By Pierre Briançon
The Dutch capital is displacing London as the exchange of choice to trade European shares and derivatives, in one of the first major financial consequences of the U.K. leaving Europe’s single market at the beginning of the year.
Amsterdam stock exchanges have seen more than €9 billion ($11 billion) worth of shares traded a day during January (up from a daily €2.6 billion in 2020). That compares with €8.6 billion of trades in London last month, down from €17.5 billion last year.
Meanwhile, the trading of euro-denominated swaps — a key derivative — dropped from 40% of the market last year to 10% in January, according to an IHS Markit survey published this week .
The trading of carbon emissions permits is also gradually moving away from London, according to industry professionals.
The changes have been triggered by the absence of dispositions for financial services in the European Union-U.K. trade deal signed late last year, with the EU now insisting that euro-denominated trades have to be supervised and regulated by European bodies.
Steven Maijoor, the head of the European Securities and Markets Authority, the EU watchdog, said on Thursday that he suspected “this is going to be a permanent change,” but noted some of the trading is done by subsidiaries of U.K. firms that set foot in the EU after Brexit.
The outlook: After a major shift in January, the outflows will slow in the coming months but the trend is unlikely to reverse. And Brussels, playing for time, will wait until more business has moved to the continent before it starts granting U.K. financial players the regulatory “ equivalence ” authorizations to do business in the EU.
Bank of England governor Andrew Bailey criticized the EU’s hard-line position on equivalence this week, and reiterated that the U.K. didn’t want to become a “rule taker” implementing blindly the EU’s financial rules and regulation. But a rising choir of City of London finance professionals views regulatory convergence with the EU as a small price to pay for access to the large EU market.