LMAX Exchange, UK technology firm and an FCA regulated multilateral trading facility (MTF) for FX trading, plans to be regulated in Ireland unless the British government preserves the EU single market passporting rights for the financial services industry.
LeapRate recently shared an article, indicating that the EU powers are going to take a hard stance on enacting a Hard Brexit, including removing the UK’s FCA from participating in financial passporting. LMAX Exchange commented that it will begin regulatory filings in Ireland in January 2017, if no UK Government assurances are received.
UK is the world’s FX centre, twice the size of the US market, and accounts for over 40% of the $5 trillion/day global FX industry. The backbone of global trade, the FX market in London depends on regulatory equivalence with the EU. The current uncertainty about the future of the single market access for the City of London, means that UK-based firms, such as LMAX Exchange, an FCA regulated MTF and broker, have to seek regulation in EU states.
In the case of LMAX Exchange, the company plans to get regulated in Ireland and further believes that it is inevitable that larger banks, funds and investment managers will do the same.
A breadth of market access is key for LMAX Exchange: the company has clients in over 90 countries today, including 22 of the EU states and current operating presence in the US, Japan, Australia, New Zealand and Hong Kong. The risk of losing access to 25% of the company’s current client base with one signature is significant and one that LMAX Exchange is protecting against – in the absence of any government or regulatory assurance or guidance.
David Mercer, chief executive of LMAX Exchange, said:
The net effect to the economy could be severe with new foreign investment into financial services choosing the EU over the UK, and existing investment and jobs leaving the UK in short order. Furthermore, lost capital markets revenue and associated taxation income could be catastrophic for the UK.
We passionately believe the UK can remain the global hub of capital markets due to geography, history, regulatory framework, existing infrastructure and a highly skilled multidisciplined workforce but sadly this will not be enough if regulatory equivalence is not maintained.
It is clear our European counterparts are opportunistically targeting the current UK capital markets franchise and it is vital we proactively address the regulatory passport issue immediately. We urge the government to make this top of their agenda as they consider the timeline to an exit from the single market and provide guidance to our industry as soon as is practicable.”