Exchange boss says UK’s Swiss trading nod is a ‘free kick’ in a losing game

February 4, 2021

By William Canny

The resumption of Swiss stocks trading in London is a small win for the City, but in the absence of a Brexit deal for financial services "its a free kick getting Switzerland back, its not an equalizer", says Alasdair Haynes, CEO of the Aquis exchange.

Haynes says the UK government's snub of the financial services industry in its Brexit deal was an "own goal".

Swiss regulators confirmed the readmission of local shares for trading on UK venues on 3 February, in a move designed to offset the negative ramifications of the lack of an equivalence deal with the EU. The trading of Swiss shares had been suspended for 18 months after the country moved to protect its markets following a spat with the EU. Now that the UK is no longer part of the EU, they are free to trade in these stocks again.

For equities, Haynes see no prospect of an equivalence deal being granted. For the rest of financial services, a deal won't be finished by March, he added, as negotiations will take a long time.

The EU "doesn't want to grant passporting rights into Europe, why would they?", he said, referring to equities. The UK has been abiding by Europe's sweeping overhaul of financial regulation, dubbed MiFID II, since it kicked in three years ago. Thus, "to say we are not equivalent in equities is wrong," he says, and that any snags are solely political.

The UK's decision to leave the EU without a deal for the City has had wide ranging repercussions for investment banks and brokers, particularly those trading equities. As of 4 January, traders wanting to deal in European stocks or service clients on the mainland are bound by rules of the EU financial regulator, the European Securities and Markets Authority (ESMA).

The new rules caught companies flat-footed — Financial News has reported that some firms have scrambled to move staff to the continent, while others have sidestepped regulations with tactics including registering EU-based email addresses in London or leaning on larger investment bank providers to be Brexit compliant. This prompted ESMA to issue a stern rebuke on 13 January, warning City firms not to adopt "questionable practices" to get around Brexit.

What happened on 4 January was "remarkable",  Haynes says. In his career spanning 40 years in the City he has never seen a shift in liquidity like that happen overnight, when 99% of Aquis' trading volume intra-day moved from its UK entity to its Paris entity. "Anyone thinking it's coming back is living in dreamland," he added.

Due to Brexit, the City saw the loss of over €6bn in daily share trading in European stocks. The resumption of trading in Swiss shares is seen as a small victory, as prior to the EU ban, platforms in London were responsible for about €1.2 billion euros in daily trading of Swiss stocks.
The next battleground with the EU may be over the vast derivatives market. The issue is that London has built an incredible infrastructure and has invested heavily in technology. This isn't present in Europe yet, Haynes says, adding that the EU might try to build a settlements and clearing market in Europe for derivatives.

The EU may also want to move data centres to Europe, this is potentially the next "political hot potato", he says.