Two key markets are moving out of the U.K. as Brexit forces finance firms to put more of the region's trading infrastructure on the continent.
CME Group will move its foreign-exchange forwards and swaps venue, which has trading volumes of about $15 billion a day, from London to Amsterdam, while Cboe Global Markets will shift most European equities trading to its market in the Dutch capital after Brexit.
The latest moves follow CME's decision last year to move its €200 billion-a-day ($227 billion) short-term financing market to Amsterdam. As trading venues shift activity to the Continent to comply with requirements that European trading is conducted on an approved European market, Cboe is heading toward Amsterdam to protect liquidity.
"We are splitting rather than duplicating stock trading to avoid a fragmentation in liquidity, which could disrupt the market,'' David Howson, chief operating officer at Cboe Europe, said in an interview.
Firms trading European equities on Cboe's markets — currently the continent's busiest — will have to connect to the Amsterdam venue. Cboe handles €7 billion ($8 billion) of European stock trades every day. Its London business will continue to oversee €3 billion of daily Swiss and U.K. stock trades. Transaction fees that currently generate tax revenue for the U.K. Treasury will in future go to the Dutch authorities.
Cboe will test its enlarged Amsterdam market in February and March, according to Howson, and the vast majority of clients are preparing to trade there. About 10 people will be located in the city, a mixture of secondees and new staff, he said.
CME's FX division EBS, which it acquired as part of the takeover of NEX Group last year, handles about $15 billion of forwards and swaps trades a day on its trading venue, according to people familiar with the matter. A CME spokeswoman said that the company's Amsterdam-based multilateral trading facility will begin trading forwards and swaps March 18. The U.K. is currently on track to leave the European Union on March 29.
EBS's spot FX market, one of the world's biggest with $76 billion of trades a day, will remain in London, the spokeswoman said.
FX forwards and swaps allow companies to protect themselves against future swings in the value of currencies. With Brexit developments likely to move the pound against the euro this year, CME expects its market for these derivatives to grow. CME's fixed-income division BrokerTec announced late last year that it would move its €200 billion-a-day European repo market and its smaller European government bond market to Amsterdam in time for Brexit.
CME and Cboe are both still awaiting regulatory approval from the Dutch Authority for the Financial Markets.