Breaking: LMAX Exchange to Seek Irish Regulation in Case of Hard Brexit

The risk of losing access to 25% of the company’s current client base with one signature is significant.

LMAX Exchange has just announced that the company will look for a regulatory license in Ireland, should the UK government fail to preserve single European Union market access for companies in the financial markets industry.

The FCA regulated multilateral trading facility (MTF) for foreign exchange trading has unveiled its plans to get a regulatory license in Ireland. since the UK government led by Theresa May has been steering towards a ‘hard Brexit’. Should access to the single market be revoked, financial services companies from the UK are planning to get regulated in an EU member country.

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According to LMAX, London’s status as an FX center depends on preserving regulatory equivalence with the European Union. The London market is currently twice the size of the US market, with over 40 percent of the daily turnover in FX flowing through the highly developed infrastructure in the financial capital of Europe.

The ongoing uncertainty about the preservation of access to the single European market is causing LMAX Exchange to seek regulation in other EU-member states. The company also believes that larger banks, funds and investment managers will also make similar steps in order to mitigate the impact from Brexit.

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LMAX Exchange is aiming to begin the process of applying for a license in Ireland in January 2017, provided that no assurances are received from the UK government.

David Mercer, LMAX Exchange
David Mercer, CEO of LMAX Exchange
Source: LinkedIn

Commenting on the matter, the CEO of LMAX Exchange, David Mercer, said: “The net effect to the economy could be severe with new foreign investment into financial services choosing the EU over the UK, and existing investment and jobs leaving the UK in short order. Furthermore, lost capital markets revenue and associated taxation income could be catastrophic for the UK.”

“We passionately believe the UK can remain the global hub of capital markets due to geography, history, regulatory framework, existing infrastructure and a highly skilled multi- disciplined workforce but sadly this will not be enough if regulatory equivalence is not maintained,” he elaborated.

The CEO of LMAX has actively urged the UK government to protect the interests of UK companies: “It is clear our European counterparts are opportunistically targeting the current UK capital markets franchise and it is vital we proactively address the regulatory passport issue immediately. We urge the government to make this top of their agenda as they consider the timeline to an exit from the single market and provide guidance to our industry as soon as is practicable.”

LMAX Exchange has become one of the first companies to openly state its position regarding the negotiating tactics of the UK government. A breadth of market access is key for LMAX Exchange: the company has clients in over 90 countries today, including 22 of the EU states and current operating presence in the US, Japan, Australia, New Zealand and Hong Kong. The risk of losing access to 25% of the company’s current client base with one signature is significant and one that LMAX Exchange is protecting against – in the absence of any government or regulatory assurance or guidance.

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