UKH

Amsterdam overtakes London as Europe’s top trading hub

https://www.thelondoneconomic.com/business-economics/amsterdam-overtakes-lo...

It would appear the supposedly unthinkable is happening

I know there are some traders on here: did you and/or your colleagues think this was inevitable?

Yes.  Tragic but obvious - UK now a competitor rather than a member.

I know pro-Brexit people say they knew what they were gotting into and, of course, everyone knows about "project fear"... but what we've done is self-harm on a hard-to-imagine scale.  For reference we did around €12.5bn/month pre-Brexit, so 30% down and falling.  How do people imagine that this is good for the country?

Edit: not a professional trader; but reasonably seasoned investor

I have to admit to knowing not a lot about trading but even I suspected this would happen

I just remember lots of noise a few months ago (mostly from Brexit voters?) about how there was no way anywhere in the EU could usurp London's position

Of course the City will survive but I fear with reduced status

Well, with reduced taxes from reduced incomes, something else will have to reduce.

Anyone wonder how long before unemployment rates go down, along with just about everything else.

(Not exactly wanting it, but it's pretty well inevitable).

Jacob Rees Mogg in 2017:

“We need to be reiterating the benefits of Brexit! This is so important in the history of our country, it’s Magna Carta, it’s the burgesses coming at parliament, it’s the Great Reform Bill… It’s Waterloo! It’s Crécy! It’s Agincourt! We win all these things!”

https://www.theguardian.com/politics/2017/oct/08/jacob-rees-mogg-pinstripe-...

JRM moved nearly all his business to the EU, so it's going swimmingly for him.

There is mention of a memorandum of understanding in March. As we have seen, the brexit deal went down to the wire. The fishermen, who had banked on open seas, are screwed. The fact that it's Feb, and we've not really heard much seems a tad worrisome.

"London accounts for nearly half of the UK’s export earnings from services."

https://www.cityam.com/exclusive-brexit-hit-to-london-may-be-9-5bn-a-year/

When the bankers say "great opportunities", I think they actually mean shorting British companies.

https://www.bbc.com/news/business-55974079

Failed in his previous role..gets promotion...

Some context from Gérard Lyons

London is Europe’s major financial centre and one of the world’s two leading financial hubs. This is unlikely to change following Brexit. Its main competition is with New York, Singapore, Hong Kong and other centres like Shanghai that will emerge in the coming years.

However, the headline of today’s main story in the Financial Times proclaimed, ‘Amsterdam ousts London as Europe’s top share trading hub’. The article correctly reported that more shares were traded last month on ‘Euronext, Amsterdam and the Dutch arms of CBOE Europe and Turquoise in January’ than ‘in London’.

While the data in this story is naturally correct, it needs to be put within context in order to draw the right conclusions. There are probably seventeen exchanges in western Europe. Euronext is third in size, the Deutsche Borse second and the London Stock Exchange (LSE) first. But London is not just captured in the LSE.

In fact, the bulk of trading never makes it onto these exchanges. The vast bulk of trading is carried out on what are called ‘systematic internalisers’ within large trading firms based in London. This is where banks and other financial firms match up trades internally between clients, such as people and institutions. Then there are block trades and ‘dark pools’. The latter are private trading exchanges or forums where users have some degree of anonymity. They can be popular with institutional investors wanting to execute large orders without it becoming public and thus unduly affecting prices. So, the vast bulk of such trading, which is centred in London, is not captured on those exchanges.

Moreover, what is reported in the FT is EU trading. Naturally, this is important but it is a subset of the international trading that takes place in London. In fact, the London ecosystem is vast.

What the article doesn’t make clear is that this activity does not mean that business is moving to Amsterdam. More trades are being booked within the EU because EU regulators now demand it. More importantly, though, the value in the trade for an economy remains in London — in the sense that activities such as settlement, clearing and risk management are still carried out here.

Amsterdam makes a natural choice as it was, even pre-Brexit, the centre of European options trading and has been for a long time. Of course, the City must not be complacent. It was always likely that there would be some relative increase in business in regional centres like Amsterdam.

As I and others have pointed out, firms will need to make changes post-Brexit depending upon their business model. For some, this will mean basing some staff or doing more business in the likes of Dublin, Luxembourg, Paris, Frankfurt as well as Amsterdam. That is in order to serve EU based clients within the EU. Again, this was well recognised before Brexit.

For others, though, it will mean doing more business in London. Notwithstanding Covid’s impact on London as a place to live, work and visit, the City’s position is still very strong. UK regulators, in the face of uncertainty, have granted a temporary permissions regime for three years to firms who want to carry out business here. The large number of firms that have sought to take advantage of this, reported to be 1,500, is testimony to the City’s pulling power and that many firms, given their business models, need to have access to London. This successful take-up is another positive for the UK.

The success of financial centres depends upon a combination of their natural characteristics, the regulatory environment and where clients want to do business.

Even if you are negative about Brexit, London’s inherent characteristics are acknowledged as being Brexit-proof. Others, including myself, would argue that they are actually enhanced by Brexit and that we should be optimistic about what lies ahead. These characteristics include English common law, time-zone, language, flexible workforce, its creative hubs as well as the skills, knowledge and experience based here. London has proved to be a good place to do business in, and from, hence its global appeal.

Its regulatory environment is vital — as the Governor of the Bank of England made clear last night, the UK should not be a rule taker. In fact, it has the ability to make the most of its opportunity to diverge, if needed. At the same time, the UK will continue to help set the agenda at the global level, vital for the raft of firms in the City.

Between the EU and the UK, there are about 17 types of equivalence that need to be addressed (equivalence being a recognition between states of the legal regulatory requirements for good and services), not all linked to market access. Equivalence is a nice to have, regulatory independence is a must have. That is the key.

Then, there is where clients want to do business. This too favours London given its pools of liquidity. As Mark Carney pointed out in 2017, if the EU approach forced clearing into the euro area it risked segmenting the market, with higher bid-ask spreads, resulting in more capital having to be set aside to address this, thus limiting the lending ability, not helpful to EU based banks themselves. Attention is still being drawn to that risk.

In some respects, EU regulators are trying to create a walled garden. In all likelihood, if they pursue this further, then we may well see a repeat of the trend of half a century ago when tougher regulations in the US saw business flow to London with the growth of the euro-dollar market. This time, however, it may be the euro-euro market that blossoms in London, as the place clients wish to transact business.

Importantly, the events at the start of this year highlight that the City of London currently lacks a dynamic cheerleader who can speak up for it on the global stage. Just as with the economic outlook, there needs to be a clear, long-term vision for the financial sector.

It is noticeable how the view in the City has changed. Employment in the City has risen. There is an acceptance of the benefits of the UK setting its own regulatory agenda, and diverging from the EU if needed, in order to retain our global cutting edge. Also, as we have seen, London has gained a competitive advantage in some of the key growth areas, such as green finance and financial technology, building upon its previous strong position in growth areas such as Islamic finance and the offshore Chinese renminbi.

Different European regulators are keen to steal a slice of the London cake. We need to ensure we are proactive in our response, ensuring London remains a good place to do business.

What a crock of shit... 

Insightful 

That's very interesting - thanks. 

That's an interesting analysis of the piece

Is "crock of shit" some kind of code for "I don't really understand what he's on about but I know it isn't what I want to hear so I'm going to say I disagree with it"?

How exactly do your credentials compare with Gérard Lyons?

I'll admit my credentials do not include being a very vocal proponent of a hard Brexit like Mr Lyons......a man who claimed being outside of the SM and CU would be a benefit to our economy.

Now forgive me if I am not now listening to his waffle about how diverging from the EU being of benefit for the city.....how is diverging from the EU going for the rest of our economy so far?

All I hear about are problems and zero benefits.....perhaps you see it differently.

Unfortunately the numbers say otherwise. City worth £135bn/year previously (BBC reference). The numbers include international share trading. So the reassurance in that piece is misplaced.

It also triggers sirens because it takes a storm of words and jargon to make its point...but almost no numbers.

I hope the City of London is losing status as a financial centre and would count it as a benefit of Brexit if it is.

https://www.taxjustice.net/press/press-release-city-of-london-costs-uk-4-5t...

The power of finance in the City of London is harmful to the real economy of the UK and the distortions that it causes outweigh any benefits we get from taxation or jobs.

So much so that i checked the source (which you interestingly chose to omit).  No, economic advice from the Spectator isn't a quality rebuttal to the FT... although it's now clear why you omitted the source!

Interesting reading and how money circulates in the economy..

The other side of the coin is that the other parts of the economy would not take up the slack and fill the shortfall. Put it this way you are not going to get a sudden 9% growth in manfacturing and others. It would also mean a shortfall in tax income( pretty basic stuff and that would have to be made up elsewhere).

You are currently witnessing a 10% fall in GDP as a result of Covid.Think of it that way without London.

Unfortunately there is  a mixed view in the City as I see it. You even had the top guy at Barclays putting forward a "world" view the other day.

I view it as the City is agile and stroing enough to take ht ehit. But things like manufacturing, chemicals, SMEs involved in online sellign to Europe and so on . They are the ones going to rsuffer.

From the news this morning....it is viewed as symbolic more than anything else.

On the flip side..an EU based business said he was sourcing his product from Ireland rather than the UK as it was simpler.

Well that is why  alot of  business people in NI are also rubbing their hands with glee at the moment...they have somehow landed themselves in a position of being in  both worlds........

https://www.bloomberg.com/news/articles/2021-02-12/city-of-london-s-brexit-...

It has the advantage of not cluttering up the thread, and it's useful for the reader to know the source. You can post several of these 'links', offering the reader some balance, rather than just one opinion piece from a prominent Brexiteer in the Tory Spectator.

I agree that a hard Brexit fanatic writing for the Spectator with almost no detail represents the weakest of arguments.  Your link is behind a paywall though...

I must be privileged!

Try this

https://finance.yahoo.com/news/city-london-brexit-tab-rises-000000934.html

Its interesting, but very complacent, and a somewhat one-sided view. Its too long to go through every point, but;

The 1500 companies arent "moving to London", they have applied for and been granted licenses to operate in London, which they have been doing for years, but a separate license has thus far been unnecessary.

Euronext are pushing hard in their expansion plans in Europe; Gerard Lyons is correct in that this needs to be watched carefully in London; if they are not very proactive in pushing their services, they will continue to lose out. Euronext operate in more places than just amsterdam; todays news is just a headline. 

Not quite sure I deserve the slightly patronising response?

Yep, it's an opinion piece from the spectator (shock). I did not post the link as I was curious to see if people would actually read the article rather the offer some pavlovian rejection out of hand because it comes from a right of centre magazine.

Apologies, that wasn't my intention.... I was going for puerile sarcasm

No shock, but an opinion piece in the Spectator isn't the best source for 'context'. This article does seem to give some context

https://uk.finance.yahoo.com/news/brexit-london-new-york-swaps-trading-deri...

with a range of views from those involved.

Ah right, so you were playing with us! We can't all be doing that.... we'd get UKC in copyright trouble and they'd need more storage space!

We all have biases, the author and publication can provide insights into the likely biases of an opinion piece.

If you don't have an in depth knowledge of the financial markets, there is no way of assessing whether that particular opinion piece has any basis in fact, or is just a load of jargon strung together to make people feel better about a course that the author has championed.

The Article is a good example of the public school boy trained certainty liberally sprinkled with some modern day jargon that seems to get us into a pickle in the modern world especially when the emperors new clothes are pointed out.

The article essentially says that financial services are poorer today than last year and now have more hoops to jump through and more competition on its doorstep, it’s says it with the blind confidence that this is a good thing .

https://www.google.com/url?sa=t&source=web&rct=j&url=https://ww...

Graffiti appearing threatening EU official...

Not sure anybody is rubbing their hands with glee just yet...

There is the small issue that he is the son of Irish immigrants who grew up in Kilburn and schooled at the local primary school before heading to the Catholic comprehensive school in the neighbouring borough. By all means challenge the article, but poor form to attack the man. 

I was being slightly tongue in cheek and made no personal attack on the man himself more the style of certainty in delivery and his education was pretty privileged, having said that the man probably has more reason than most for his certainty.

https://en.wikipedia.org/wiki/Cardinal_Vaughan_Memorial_School

So basically the rich will get richer and the rest will suffer. Which was the point of Brexshit after all.

Andy F

is there any information on whether FarRage has prospered or suffered from Brexit - I suspect it will have been the former and quite substantially.

He's been surprisingly quiet about all the disastrous results of quitting hasn't he? What an utter cnut.

Andy F

I don’t see much evidence whatsoever of the export business booming in NI.

It will take a couple of years. I am not necessarily  convinced.But when a couple of Irish business owners I know are saying the same thing it makes you step back and think. They are after all well known for being shrewd.

There's a piece about this in today's Guardian:

https://www.theguardian.com/commentisfree/2021/feb/13/london-financial-cent...

It makes the points that losing trading volume isn't in itself a bad thing in the short term, but traders go where the volume is because it represents more trading opportunities. So over time, business may well migrate away from London, causing greater loss of volume, causing even more migration. Exponential positive feedback.

Also new developments like carbon emissions trading may never come to London at all, causing it to become increasingly irrelevant as a trading centre. Positive feedback again.

I'm thankful that I know very little about this stuff, but the arguments seemed convincing.

I can’t really comment about Shares/equity trading but I can say that Euro Interest Rate Swap trading has definitely migrated away from U.K. venues. Although nothing is for ever, once the liquidity is established somewhere it tends to be sticky. Given that it’s being driven by EU based Legal Entities it’s only a matter of time before more EU denominated products migrate away from U.K. venues. 

Well-spotted. However, it might be that large-scale financial trading harms the wider economy OR that it is simply a symptom of a failing wider economy.

The symptom of failure hypothesis seems to work well when put in the context of 1980s Britian with manufacturing taking a dive shortly after Thatcher's rise and the ongoing economic stagnation while the financial sector grew ever stronger. The considerable size of the Scottish financial sector may be a symptom of the constraining influences of London rule on the wider Scottish economy. 

If it's a symptom then it is even worse than a harm since it may be more difficult to find one's way back to broader economic prosperity. 

Despite working in the financial sector I can see some of the negative effects from it. One particular point has been the recruitment of the A class from universities. Some of these students could apply their intellect to medicine, engineering, manufacturing, other forms of commerce rather than the pure pursuit of money making. That said many of said students now are turning their back on the City so it will be interesting to see how that plays out into the wider economy. 

https://www.equalitytrust.org.uk/scale-economic-inequality-uk

We have the highest area with wealth in Northern Europe.. London,then we have 9 of the poorest areas in Europe..