MarketAxess to set up second EU base after Brexit

Frankfurt, Germany – one of the countries to make MarkAxess’s shortlist of possible locations

The Nasdaq-listed operator employs around 140 people at its London offices and has been growing fast in the region. It handled Eurobond trades worth $ 86.8 billion between January and August, a figure that is up 84% year-on-year.

However, it is one of many London-based firms concerned about the availability of passporting rights after Brexit, which allows firms to access clients across the EU without needing to seek separate approval in each member state.

Miranda Morad, general counsel for MarketAxess Europe and Trax, the firm’s data and reporting arm, told FN that while the firm would maintain its regional headquarters in London, it has already decided to set up a second office in continental Europe if Article 50 is triggered.

Morad said that the firm had shortlisted a possible list of alternative locations, including Germany, France, Ireland and the Netherlands, and was undertaking a professional review of them.

“We are taking the view that we cannot rely on getting passporting rights from London into the EU to serve all our clients. We are hedging ourselves and will establish a regulated entity on the continent if Article 50 is enacted to make sure we can continue providing services to those firms,” Morad said.

She said setting up a new entity would probably take between 12 and 18 months, and added that the firm “could reverse that decision quickly if need be”.

Morad said: “For banks, that timeline is likely a lot longer, but we are a trading platform operating in an uncleared market and have less infrastructure to move.”

UK Prime Minister Theresa May has indicated she will not trigger Article 50 before the end of 2016, but there are calls for her to seek parliamentary approval for the move.

Uncertainty about what type of deal the UK will strike with the EU on single market access has prompted many financial firms with regulated entities in London to explore alternative bases in the EU.

Mark Hemsley, chief executive of London-based Bats Europe, the region’s largest stock exchange, told FN in July that it was “highly likely” to establish a eurozone presence unless the terms of the UK’s split from the EU come “early and clear”.

MarketAxess – which is also a major provider of reporting services for fixed income trades following its 2012 acquisition of Xtrakter, now rebranded Trax – operates as a multilateral trading facility and is regulated by the UK’s Financial Conduct Authority.

Morad said that there was “no clear winner” among the countries it was considering for the second office, even though regulators were “competing heavily with one another to establish themselves as the go-to place for certain types of business”.

But she said it would look to countries that have experience of regulating MTFs among other factors, such as “the sophistication and openness of the regulator to work with us, their availability to work with us in English, as well as their transport system and taxes”.

There are currently 150 MTFs registered in Europe, according to the European Securities and Markets Authority. The UK is home to 73, the data shows, more than any other country. Germany is second with 14 MTFs regulated by BaFin. Italy, Belgium and France have nine, eight, and six, respectively. Ireland is home to four MTFs, while the Netherlands regulates three of the venues.

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