April 9, 2019

Aquis Exchange is preparing to offer EU27 stocks in both Paris and London on day one of a no-deal Brexit, a move that could see it steal a march on larger rivals that will initially move all trading in these shares to the bloc.

The UK’s stock markets are scrambling to prepare for the possibility of the country leaving the European Union without a deal on Friday. This could cause immediate disruption to the billions of euros of equities traded every day in the City.

In a notice to its members on April 9, Aquis said that, under this scenario, it would “ensure EU27 securities will be available to trade on both Aquis Exchange PLC and Aquis Exchange Europe from market-open on Monday April 15”.

Aquis’s move to allow trading in EU27 stocks in two jurisdictions distinguishes it from its older and larger rivals Cboe Europe — the region’s biggest market for shares — and London Stock Exchange-owned Turquoise. In the event of a no-deal Brexit, both Cboe and Turquoise have said they will move EU27 shares from their London venues to new entities in Amsterdam. However, both have plans to make them available in both locations later in 2019.

Alasdair Haynes, chief executive of Aquis, hopes the distinction could hand his exchange an advantage by giving both UK and EU investors access to the stocks in their home markets. In the absence of so-called equivalence recognition from European regulators, UK venues are likely to be inaccessible from the EU in a no-deal Brexit.

A no-deal Brexit greatly threatens London’s dominance as a hub for trading shares, but Haynes said the City was not panicking yet. He said: “I don't think we’re seeing panic. We’re seeing anger. Here we are, potentially three days away from something which is huge, the biggest thing to hit this market in decades, and we don’t have an answer. In my view that is disgraceful. We have been seriously let down by the politics.”

Regulators in the UK and the EU have clashed over share trading after Brexit in recent weeks. The European Securities and Markets Authority set out a list of thousands of shares that EU-based investors would be forced to trade inside the bloc after a no-deal exit by the UK.

To the consternation of the UK Financial Conduct Authority, Esma’s list includes 14 stocks that represent one-third of the FTSE 100 index of London blue-chip companies by market capitalisation, including the telecoms operator Vodafone and oil group BP. A similar approach by the FCA could lead to further complications.

The Association for Financial Markets in Europe, a banking lobby group, and the European Fund and Asset Management Association, have both written to the European Commission to warn about the costs to investors of splitting liquidity between London and the EU. This could eat into the returns of pension funds that are crucial to the future financial security of millions.

By Samuel Agini