London Stock Exchange’s Hard Brexit plans

April 9, 2019, | AtoZ Markets  According to the London Stock Exchange hard Brexit plans announced this week, in case of no-deal Brexit, the stock exchange’s pan-European platform Turquoise will shift its trading in euro-denominated shares to its new Dutch hub.

London Stock Exchange Hard Brexit plans revealed

Despite the fact that the London Stock Exchange (LSE) is the sixth largest stock exchange in the world and the second in Europe, it, along with smaller financial enterprises, faced enormous uncertainty after the Brexit referendum.

According to the London Stock Exchange Hard Brexit plans, if the United Kingdom leaves the European Union on April 12 without a deal, the European shares of its pan-European platform Turquoise will be traded in Amsterdam.

The LSE noted that British, Swiss and American stock exchanges would remain on their existing platform in London. In the case of a hard Brexit on April 12, Turquoise intends to reintroduce the shares of the European Economic Area to its London platform during the year. However, the LSE did not provide any further details on this.

London Stock Exchange future uncertain after Brexit announcement

London Stock Exchange hard Brexit plans were revealed mostly to reassure investors of the institutions future and their funds’ state. However, the firm also acknowledges that only the terms of the Brexit will ultimately determine the form of the company’s financial agreements.

Thus, although the terms of the Brexit deal are still unknown, it is difficult to predict its impact on the LSE’s operations with confidence.

Earlier, the EU promised to consider the LSE as the equivalent of exchange and clarification in the EU on a temporary and conditional basis. Therefore, in the short term, there can be no influence on the stock exchange. However, in the long run, this is another matter, and uncertainty still exists.

London Stock Exchange in a brief

London Stock Exchange Group plc is the United Kingdom’s primary stock exchange. The LSE provides markets that facilitate the raising of capital and the trading of corporate securities, access to a trading environment, as well as real-time pricing and reference information services worldwide. Market coverage includes equities, derivatives and fixed-interest securities.

Despite some uncertainty, the LSE maintains its superiority in the financial sector. The components of the FTSE 350 index (the top 350 market capitalization firms listed on the LSE) in November 2018 included 95 firms operating in the financial sector.

These include banks (10 firms), equity investment tools (20 firms), financial services (24 firms), life insurance firms (6 firms), real estate investments and services (7 firms), and real estate investment trusts ( 19 firms).

Brexit impact on the UK and global finance market

Given the importance of the LSE in the European and world arenas, it is important to consider the future of the market in the face of Brexit uncertainty. The impact of Brexit on stock market prices in December was not overwhelming.

This is evidenced by a slight drop in total stock prices following the results of the referendum (the FTSE350 index fell from £ 3,513 on June 8, 2016, reaching a minimum of £ 3,305 on June 14, 2016 – a drop of only 6%). Since then, it had recovered to £ 3,920, according to the data from  December 4, 2018.

Then, however, the UK Stock Market was on the rise, following similar patterns seen throughout the world. Despite this, a growing number of market commentators at that time were warning about increasing volatility. In particular, in the UK, this volatility could have been triggered during discussions on the Brexit agreement, which was proposed to the UK government.

Currency and stock markets leave London in preparation for Brexit.

Negotiations on whether the UK rules are equivalent to the EU are ongoing, so international exchanges have created European platforms to provide permanent cross-border services between the EU and the UK.

CME Group Inc. a U.S. financial market company operating an options and futures exchange announced that it will transfer its currency platform for forwards and swaps, the volume of trading of which is about 15 billion dollars a day, from London to Amsterdam. The Chicago Board Options Exchange(Cboe) in its turn, due to the delay in Brexit decided to postpone the opening of his Amsterdam office.

Hard Brexit might not be a big threat to a financial market

Back in March, when lse Group, the parent company of the London Stock Exchange, the largest in Europe, published its annual results for 2018, some commotion rose on the trading floor. The company announced a reduction of 250 jobs, 5% of its staff.

Despite this, there were positive changes. Last year, the group’s revenue grew by 8%, and operating profit – by 15%. It’s stock price has risen by 22% since December. The company has five different offices in New York. After the referendum in US dollars, the exchange operator added 49%, and in local currency – about 70%, which was undermined by uncertainty about future UK relations with the EU.

Another Brexit agreement on its way

The financial sector representatives are wondering whether the British market financial regulator will impose restrictions on where to trade stocks, in the case of no-deal Brexit. The measures taken by the LSE, Cboe and CME Group Inc. could provide the flexibility to trade clients in the UK and on the continent, regardless of what the UK financial watchdog – FCA decides.

The British Parliament will hold another vote on the plan of Prime Minister Theresa May on the transition to Brexit, the deal has changed only slightly since in January it was rejected with a record margin. Britain may be in a political turmoil, and banks can move jobs and assets from London, but will Brexit have any influence on financial markets so much?

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