London Stock Exchange Shifts EU Share Trading to Turquoise

London Stock Exchange Group (LSE) is activating contingency plans in case Britain crashes out of the EU without a deal. While Britain’s exit from the EU was still hanging in the balance, the LSE said its pan-European platform Turquoise would shift trading in shares of companies based in the bloc to its new Dutch hub next month if it loses access to the single market in November.

Other shares would remain on its existing platform in London. Turquoise has the necessary approvals to operate regulated markets, benchmark indices and trade reporting units in the Netherlands.

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The London stock market is the biggest in Europe and it faces a split should Britain leave the EU without a deal.

“Turquoise can confirm that it is planning on invoking its Brexit contingency plans on Monday 30 November 2020, unless relevant equivalence decisions to allow cross-border services between the EU and UK are agreed prior to this date,” the UK exchange said in a statement.

The current transition deal allows cross-border financial services to continue uninterrupted only until the end of 2020. But after UK leaders failed to have their divorce settlement passed, this would leave EU customers cut off from UK-based market operators if no contingency measures were in place.

Brexit may cause disruption in the cross-border derivatives market

European investors were worried about being cut off from Britain’s financial markets because all the other financial centers in Europe are smaller in size. In turn, the UK’s financial services sector is struggling to find a way to preserve the existing flow of trading after the nation leaves the EU.

A previous agreement between the BOE and European Securities and Markets Authority (ESMA) also came as a relief to UK clearinghouses as they must decide whether to shift derivatives trades worth billions of euros from Britain. For instance, LCH, the LSE-controlled clearinghouse that processes around 90 percent of euro-denominated derivatives, will be outside the bloc’s legal system once Britain leaves the EU.

Without such an arrangement, clearinghouses may not get regulatory approvals, leading to operational problems such as European banks facing much higher capital charges when they use it to process their trades.

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