(Bloomberg) – The golden age of the City of London started with a big bang. It ends with a moan.
Fears that the financial powerhouse that emerged from Margaret Thatcher’s deregulation in 1986 – known as the Big Bang – would be gradually dismantled have escalated with a recent wave of announcements of some companies heading to the European Union as Britain is entering the last month of Brexit transition period with no financial services deal in sight.
The latest change was at 8 a.m. on Monday, when London Stock Exchange Group Plc’s stock trading platform, Turquoise Europe, went live in Amsterdam. He joins other trading platforms like Cboe Europe and Aquis Exchange Plc moving to the continent as part of their no-deal Brexit plans, a contrast to the late 1980s, which ushered in a period when London was become the ideal place for stock trading. .
“The city of London has been thrown to the lions,” said Alasdair Haynes, CEO of Aquis, adding that the UK could lose even more stock trades than it expects if giant US asset managers like BlackRock Inc. decide to negotiate in Paris. and Amsterdam.
Last week Goldman Sachs Group Inc. said it asked French regulators to open its SIGMA X Europe trading platform in Paris from January 4. Goldman’s partner Elizabeth Martin said she expects most of the 8.6 billion euros ($ 10 billion) per day. in London-based European equity trading to move to the block.
Aquis has already established a platform in the French capital. It was uploaded with over 1,700 European stocks earlier this month. Other trading sites like Liquidnet have outposts in Dublin to make sure they can serve clients.
“We expect a big bang on January 4,” said David Howson, chairman of Cboe Europe, London’s largest stock trading platform, which opened its own site in the Dutch capital last year. “The industry has never had to move so much flow overnight.”
It’s not just stock transactions that change. Brussels disappointed London swap traders last week when its markets regulator said derivatives should change hands on EU-based platforms from January. This means billions of dollars in transactions are at risk of being traded outside the UK.
The bloc has already made a land grab for London’s euro swap clearing business, urging its banks to speed up the move to Europe. Deutsche Boerse AG’s Eurex Clearing has accumulated a 19% share of the business over the past few years, although it is eclipsed by London’s market share.
In recent weeks, Goldman and JPMorgan Chase & Co. have indicated that between them, more than 300 employees will move to mainland cities. Goldman is transferring up to $ 60 billion in assets to Frankfurt, while JPMorgan is transferring around $ 230 billion to the German city.
Consulting firm EY said in a new report on Monday that only 10% of large financial services firms plan to establish or expand their business in the UK in the coming year, discouraged by Brexit uncertainties and of the Covid-19 pandemic. This is down from 45% in April.
EY said in a report last month that the 7,500 roles and 1.2 trillion pounds ($ 1.6 trillion) in assets that have already moved may just be the beginning. He expects further staff and asset changes once the UK’s transition period officially ends.
This does not bode well for the UK, where finance employs over a million people, accounts for around 7% of the economy and accounts for over a tenth of all tax revenue. Despite this, the sector has received little attention to fishing, which accounts for just 0.1% of the UK economy, in the lengthy Brexit negotiations.
“There is a sense of frustration” that the city is being left behind by the government in key Brexit talks, London Mayor William Russell said in an interview on Monday. “It’s disappointing.”
To be sure, London’s long-standing advantages of the English language and legal system and a deep talent pool mean it won’t be overwhelmed anytime soon. And a last minute deal with the EU on financial services could still take place.
The LSE has said it will cancel its plan for Turquoise Europe if the European Union declares that Britain can host trading services for EU stocks, in a process known as equivalence name. Such an agreement remains a possibility.
How ‘equivalency’ is key to post-Brexit banking services: QuickTake
But time is running out. And without a deal, London’s status as Europe’s financial hub will no longer be in its hands.
“The kingmakers here will be the Americans,” said Haynes, CEO of Aquis. “There is no guarantee that they will continue to trade in London. They will follow the liquidity. “
(Updates with Lord Mayor’s comments in the 14th paragraph)
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