Europe’s biggest exchange sounds Brexit warning

Bats Global Markets, which runs US and European stock markets, warned in a filing that a withdrawal by Britain from the European Union, or "Brexit," could damage the London business climate enough to drive some or all the company's operations out of the UK.

UK Prime Minister David Cameron has pledged to hold a national referendum by the end of 2017 on whether Britain should remain in the EU. He’s seeking to renegotiate terms of membership before then and has hinted the vote may come as soon as the middle of this year. “Should the United Kingdom vote to withdraw from the European Union, there may be an unfavorable business environment for companies with operations in the United Kingdom that do business in the European Union,” Bats, the parent company of European arm Bats Chi-X Europe, said in a Jan. 29 filing. “In such a case, BATS Chi-X Europe may move some or all of its operations to the European Union and the related costs and expenses could have a material adverse effect on our business,” Bats said.

Bats amended its US public offering filing to reflect the risk. It joins a list of businesses warning that a vote to leave the EU could drive jobs and investment out of the UK.

Hannah Randall, a spokeswoman for Bats, declined to comment.

Investment losses

The "Brexit" debate has already cost the UK some foreign investment, according to senior corporate directors at BT Group and Barclays. The discussion began almost three years ago when Cameron pledged to hold a stay-or-go referendum as a way to stop members of his Conservative party from defecting to the UK Independence Party, which pushes for separation from the bloc.

Britain leaving the EU is the biggest threat the UK economy faces, according to some economists. Polls suggest many British citizens feel the trade-offs no longer serve their interests and may prefer the idea of living outside the EU, which is the status of Norway and Switzerland. A large poll by former Conservative lawmaker Michael Ashcroft published in December found close to a third of the electorate had yet to make up their minds.

Lenexa, Kansas-based Bats Global Markets added “Brexit” among the risk factors in its filing with the US Securities and Exchange Commission. The company is the second-largest operator of US stock exchanges and plans to list on its own market this year. Its London-based Bats Chi-X Europe unit runs the biggest pan-European exchange.

Bats had 284 employees globally as of September, according to the SEC filing. Its European arm had a 24 per cent share of trading in securities available on that market.

Bats also listed European regulations known as MiFID II, a market overhaul initiative, as a risk, as well as the possibility of a common currency member leaving the euro.

Cameron is seeking to reach a deal on revised terms of UK membership with his fellow EU leaders at a summit in Brussels this month. Agreement then on key items that Cameron is seeking to renegotiate, including contentious proposals to curb benefits for EU citizens in Britain, would allow a referendum as soon as June.

Bloomberg