London currency exchange firm delays Dublin move

LMAX Exchange ‘pauses’ bid for Irish regulatory approval over Brexit uncertainty

London-based LMAX Exchange has more than $2 trillion of transactions a year on its platforms. Photograph: Simon Dawson/Bloomberg

London-based LMAX Exchange has more than $2 trillion of transactions a year on its platforms. Photograph: Simon Dawson/Bloomberg

 

London-based currency exchange operator LMAX Exchange, which signalled last October that it would seek to set up a European Union hub in Ireland as soon as this year, has stalled on a decision until 2019.

“Given the uncertainty around the outcome of the upcoming Brexit negotiations and whether the UK’s financial services industry would maintain its EU passporting rights, LMAX Exchange decided to pause the process of seeking regulatory approval in Ireland,” a spokeswoman for the firm said.

“Until further clarity on Brexit, which is likely to happen only in 2019, LMAX is not likely to comment on expansion in the EU.”

LMAX Exchange, which was launched in 2010, has established itself as the main so-called multilateral trading facility for foreign exchange transactions authorised and regulated by the UK’s Financial Conduct Authority, with more than $2 trillion of transactions a year on its platforms.

London is the world’s largest foreign exchange centre, accounting for more than 40 per cent of the $5 trillion-a-day value of transactions in the global industry.

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Passporting rights

LMAX Exchange said in October that it would start the process in January of applying for a licence to set up in Ireland, if the UK government did not give assurances that its EU passporting rights for financial services would survive Brexit.

The company, which has clients in more than 90 countries, said at the time that it risked losing access to 25 per cent of its customer base if the UK lost access to the EU single market.

UK prime minister Theresa May made it clear in January that she would not seek continued access to the single market, but a “comprehensive free-trade agreement”.

While Ms May’s move this week to call a snap general election in June is seen by analysts as having materially reduced the likelihood of divorce talks with the EU ending without an agreement, it may prolong the period of uncertainty for businesses seeking to make plans.

Analysts at Deutsche Bank have said the need to arrive at a “clean” Brexit without a lengthy transitional arrangement by 2019 was “far less pressing” as no general election will be due the year after.

The delay in LMAX’s deliberations comes a week after CME Group, which operates the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange, said it would close its European derivatives exchange and clearing house, both based in London, by the end of this year.

It had been reported in November that CME was examining options in Dublin to ensure its European clearing house, which plays a key role in the market for financial derivatives in acting as a middle man between trading companies, would retain access to the EU after Brexit.

In finance, a derivative is a market bet on the future price of financial instrument, from shares and bonds to interest rates.