading market may take post-Brexit. 

David Howson, president of Cboe Europe, stated his concern by saying that “we need to be mindful Brexit doesn’t result in trading reverting back to national exchanges and undo all of the good work we’ve done to bring competition to [the] European equities market over the past decade.” 

 

 

If you are concerned by how Brexit may affect the Stock Exchanges, and its repercussions on your business, please do get in touch. Reputable business finance planning can help you plan ahead!

Written by Alex Welsh

Alex is a Resolution-accredited, Chartered financial adviser. Having joined the firm in 2012, he has extensive knowledge of all areas of financial planning.

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