City of London Just Lost a $240-Billion-a-day Financial Market.
The City of London was just dealt its biggest Brexit-related blow following an announcement by American financial markets operator CME Group that it is shifting its European market for short-term financing, the largest in the EU, out of London to Amsterdam. Worried about the dense fog of regulatory uncertainty hanging over London’s future, the firm wants to ensure that its continental clients can continue using its services even in the event of a no-deal Brexit in March.
The decision was apparently taken before CME’s acquisition of BrokerTec — as the company is known — from NEX Group PLC was given the green light by UK market regulators last week. It is the first case of a major financial market leaving the UK over Brexit fears. Although all large London-based trading venues have set up a regulated entity in the EU in preparation for Brexit, BrokerTec is the first to move an existing market lock, stock, and barrel to a continental European city.
“All of our euro-denominated bonds and repo will move to Amsterdam,” John Edwards, managing director of BrokerTec Europe, said in an interview. “We saw no benefit in splitting liquidity pools. Our U.K. business will not be able to provide services to the European clients.”
On average, €210 billion of European short-term financing instruments were traded per day on BrokerTec in October, Edwards said. But that market will now be moved to CME’s Dutch subsidiary, NEX Amsterdam BV, so that BrokerTec can eradicate the risk of its EU-based clients being cut off from Europe’s repo market if Britain severs its ties with Brussels in four and a half months’ time…