Amsterdam – the new financial capital of Europe
Category: International law
Why financial services have changed course
Since Brexit, the EU does not recognise UK exchanges and trading venues as having the same supervisory status as its own. Under European rules which pre-date Brexit, EU shares traded in euros must be traded on EU exchanges or in countries with special “equivalence” status.
After Brexit, Britain failed to keep its equivalence status or reach a comprehensive trade deal with the EU covering the provision of financial services. As a result, EU based financial institutions are banned from trading in London, and vice versa. Exchange operators such as CBOE and Turquoise have subsequently chosen the Netherlands as their alternative venue for EU share trading. (Amsterdam overtakes London as Europe’s top share trading centre, The Guardian, 15 February).
Businesses settle in Amsterdam after Brexit
This exodus of business from the UK saw Amsterdam overtake London as Europe’s largest share trading centre for January 2021 (Amsterdam ousts London as Europe’s top share trading hub, Financial Times, 10 February). On average, 9.2 billion euros of shares a day were traded on various Dutch platforms in January, which is more than a fourfold increase from December 2020, according to data from CBOE (Amsterdam staat weer op de kaart in de financiele wereld, Het Parool, 14 February). This pushed London into second place, with average daily trading dropping from 17.5 to 8.6 billion euros per day last month (Amsterdam ousts London as Europe’s top share trading hub, Financial Times, 10 February).
Why choose Amsterdam for financial services?
Besides Amsterdam’s stock exchange being the oldest ‘modern’ securities market in the world, the city is attractive for a number of reasons: it has a traditionally strong financial sector, a workforce fluent in the English language, and an excellent digital infrastructure.
Importantly, the stability of the Netherlands’ political and economic climate is also a major draw card for traders. According to CBOE’s European director, The Netherlands offers a “competitive and open financial infrastructure”, while the country’s Financial Regulatory authority (AFM) and the Dutch central bank (De Nederlandsche Bank) have “a deep understanding of the equity and derivatives markets” (How Amsterdam is stealing a march on rivals as Brexit trading hub, Reuters, February 18).
Financial trading and fintech choose the Netherlands
According to the Netherlands Foreign Investment Agency, certain financial sectors such as trading and fintech were targeted as key focus areas after Britain’s decision to leave the EU in 2016 (How Amsterdam is stealing a march on rivals as Brexit trading hub, Reuters, February 18). This focus is reflected in the number of trading firms which have moved operations entirely or partly from London to Amsterdam, including CME, MarketAxess and Tradeweb.
Whether Amsterdam retains its newly acquired position as the European capital of financial trading depends on a number of factors. The negotiations surrounding the equivalence rulings between the EU and the UK are still ongoing and if an agreement is reached between the parties, then London could regain its position at the top of the pile.
Until then, however, more and more trading platforms are moving to Amsterdam, with businesses in other sectors following suit. And for global businesses examining where in the EU to mitigate the problems caused by Brexit, Amsterdam is emerging as the clear favourite.