Study: London FX Trading Hub to Suffer in the Unlikely Case of a Brexit

The repercussions of a British exit from the European Union are likely to affect London as a foreign exchange center

A survey on the prospective effects on London’s position as the world’s main currency trading center found that the status of London as a key electronic trading hub is likely to be materially affected in the event of the UK leaving the European Union. That said, an overwhelming majority of the respondents, 80 per cent, said that a Brexit is unlikely.

A Brexit from the European Union could fragment the space, with other financial centers across the continent likely benefiting from the event. Frankfurt, Paris, New York and Dublin are the most likely to reap the benefits of the change.

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About two-thirds of the respondents believed that the event is likely to have a negative effect on the industry. Only 13 per cent of the 12,000 members of the ACI Financial Markets Association who responded to the survey thought that the referendum vote on the 23rd of June is likely to have no effect on the FX business.

Frankfurt snatched the title as prospective key beneficiary of a Brexit

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Frankfurt snatched the title as prospective key beneficiary, with 70 per cent of the respondents identifying it as such, while Paris and New York followed with 49 and 40 per cent respectively. A minority of 28 per cent of the respondents saw some benefits for Dublin which is the closest financial center to London within the European Union.

According to data from the Bank of International Settlements (BIS), over 40 per cent of foreign exchange trading volumes are generated in London, with New York in distant second with 19 per cent and Singapore, Tokyo and Hong Kong in the mid single digits.

over 40 per cent of foreign exchange trading volumes are generated in London

The CEO of Chatsworth, Nick Murray-Leslie, commented on the findings: “The views of the respondents and their analysis on the impact of a Brexit matter a great deal because they manage investment positions and make a daily judgment on currencies, interest rates and cross-border economic factors impacting international trade and commerce.”

The profile of respondents in the survey speaks a great deal about their expertise, since about 30 per cent of them have been working in the industry for over 20 years. Another 50 per cent have been involved in the foreign exchange line of business for between 5 and 20 years.

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