Banks and asset managers warn that the flood of EU stock trading from the city of London is unlikely to come back after the end of Brexit.
The first day of trading in the city outside the EU’s single market caused a major shift from London, where euro-denominated stocks are normally traded, to new locations in Amsterdam and Paris. This has changed overnight for investors and banks who were free to trade across borders using the UK’s EU member states.
“It was an amazing own goal for the UK, and this is just the beginning,” said Gianluca Minieri, deputy global trading director for fund manager Amundi. He added that he would move to a place where he could get liquidity.
As investors became accustomed to the new regime, they traded in the EU on Monday, and on Tuesday at similar value, about 6 billion euros of stock, usually replaced in the city, were traded. That’s about half the amount of business that London banks and brokers typically process.
A sudden shift was needed as the EU refused to admit that most of the UK’s regulatory system was “equivalent” to itself. This put virtually all euro-denominated equity business transactions back into the block. Following Brexit, Brussels is enthusiastic about claiming its own sovereignty in financial services and not letting foreign regulators regulate euro assets.
“I don’t think this will change anytime soon. Nick Bailey, managing director of consultancy Duff & Phelps and a former director of the Financial Conduct Authority, said:” EU Can’t be seen immediately to give equivalence in this area. “
“As the market adapts, the need for equivalence diminishes, and its value diminishes month by month,” Bailey added.
Brussels is not keen on returning the business, and acquiring trading rights from an equivalent process would be a “painful process” for the UK, Minieri said.
The UK and EU are aiming to reach a memorandum of understanding on future cooperation in financial services by the end of March, but expectations for a broader agreement are diminishing.
While this change underscores how harsh the equivalent rulings are, it is unlikely that the escape will seriously worsen Britain’s finances. Most of the taxes in the stock trading industry are paid on the returns reported by the exchange, not on the transaction itself. Financial services provided HM Treasury with approximately £ 76 billion in tax revenue last year.
Banks and fund managers also said that thousands of trading jobs are unlikely to soon follow assets from London, as splits were widely expected and prepared.
“What we and all our peers have done in the transaction is to make sure that the contacts of our core clients are EU-based, but the product representative is still in London,” said a trading manager at a Swiss bank. I will. ” “Therefore, we don’t violate the rules. We just talk to the client over the phone, but nothing really changes.”
The head of trading for a large UK-based asset management company said it was unlikely to make a difference in the physical location of the trading team.
“I don’t think it will be a problem as long as the regulatory environment allows us to continue to access these markets.”
Additional Report by Stephen Morris and Attractor Mooney
London’s lost EU stock trading could disappear forever, warning city figures
Source link London’s lost EU stock trading could disappear forever, warning city figures