By Huw Jones
LONDON, Jan 15 (Reuters) - New European Union cross-border
share trading platforms set up by the London Stock Exchange and
rival Aquis ahead of Brexit have been mothballed due to limited
demand.
The LSE said there are no plans for the new Amsterdam
offshoot of its Turquoise pan-European platform to start up next
month, while Aquis, which set up a hub in Paris, said trading in
euro shares would continue in London for now.
"To do anything else at this point would unnecessarily
fragment liquidity and, not surprisingly, there has been no
member push for this," an Aquis official said.
The LSE, Aquis and Cboe Europe, the region's biggest
cross-border share trading platform, created EU hubs in case
their London operations get cut off from customers in the bloc
after Brexit, which is now due to take place on January 31.
Brexit raised the spectre of London being sidelined in
trading euro-denominated shares after transactions in
euro-denominated fixed income moved to the bloc in March 2019.
But Britain will now leave the EU with a settlement that
includes a transition period to December, meaning continued
unfettered access for London-based financial firms.
Cboe Europe has already started up its new Amsterdam hub and
although volumes remain negligible, its president David Howson
said it will remain open despite the transition period.
Volume in euro shares could start moving from its London
unit to the Netherlands if uncertainty over Britain's direct
access to EU investors after transition grows.
"As things evolve throughout the year, we will get clarity
on equivalence (EU market access)... Depending on what that time
horizon looks like, we will look to differentiate and induce
volumes to potentially go there," Howson said.
Amsterdam will be a base for building up the U.S. exchange
operator's plans to expand into areas like derivatives trading
and clearing in Europe, Howson said. Cboe is buying a
pan-European stocks clearing house headquartered in the
Netherlands.
POLITICAL HURDLES
Britain and the EU aim to complete assessments on so-called
equivalence-based market access for firms like trading platforms
and clearing houses by June.
Steven Maijoor, chair of the European Securities and Markets
Authority (ESMA), said last week that assessments can be done by
the summer, but a decision on access would hinge on wider trade
negotiations between Brussels and London.
ESMA had said that in the event of a no-deal Brexit, EU
investors would have to use EU-based platforms for trading euro
denominated shares and derivatives.
There are also other potential hurdles to UK access.
Prime Minister Boris Johnson has said he does not want
Britain to align itself to EU rules after Brexit, which could
make access for financial firms hard to maintain.
The EU is also keen to build up its own capital market to
cut reliance on London and could insist that EU investors trade
euro-denominated shares on platforms inside the bloc.
Faced with pressure from EU policymakers, CME and the LSE
moved trading in euro-denominated fixed income from London,
while UK-based derivatives platforms are also waiting to see how
much access they will get to the EU after transition.
"We would like to see a great deal more clarity in the area
of... derivatives trading obligation," said Roger Cogan, head of
European public policy at global derivatives industry body ISDA.
If trading moves, clearing could follow over time, industry
officials say, further harming London. So far this has not been
the case in swaps, where the LSE dominates clearing for now,
although it has shifted clearing in euro repurchase agreements
from London to its Paris arm.
(Reporting by Huw Jones;
Editing by Alexander Smith)
