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of overseas regulators . Up until 4 January and the weeks that have followed , up to 30 % of all EU shares traded across the continent passed through London , arguably a sore spot for EU trading venues unable to dominate a market based on domestic stocks .
With EU names now trading on EU venues or primary exchanges in Paris and Amsterdam , Europe has regained the market and it seems unlikely that Brussels will throw this away with a decision on equivalence . Why would they ?
“ You would struggle to see why Europeans would think equivalence was a good thing to do now , given that they have more than 90 % of trading and in EU names back onto EU-based venues . Any form of equivalence now might endanger that ,” adds Howson .
Even UK-based trading venues may not want to rock
" By the UK taking this position the EU could decide to rethink the dark pool reforms it is currently considering as part of the MiFID II review ."
ANISH PUAAR , EUROPEAN MARKET STRUCTURE ANALYST , ROSENBLATT SECURITIES
the boat and risk further disruption by encouraging a major shift of liquidity back to the UK in the event of an equivalence agreement . With the centre of gravity for liquidity now almost wholly shifted to Europe , even more volumes could also be at risk of moving from London to where is the opportunity for better pricing and liquidity .
Swiss parallels The UK has equivalent rules and regulations in place for share trading , having been a member of the European Union since 1973 . The question of equivalence is instead centred around whether Brussels would like to grant it .
“ Equivalence is a gift of the European Commission , and the European Commission has the right to veto ,” Haynes explains .
Switzerland found itself in a not dissimilar position 18 months ago when it was denied renewed equivalence by the EU , despite its rules being unchanged . The move meant that EU-listed securities could not be traded in Switzerland , much like the current situation in the UK .
Switzerland responded to this decision by banning EU trading venues from trading Swiss shares , the current situation remains that Swiss shares can only be accessed by European traders on the SIX Swiss
primary exchange via a recognised broker or through an SI operating in the UK .
The UK and Switzerland have found themselves in similar equivalence stand-offs with the EU . An equivalence decision between the two nations has the potential to offer a partial remedy to those bearing the brunt of Brexit .
On 28 January , the UK and Switzerland were bound together officially outside of the EU . The Federal Councillor of Switzerland Ueli Maurer and UK Chancellor of the Exchequer Rishi Sunak agreed upon exchange equivalence that readmitted around 200 Swiss names previously removed from UK trading venues ’ stock universe in 2019 following the EU ’ s decision not to renew Switzerland ’ s equivalence .
UK based pan-European exchanges were executing on average 7-10 % of their trading volumes in Swiss securities before they ceased to be available in July 2019 .
“ That ’ s [ Swiss share trading ] going to be a nice bump to the UK platforms , and it ’ s an eagerly awaited return for us and our customers ,” says Howson .
Looking ahead With the trading of EU shares
30 // TheTRADE // Spring 2021