Brexit 'big bang' to trigger tectonic trading rift in Europe

[snoop1130]

Brexit 'big bang' to trigger tectonic trading rift in Europe

By Huw Jones, Tommy Wilkes

 

FILE PHOTO: St Paul's Cathedral is seen together with skyscrapers in the City of London financial district, Britain, October 16, 2020. REUTERS/Toby Melville/File Photo

 

LONDON (Reuters) - Europe will see its biggest transfer of share trading in more than two decades when stock exchanges open for business in 2021, with Brexit shifting its centre of gravity away from London.

 

While market players hope that years of preparations since Britain voted to leave the European Union means the transition of most euro-denominated assets like shares and derivatives out of the country will be relatively smooth, the long-term impact is unclear.

 

“This is a big bang event and that is one of the things that the market hasn’t truly understood yet,” Alasdair Haynes, chief executive of London-based share trading platform Aquis Exchange, told Reuters.

 

“This is literally everything moves on a specific day and we have got to pray to God that we don’t have some extraordinary event happen in the market that creates high volumes,” Haynes said.

 

While the landmark trade deal agreed last week set rules for industries such as fishing and agriculture, it did not cover Britain’s much larger finance sector, meaning automatic access to the EU’s financial markets comes to an end on Dec 31.

 

The following days will provide a first taste of the effects of the shift and regulators on both sides of the English Channel will be on alert for market dislocations on Jan 4, the first trading day of the new year.

 

The EU wants to reduce reliance on the City of London for financial services and see more euro-based trading in Frankfurt, Paris, Amsterdam and other financial centres in the bloc.

 

That will split Europe’s stock, bond and derivatives markets into two separate trading pools, raising concerns that investors will get less competitive prices.

 

EU banks must trade euro-denominated shares inside the bloc from Jan. 4, forcing them to switch from platforms run by the likes of Cboe Europe, Aquis Exchange, London Stock Exchange’s Turquoise and Goldman Sachs in London, to EU hubs they have opened in Amsterdam or Paris.

 

Most shares are still traded on their home exchange, but between them London platforms account for nearly all cross-border trading in shares in the remaining 27 EU states.

 

That amounted to 8.6 billion euros ($10.4 billion) a day collectively in October, or a quarter of all European trading, Cboe data shows.

David Howson, president of Cboe Europe, said almost all cross-border European stock trading will switch overnight.

 

The last time there was such a rapid shift in volumes was in 1998 when trading in 10-year German Bund futures by dealers in stripy jackets on the LIFFE exchange floor in London was lured by cheaper electronic screens to Frankfurt.

 

“It’s the biggest single share trading shift in the last two decades at least,” Howson said.

 

‘HUGE OWN GOAL’

 

For Aquis, more than half of its business will in future be in the EU rather than all in London, while Cboe is hopeful that clearing in share trades could move from rivals in London to its own clearing house in Amsterdam over time.

 

Goldman Sachs expects half the daily trading in shares on its Sigma-X Europe trading platform to shift over time to its new Paris hub from London.

 

Cboe held a simulation exercise on Dec. 5 and Howson said this revealed its customers expect to shift all their trading in European shares to EU venues.

 

Another of London’s top money spinners is its trade in trillions of euros in derivatives. This anomaly, which dates back to 1999 when Britain opted out of the euro’s launch, has seen a dominant share of trading in euro-denominated swaps take place in the capital.

 

The Bank of England has warned that trade in interest rate swaps worth around $200 billion could be disrupted, because banks operating in Britain and the EU must trade inside their own jurisdiction, or on approved platforms in New York.

 

It may force Britain at the last minute to ease its restrictions on swaps trading to minimise disruption.

 

Erik-Jan van Dijk, Achmea Investment Management’s head of treasury and derivatives, said regulators have already taken steps to mitigate some of the risks by allowing EU banks to continue clearing their derivatives in London temporarily.

 

But trading will have to move, and some counterparties with existing swaps contracts in Britain were reluctant to shift them before they absolutely had to.

 

“We may leave some existing positions in the UK and we might choose not to do business with those UK counterparties in future,” van Dijk said.

 

Bank of England Governor Andrew Bailey has said he will have all its “armoury” at hand, although so far regulators say they do not expect any threats to financial stability.

 

“You can’t rule out that there will be some particular disruption given the scale of change, but overall we are satisfied there has been good proactive management of the risks across the system,” Nikhil Rathi, CEO of Britain’s Financial Conduct Authority, told Reuters.

 

The first day of trading in January may even be a quiet one as volumes could suffer if some market participants sit on the sidelines to see how the dust settles, Cboe and Aquis said.

 

In the longer term, the focus will be on just how much the volumes build up inside the EU and fall further in Britain.

 

“It’s not the start of the end of London, but it’s pretty bloody embarrassing and a huge own goal for Britain,” said Aquis’ Haynes.

 

-- © Copyright Reuters 2020-12-29

 

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[RubbaJohnny]

Eternal optimism, 

 

None yesterday,

Nun today

but Nong tomorrow

 

 

[bannork]

Services account for 80% of UK's GDP and it's an area where the UK has a large surplus with the EU in contrast to trade.

Not covered by the trade agreement just signed.

 

 

[Chomper Higgot]

Oops!

[welovesundaysatspace]

Good news. ???? 

[Laughing Gravy]

More maybe, might, possible and could. Tripe as usual from the EU loving Reuters who are fast becoming as bad as the Guardian and Independent newspapers yet so many posters on here use them a slinks, like they are academic journals of integrity when really, the stories could be used for better things, like wiping ones bottom with.

[Chomper Higgot]

2 hours ago, Laughing Gravy said:

More maybe, might, possible and could. Tripe as usual from the EU loving Reuters who are fast becoming as bad as the Guardian and Independent newspapers yet so many posters on here use them a slinks, like they are academic journals of integrity when really, the stories could be used for better things, like wiping ones bottom with.

The list of news sources you are ‘trashing’ to avoid hearing stuff you don’t want to hear is growing by the day.

[Venom]

Just leave already! 

[George Aylesham]

1 minute ago, Venom said:

Just leave already! 

Whatever the cost?

[placeholder]

5 hours ago, Laughing Gravy said:

More maybe, might, possible and could. Tripe as usual from the EU loving Reuters who are fast becoming as bad as the Guardian and Independent newspapers yet so many posters on here use them a slinks, like they are academic journals of integrity when really, the stories could be used for better things, like wiping ones bottom with.

Interesting. Before the Brexiters were on about how the EU was trying to sabotage the UK. But now, with an obvious and easy way  to take some very valuable business from the UK, it's only speculation. Doublethink much?

[Venom]

Just now, George Aylesham said:

Whatever the cost?

A pound of flesh? 

 

[Thingamabob]

9 hours ago, Chomper Higgot said:

The list of news sources you are ‘trashing’ to avoid hearing stuff you don’t want to hear is growing by the day.

I agree. Time for remainer Brits to stop whining and moaning and to support their country.

[placeholder]

3 minutes ago, Thingamabob said:

I agree. Time for remainer Brits to stop whining and moaning and to support their country.

This is what is known as the Tinkerbell theory of politics and economics. All ya gotta do is clap your hands real hard to show you believe and everything will turn out okay.

[Thingamabob]

12 hours ago, Laughing Gravy said:

More maybe, might, possible and could. Tripe as usual from the EU loving Reuters who are fast becoming as bad as the Guardian and Independent newspapers yet so many posters on here use them a slinks, like they are academic journals of integrity when really, the stories could be used for better things, like wiping ones bottom with.

Well said.

[david555]

I find it a good trading deal  .....giving in on fish a bit & still 5.5 years fishing in your U.K. territorial waters and still controlling the E.U. fish market ..., but taking Our Euro passporting & more ... to Our financial system ....both happy i guess ????

 

The fish trap worked apparently

Edited December 30, 2020 by david555

[Rimmer]

Troll/flame removed

[nausea]

Luckily, I'm a stupid man and cannot predict the future, I might not like what I see. Time will tell, as they say.It does rather fit though, with the whole UK strategy - retreat from Empire, retreat from Europe, If this goes on I predict not only a dissolution of the Union, but a dissolution into various regional areas. A lot of people are pretty peeved with London's pre-eminence. Maybe we're entering the era of city states once again. 

[david555]

4 minutes ago, nausea said:

Luckily, I'm a stupid man and cannot predict the future, I might not like what I see. Time will tell, as they say.It does rather fit though, with the whole UK strategy - retreat from Empire, retreat from Europe, If this goes on I predict not only a dissolution of the Union, but a dissolution into various regional areas. A lot of people are pretty peeved with London's pre-eminence. Maybe we're entering the era of city states once again. 

Luckily, I'm a stupid man and cannot predict the future

 

Your post  does not look stupid at all ..... only against all other predictions , but you could be the one thinking right way.... however a "out of  the box thinking "....

[candide]

2 hours ago, placeholder said:

This is what is known as the Tinkerbell theory of politics and economics. All ya gotta do is clap your hands real hard to show you believe and everything will turn out okay.

A bit like placebo effect.

[onebir]

On 12/29/2020 at 1:31 PM, snoop1130 said:

“This is literally everything moves on a specific day and we have got to pray to God that we don’t have some extraordinary event happen in the market that creates high volumes,” Haynes said.

Excellent planning

[Chomper Higgot]

4 hours ago, Thingamabob said:

I agree. Time for remainer Brits to stop whining and moaning and to support their country.

Apart from Brexit has moved from dreamed possibility to lived reality.

 

Enjoy

[Chomper Higgot]

1 hour ago, nausea said:

Luckily, I'm a stupid man and cannot predict the future, I might not like what I see. Time will tell, as they say.It does rather fit though, with the whole UK strategy - retreat from Empire, retreat from Europe, If this goes on I predict not only a dissolution of the Union, but a dissolution into various regional areas. A lot of people are pretty peeved with London's pre-eminence. Maybe we're entering the era of city states once again. 

The UK has never had an era of ‘city states’.

 

You are perhaps confusing the history of mainland Europe with that of the UK.

[Chomper Higgot]

1 hour ago, david555 said:

Luckily, I'm a stupid man and cannot predict the future

 

Your post  does not look stupid at all ..... only against all other predictions , but you could be the one thinking right way.... however a "out of  the box thinking "....

Actually his post looks rather confused and/or ill informed.

[david555]

9 minutes ago, Chomper Higgot said:

Actually his post looks rather confused and/or ill informed.

His post 

 

Luckily, I'm a stupid man and cannot predict the future, I might not like what I see. Time will tell, as they say.It does rather fit though, with the whole UK strategy - retreat from Empire, retreat from Europe, If this goes on I predict not only a dissolution of the Union...

 

only this part of it looks rather confused ..:

"but a dissolution into various regional areas. A lot of people are pretty peeved with London's pre-eminence. Maybe we're entering the era of city states once again. " 

Edited December 30, 2020 by david555

[welovesundaysatspace]

20 hours ago, Laughing Gravy said:

More maybe, might, possible and could. Tripe as usual from the EU loving Reuters

You must have been reading a different article. Either that or you’re just delusional. I believe it’s the latter. 
 

Anyway. Thank you for the Brexit dividend. Keep it coming. 

 

[Lancelot01]

9 hours ago, placeholder said:

This is what is known as the Tinkerbell theory of politics and economics. All ya gotta do is clap your hands real hard to show you believe and everything will turn out okay.

"There's no place like home "

[Laughing Gravy]

On 12/29/2020 at 7:31 PM, snoop1130 said:

“You can’t rule out that there will be some particular disruption given the scale of change, but overall we are satisfied there has been good proactive management of the risks across the system,” Nikhil Rathi, CEO of Britain’s Financial Conduct Authority, told Reuters.

On 12/29/2020 at 7:31 PM, snoop1130 said:

Goldman Sachs expects half the daily trading in shares on its Sigma-X Europe trading platform to shift over time to its new Paris hub from London.

 

On 12/29/2020 at 7:31 PM, snoop1130 said:

The EU wants to reduce reliance on the City of London for financial services and see more euro-based trading in Frankfurt, Paris, Amsterdam and other financial centres in the bloc.

 

On 12/29/2020 at 7:31 PM, snoop1130 said:

It may force Britain at the last minute to ease its restrictions on swaps trading to minimise disruption.

 

On 12/29/2020 at 7:31 PM, snoop1130 said:

“We may leave some existing positions in the UK and we might choose not to do business with those UK counterparties in future,” van Dijk said.

 

On 12/29/2020 at 7:31 PM, snoop1130 said:

The first day of trading in January may even be a quiet one as volumes could suffer if some market participants sit on the sidelines to see how the dust settles, Cboe and Aquis said.

 

For those who are struggling like wolves with the terminology. Delusional.

 

There is nothing concrete in these sentences but the remainers and foreigners seem to see magic which simply isn't there.

 

 

On 12/29/2020 at 7:31 PM, snoop1130 said:

 

 

Edited December 31, 2020 by Laughing Gravy

[placeholder]

9 hours ago, Laughing Gravy said:

 

 

 

 

For those who are struggling like wolves with the terminology. Delusional.

 

There is nothing concrete in these sentences but the remainers and foreigners seem to see magic which simply isn't there.

 

 

 

Sure. The EU is going to leave all that money lying on the table. Makes sense. In opposite world.

[Rimmer]

An inflammatory post and a reply has been removed

[placeholder]

On 12/31/2020 at 7:17 AM, Laughing Gravy said:

 

 

 

 

For those who are struggling like wolves with the terminology. Delusional.

 

There is nothing concrete in these sentences but the remainers and foreigners seem to see magic which simply isn't there.

 

 

 

Nothing concrete. Now set in stone.

Brexit Forces Bankers to Shift Trading of European Stocks Out of London

The abrupt move underscores the European Union’s broader plan to bolster its own financial centers

Brexit Forces Bankers to Shift Trading of European Stocks Out of London - WSJ