London has reclaimed its crown as Europe’s largest share trading centre after it was dethroned by Amsterdam in the wake of Brexit.
The UK capital’s share of the European market, where about €40bn of deals are completed a day, has steadily risen in recent months thanks to the resumption of UK trading in Swiss stocks.
Swiss equities were reintroduced in London after the UK’s departure from the EU, in the first significant split from EU policy on financial services.
An average of €8.9bn of share deals changed hands every day on London-based exchanges and trading venues in June, compared to €8.8bn on Dutch venues, according to data from Cboe Global Markets. It was the first time London had been the most active destination since leaving the single market in January.
London’s fightback provides an early boost for the City, as UK chancellor Rishi Sunak prepares a series of changes to London’s share trading rules to make the capital more competitive.
The landscape for share trading on the continent following Britain’s departure from the EU has already been reshaped. Previously, banks and fund managers across the bloc would often funnel their deals through London.
Brussels mandated that EU institutions could no longer trade shares through London after Brexit. The bulk of that business went to Amsterdam in January, where many trading venues are based.
More than €6.4bn of transactions left the City overnight for a legally-compliant new home when the UK left the single market in January. Britain, which typically accounted for about a third of average daily trading volumes in Europe, dropped to having about a fifth of total market share, according to data from Big XYT.
London venues have reclaimed a 30 per cent share of trading in Swiss blue-chip stocks, after the two countries recognised each other’s stock exchanges as having equivalent standards.
London was the busiest exchange for capital raisings outside the US and greater China in the first half of the year, raising more than £27bn, the largest amount since 2014, and far outstripping totals on exchanges in Frankfurt, Amsterdam and Paris.
Activity has increased following the listings of 49 companies, including Deliveroo, Darktrace and Alphawave, even if some have underperformed since listing.
“Over half of all IPO capital raised [in London] has been by technology and consumer internet companies using public markets to support the next stage of their growth,” said Charlie Walker, head of equity and fixed income for primary markets at the London Stock Exchange Group.
London’s fightback in equity trading, first reported by Bloomberg, comes as the City is set to diverge further from rival markets in the EU in the coming years, following plans laid out by the Treasury this week.
The UK wants to allow investors more flexibility to trade away from the stock exchange. It plans reforms for “dark pools”, where fund managers buy and sell large blocks of shares without disturbing the price on the market, and lightly regulated private venues run by banks and high-frequency traders. EU rules have sought to clamp down on their use.
“While an equivalence deal is still preferable, the absence of a comprehensive agreement has opened possibilities for each region,” said Sylvain Thieullent, chief executive of Horizon Software, a trading technology provider.
“Each market can think more pragmatically about their future and what they can do to support their trading ecosystems that they couldn’t before,” he added.