City of London Remains THE destination for Europe’s traders

America and Europe have both emerged as key beneficiaries in the reshuffling of trading destinations post-brexit. Despite some traders making the move, trading volumes show that the lions share hasn’t budged from the City.

Across the Atlantic, swap hedging volumes against euro and sterling have doubled in the first weeks of 2021; with 23% which was formerly traded in London moving to American destinations (Source: IHS Markit). Put into perspective, maintaining 75% sends the message that London is still the main hub for derivatives trading across Europe, a market that sees over $2tn volume every day.

Kirston Winters, managing director of MarkitSERV, IHS’ derivatives data arm, said a small shift to the US was inevitable given investors’ preference towards trading in the most active markets.

“Time and time again the data show us that the over-the-counter derivative markets are global in nature and very agile.” He Said. 

Similar to the US, Amsterdam has also drawn away a small portion of the UK’s swap and sovereign debt business since the beginning of the year- backed by comment from Sander van Leijenhorst, Brexit programme manager at the Autoriteit Financiele Markten (Dutch watchdog). 

The move highlights Amsterdam as a promising candidate for Europe’s secondary destination, further illustrated by strategic support providers such as TradeWeb, MarketAxess and Bloomberg pinpointng the Venice of the North for their newfound European operations. 

To conclude, both the US and the Netherlands have begun to chip away at London’s dominant position in bond and derivatives trading; amplified by the dispute between Britain and the EU. However, despite some market share being taken, London remains THE location for a derivatives / fixed income trader in Europe.

Many strategic support providers have taken the divide as an opportunity to capitalise on this shifting end-user base and have begun expanding on the other side of the channel. If you happen to be operating in the space and seeking to raise capital to support your ambitions; we have worked with some of the market leaders and would be keen to hear about your ambitions. 

“Time and time again the data show us that the over-the-counter derivative markets are global in nature and very agile.”

By Shaan Bharwani on 28/01/2021