London loses share trading crown to Amsterdam in 'symbolic' post-Brexit shift

Trading shifts to continent as EU fails to recognise Britain’s regulatory regime

Britain's divorce deal with the EU means some European institutions cannot trade in the City of London. Bloomberg.

London has lost its crown as Europe’s top share trading hub in a 'symbolic' post-Brexit shift.

Stock exchanges in the Dutch capital traded €9.2 billion ($11.15 billion) a day in January, compared to London's €8.6 billion, according to the Cboe exchange, which operates in both cities.

This compares with an average of €17.5 billion traded daily in London during 2020, when Frankfurt was second with €5.9 billion and Amsterdam sixth with €2.6 billion, Cboe said.

The data has caused alarm in some political quarters, with the chair of the European Securities and Markets Authority saying the shift could be permanent.

"I would suspect that this is going to be a permanent change in terms of movement of trading from the UK to the EU ... We have seen that most of the trading has gone to Amsterdam," Steven Maijoor said.
"The numbers are quite significant, at the same time we should realise that some of this trading is done by subsidiaries of UK market infrastructures but we have also seen increased trading in Europe not linked to London trading venues."

The decline in London trading was prompted by a ban on EU institutions trading in London post-Brexit, as authorities in Brussels have not recognised the regulatory regime in the UK.

While British-based companies can still trade EU shares in London, European companies must now trade European stocks on exchanges based in the EU.

Anish Puaar, an analyst with Rosenblatt Securities, said the findings were expected but mostly symbolic.

"The shift [from the UK to the EU] is mainly symbolic, London has been a hub for pan-European trading platforms but that ended after Brexit," he said.

However, he said he did not believe the ultimate impact would be 'significant' for jobs or tax revenue.

"The industry has been preparing for this for a while. In terms of tax revenue and jobs, the impact may not be that significant. In the future, the more important aspects will be listings and attracting big IPOs."

The City of London is now battling for so-called “equivalence” rulings from the EU, which would allow it to win back business from the continent.

Without an “equivalence” deal being struck, around €6.5 billion (£5.7 billion) of deals shifted overnight to the EU – including the fees that come with them.

The shift is unlikely to see more jobs lost from the City of London, but tensions remain high between London and Brussels as banking regulators continue to thrash out a memorandum of understanding over future rules.

Mr Puaar said it was unlikely the trading volume lost to Europe would return to the City of London, even if a deal was struck.

"If London gets equivalence firms will theoretically be able to trade in both locations. The market already did quite a bit of work in shifting everything over to Amsterdam and there wont be much appetite to move it back".

Labour Party leader Sir Keir Starmer said finance minister Rishi Sunak must do more to protect the City following Brexit.

Speaking to reporters at Heathrow, he said: “The Chancellor said that he would look after the City of London on financial services; he needs to make good on that promise because we absolutely need to protect our financial services.”

Bank of England governor Andrew Bailey said on Wednesday that the UK would not be forced to follow EU rules to the letter and that sensible agreements over what constitutes “equivalence” were needed.

Giving the governor’s annual Mansion House speech to the City, he said: “The EU has argued it must better understand how the UK intends to amend or alter the rules going forwards.

“This is a standard that the EU holds no other country to and would, I suspect, not agree to be held to itself. It is hard to see beyond one of two ways of interpreting this statement, neither of which stands up to much scrutiny.”

He added: “I’m afraid a world in which the EU dictates and determines which rules and standards we have in the UK isn’t going to work.”

A memorandum of understanding is expected to be signed between the UK and EU over financial services in March.

Michel Barnier, the European Union’s chief Brexit negotiator, warned the bloc won’t be hurried into granting UK financial firms free access to the bloc’s single market.

“Equivalence decisions are, and will remain, unilateral of each party and aren’t subject to negotiation,” he said at the European Business Summit in Brussels on Thursday. “We will take no risk about financial stability.”