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While a Brexit trade deal agreed last month set rules for
industries such as fishing and agriculture, it did not cover
Britain's much larger finance sector, meaning London's automatic
access to EU financial markets came to an end on Dec. 31.
That has meant the bulk of trading in euro-denominated shares
has had to switch from London to the EU, as the bloc seeks to
reduce its reliance on a finance centre outside its borders.
Many London-based businesses had prepared for the new conditions
by setting up units in the EU, and Monday put those new
arrangements to the test.
Trading on Cboe Europe and London Stock Exchange's Turquoise
units in Amsterdam, and on Aquis Exchange's new Paris platform,
grew steadily on Monday morning, with no glitches reported.
Data from Cboe, Europe's biggest cross-border share trading
platform, showed that two hours after the open, 60% of all of
its activity was at its Amsterdam unit.
"All our systems are operating normally, and as expected the
majority of activity in EEA-symbols (mainly EU listed shares) is
now taking place on our Dutch venue, with activity across all
our market segments," Cboe Europe president David Howson said.
"We will continue to work with clients to ensure a smooth
transition over the coming days and weeks."
Aquis reported a "clean shift" in euro share trading from its
London base to its new Paris unit, with the French capital now
the location for most of the group's business.
Trading on Turquoise was roughly split between London and
Amsterdam.
No European trading of note had taken place on the three EU hubs
until Monday.
Trading in non-EU listed shares remains in London.
"I don't think there has been any impact from this switch," said
Keith Temperton, equity sales trader at Forte Securities. "It
has been planned for years."
Britain's Financial Conduct Authority (FCA) and the EU's
European Securities and Markets Authority (ESMA) had no comment.
FRANKFURT CALLING
Banks and other financial market participants in the EU are also
required to trade swaps, a type of derivatives contract, on
platforms inside the bloc and stop using venues in London, the
world's biggest centre for trading swaps.
In a last minute intervention on Dec. 24 before markets shut
until Monday, the FCA said it would allow UK market participants
to trade swaps on EU venues until the end of March to avoid
disruption in markets.
Traders said that on Dec. 24 the spread between the 10-year
interest rate swap on Deutsche Boerse's Eurex in Frankfurt and
LSE's LCH swaps clearing unit in London ballooned by 35 basis
points.
This signified that it was more expensive to use Eurex Clearing
than LCH as customers clambered to move business from London to
Frankfurt before markets closed on Dec. 31.
A trader said that normally there is little or no spread between
the two clearing houses.
Christoph Rieger, head of rates and credit research at
Commerzbank in Frankfurt, said there was no big disruption in
initial trading on Monday.
"As far as I am aware, preparations by all the major players had
been done already, they had done their homework and made their
plans," Rieger said.
ESMA on Monday cancelled its authorisation for four trade
repositories in London used for reporting derivatives trades, in
a further sign of the British capital being locked out of EU
markets.
(Additional reporting by Thyagaraju Adinarayan and Dhara
Ranasinghe; Editing by Rachel Armstrong and Mark Potter)
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