London regains top position as Europe’s largest share trading hub – for now

The City of London regained its pole position as Europe’s largest share trading centre last month for the first time since Brexit, toppling Amsterdam from its perch, according to new data from Cboe Europe.

However, it is just by a fraction and does not signal this is a permanent trend.

Numbers crunched by Cboe Europe showed an average €8.92 bn of shares a day were traded on various London venues in June, compared with €8.8 bn on different Dutch platforms.

This compares with about €9.4 bn average daily trading value for Amsterdam in May and around €8.7 bn in London. Paris, the third largest venue, saw its daily trading decline from almost €6.1 billion in May to €5.8 bn in June.

London has gained some volumes this year from Swiss equity trading, which resumed after the UK dropped out of an EU-wide ban that has been in place since 2019.

It is still a far cry though from December 2020 before the transition period ended when London’s share trading volumes totalled €14.3 bn versus just €2.2 bn for Amsterdam.

The UK government is intent on financial services continuing to be a strong contender and believes the lack of equivalence between the UK and EU could give the industry greater freedom in shaping its own destiny.

To that end Chancellor Rishi Sunak unveiled details of proposed changes to rules governing stock market listings, stock, bond and commodity trading and insurance.

The Treasury’s issued a hefty 72-page consultation on UK wholesale markets with MiFID in its sights.

It said the regulation imposed administrative burdens on traders and wasn’t suited to London’s deep markets for stocks, bonds, derivatives and commodities.

It added that “the government sees the UK’s departure from the EU as an important opportunity to ensure that we have regulation which is right for the UK. This is best achieved by amending the regime for secondary markets to ensure that it reflects the U.K.’s position as one of the largest capital markets globally.”

More specifically Rishi is targeting the removal of the “double volume caps” on the portion of share-trading that can occur on dark pools as well as repealing the share trading obligation determining where equities must be bought.

The chancellor also backed some of the proposals laid out by Lord Hill’s report on UK listings, such as reforms to prospectus rules.

In fixed-income markets, the proposal adjusts which derivatives must be traded on venues and seeks a “more tailored regime” for which deals are subject to price transparency rules.

“It is a case of game well and truly changed if the UK government follows through with these changes to MiFID II,” says Andrew Morgan, ex-head of equities trading at Deutsche Bank now CRO at TS Imagine.

He adds, “There will be an even greater focus on sourcing high-quality liquidity, particularly in block size. The market always finds ways to adjust to new changes, and even under the existing rules, brokers are already finding ways to put together larger trades which benefit from the Large In Scale (LIS) waiver.

With small-size dark liquidity likely to be less scarce with individual securities unrestricted by the caps, periodic auction functionality will not be as valuable when it comes to discovering new trading opportunities.”

©Markets Media Europe 2021

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