UK fightback: Boris to pull rug from under EU rivals with financial masterplan – new rules

Business

Brexit: Expert discusses 'importance' of UK financial services

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As a result of regulatory restrictions which kicked in at the end of the Brexit transition period, shares valued at billions of euros a day which were previously bought and sold in the City are now traded in the Netherlands instead – meaning it took London’s crown. However, the UK is now rolling out a series of rule changes which financiers believe will significantly redress the balance – and put Europe’s financial centres on the back foot.

For a start, the return of Swiss share trading to London, permitted now that the UK is no longer a member of the bloc, has closed the gap – Amsterdam traded shares worth £9.22bn (£10.7bn) worth of shares in March, with London only fractionally behind on £9.13bn (€10.6bn).

In addition, Britain is also planning to end limits on the amount of share trading so so-called “dark pools”, or private marketplaces.

Furthermore, rules which determine where investors can trade stocks, referred to as the share trading obligation, are likewise being binned in a move which has the potential to damage EU fund managers.

A report published by one dark pool, Liquidnet, said: “European asset managers will be potentially at a disadvantage, excluded from pools of liquidity.”

Liquidnet points out that three-quarters of the trading on its venue takes place between UK and non-EU institutional investors.

The City is planning further adaptations including becoming a stronger venue for the listing of ‘blank cheque’, special purpose acquisition companies, and adopting more flexibility to offer the founders of dual-class share structures additional voting rights after a listing.

Such an approach seems likely to be aimed at enabling the City to compete with Amsterdam.

Speaking in March, Laura van Geest, chairwoman of the Dutch Authority for the Financial Markets, said: “The UK is changing its rules to get more aligned with ours, I would say.”

Significantly, Amsterdam’s gains as a result of Brexit are chiefly restricted to companies which specialise in facilitating trade, such as CME Group, London Stock Exchange Group, Tradeweb, MarketAxess and Bloomberg.

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Brokers who negotiate deals are therefore booking them in Amsterdam or New York – but remain as a vocal presence in London.

Assessing Amsterdam’s currently pre-eminence in April, Douglas Rediker, founding partner of International Capital Strategies and a former investment banker, said: “While it was easily foreseen, it still caused a stir.

“In and of itself, it didn’t create a huge impact in employment.

“But it did poke a hole in the story that London could never be replaced.”

Speaking at an online event organised by the Peterson Institute for International Economics in April, Katharine Braddock, head of financial services at HM Treasury, said Britain was “very keenly aware” it needed to re-establish a “clear sense of values for financial services”.

She added: “The Brexit experience has been seen as disruptive - in industry, as it threatens business decision-making.”

However, she stressed: “So far we have not seen the sort of scale of shift out of the UK that was widely predicted in the summer of 2016.

“There hasn’t been an enormous amount of change in the overall employment pattern in the UK financial services industry.

“A lot of the change that we have seen is as much as anything correlated with overall the picture around profits and the drive to optimise for cost and profitability in general in investment banking.

“By and large we are seeing restructuring but we have not seen massive relocation.”

“But we are under no illusions here in the UK that we are not at the steady state in terms of the distribution of activity through Europe in financial services in the wake of our departure.”

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