Brexit Makes London-Based Exchange Eye Eurozone
June 30 2016 - 12:00PM
Dow Jones News
LONDON—The chief executive of Europe's largest stock exchange
said it is "highly likely" to establish a presence in the eurozone
as a result of the U.K.'s vote to split from the European
Union.
The comments from Mark Hemsley, CEO of London-based Bats Europe,
came as his counterpart at Euronext NV, an operator of exchanges in
France, the Netherlands, Belgium and Portugal, warned the U.K.'s
exit from the EU would put London's position in euro-denominated
trading at risk. Bats Europe is the region's biggest stock exchange
by value of shares traded.
"Unless we get an early and clear view on the U.K.'s
negotiations with the EU, which I don't think is likely, we are
highly likely to set up a eurozone legal entity [in addition to the
London headquarters] just because it provides us with some
certainty," Mr. Hemsley said.
Bats accounts for about a quarter of all European equities
trading. In May, the exchange handled a daily average of €9.4
billion ($10.4 billion) of trades.
Mr. Hemsley said the move might not require a lot of staff to
relocate—the majority could probably remain in London—but the
amount of business put into the entity "could be increased or
decreased depending on what our customers are doing in terms of
their own Brexit planning."
Mr. Hemsley said the referendum result had the potential to put
restrictions on EU customers wanting to trade in London, but could
also restrict the exchange's ability to gain access to clearing
facilities in Europe.
Meanwhile, Sté phane Boujnah, CEO of European exchange operator
Euronext, reiterated his belief that the 30% to 45% of trading in
euro-denominated assets done in London would only be acceptable
while the U.K. was part of the single market.
Boujnah said: "What was normal when you share a common destiny,
a common single market, a consistent regulation becomes an anomaly
once London leaves the EU."
However, many lawyers and market practitioners believe there are
no legal grounds on which the trading of euro-denominated
transactions can be forced away from London. Lawyers say such a
move would be highly complex and would have ramifications for the
clearing of sterling products in the eurozone and euro products
cleared in the U.S. and elsewhere.
Still, the comments reflect a fear that London's financial
services industry could suffer once the U.K. leaves the EU, with
several banks, including J.P. Morgan Chase & Co. and Morgan
Stanley, already warning they would consider shifting some jobs to
the continent.
Some U.K.-based proprietary trading firms, which are among
Bats's largest customers, could move into the eurozone to provide
certainty over access to markets such as the Euronext exchanges,
Deutsche Bö rse and the large German futures market, Eurex.
The head of one large U.K.-based proprietary trading firm said
it was "seriously considering" the implications of setting up a
regulated entity in Amsterdam. Such a move is relatively easy for
the firms given they have typically young workforces and little
infrastructure on the ground.
The U.K.'s decision to split from the EU could also prove an
obstacle to a planned £ 21 billion tie-up between the London Stock
Exchange Group PLC and Germany's Deutsche Bö rse AG. BaFin, the
German regulator, said that following Brexit the headquarters of
the combined group would need to be located inside the European
Union.
LSE investors are due to vote on the deal on July 4, while the
tender offer for Deutsche Bö rse's shareholders will end on July
12. The two bourses have said that they remain fully committed to
the terms of the deal, and the merger wasn't conditional on the
result of the referendum.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
June 30, 2016 11:45 ET (15:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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