At a time when competition between financial markets is entering a transcontinental phase, several axes stand out: ICE-NYSE and CME in the United States, Bovespa in Brazil, Hong Kong-Shanghai in China and JPX in Japan. In Europe, the two markets most likely to face this configuration are Frankfurt and London. They decided to merge in order to be up to their American and Asian competitors.
Brexit’s strategic risk
At a time when the enormous challenges and difficulties of the Brexit are becoming increasingly clear, this structural link between London and the largest stock exchange in continental Europe should not weaken Europe’s position.
This strategic risk can not be minimized. It would affect the liquidity of European equities and would constitute an infringement on their competitiveness. You can not play with the Brexit: the risk is too serious. No one knows how Brexit will affect the distribution of markets, but one thing is certain: they will be broken up.
Most large European companies are held between 20 and 30% by non-European investors, and mainly by Americans. It is important that the European securities trading center remains in Europe and that the presence of American investors in Europe, and not only in London, contributes to the development of the continent.
It is also critical that it is in Europe that these companies find the trading ground that is culturally and financially the most familiar with their operations and performance. Do we want the stock market to move to the United States? The voice of these listed companies is very shy.
The importance of asset management and securities trading is crucial for investors. Most major non-European investors are present in London, which is the capital of fund management. Private asset management remains mainly in Switzerland.
At a time when Europe is trying to create a European capital market, it would be a major mistake not to support a pan-European platform. Large investors seek above all the liquidity of their securities. It is therefore imperative that this liquidity be accessible and fluid in Europe for European companies.
The LSE Deutsche Bank merger is the last chance for European stock market leadership
Now that concessions have been obtained in terms of clearing securities in order to avoid exclusive domination of the merged entity, Europe must face up to this situation which it has itself helped to create.
Several attempts at European leadership have already been scuttled by the European authorities. The figures above leave no doubt that Europe needs a solid platform capable of competing with Hong Kong, Tokyo, Chicago and New York.
The pusillanimity of political and particularist objections can not prevail in the face of this project which would create European leadership. Will Europe finally have the vision?