Amsterdam has reportedly managed to overtake London as the largest share trading center in Europe. Industry analysts have noted that the symbolic blow may be followed by London losing many more jobs and business opportunities due to Brexit.
Amsterdam, which was once the sixth-largest European exchange center, has reported an increase in average daily trading from €2.6 billion to €9.2 billion in January 2021, as exchanges began moving order books to other jurisdictions following Brexit.
These developments have pushed London into the second spot in Europe, with average daily trading being reduced to half the previous levels (from €17.5 billion to €8.6 billion during January 2021), according to CBOE exchange data.
Under the current European guidelines that were issued before Brexit, the EU shares traded in Euros have to be traded via EU exchanges or in jurisdictions that have acquired special “equivalence” status. After the UK had failed to obtain equivalence with the EU or enter a trade deal that includes financial services, exchanges like the CBOE and Turquoise were forced to transfer their order books to other nations by January 2021.
Although these numbers are quite large, the overall impact on London may still be relatively small. Only a few jobs at the exchanges were actually moved and the tax advantages to the Dutch capital from low-profit businesses like trading will be fairly limited. This, according to an analysis by Nick Bayley, MD at Duff & Phelps.
As first reported by the Guardian, Bayley noted:
“In terms of jobs, tax revenues, other revenues, the profit and loss accounts and so on being generated in Holland rather than in the UK, it’s marginal. But it is symbolic, of course.”
The change is somewhat comparable to moving a computing machine that handles online store orders from one country or city to another. Although the computing device has been moved, all of its clients and suppliers remain in the same location as before. Similarly, while share trading has been moved out of London, the vast majority of the brokers, fund managers, and traders are still residing in the City.
William Wright, Founder of the New Financial thinktank, clarified:
“It’s a technological switch or regulatory switch, but it’s not some sort of seismic shift where suddenly people think London isn’t as attractive of a place to do business or London is doomed as a financial center.”
Approximately 20% of the UK’s financial services sector is in some way connected to European Union customers and euro-denominated business operations, Wright confirmed, while adding that over 50% deal with local UK clients. He claims that this business activity is “not going anywhere.”
While Amsterdam may have taken the lead in terms of trading activity for now, London is still one of the leading Fintech hubs in the world.
Fintech mergers and acquisitions may increase in the UK following COVID, according to an analysis by Harry Eddis, Global Co-Head of Fintech at Linklaters LLP (published in December 2020).
Netherlands based firms have also made several important Fintech acquisitions in 2020 in order to diversify and strengthen business operations, according to a report released in December of last year.