CME Group has secured an exchange license with Dutch regulators that allows the company to shift its fixed income and repo trading business out of London as a hedge against a no-deal Brexit.
The new approval mirrors its current regulatory permissions in the United Kingdom and allows the company to provide its services throughout the EU from Amsterdam, operating under a MiFID II passport.
CME Group will transition the following businesses to CME Amsterdam B.V. – BrokerTec’s European Government Bond and European Repo businesses (under a new Regulated Market license) and on-MTF FX forwards and swaps (under a new MTF license), to maintain a single pool of liquidity. BrokerTec’s UK Gilts and Gilt Repo businesses and all other EBS businesses will continue to operate with no change.
In addition, CME Group will transition the CME Regulatory Reporting Approved Publication Arrangement (APA) and Approved Reporting Mechanism (ARM) trade and transaction reporting services for EU27 clients to CME Amsterdam B.V., to minimize disruption and assist clients in meeting their MiFID II obligations. CME Amsterdam B.V. will operate alongside Abide Financial DRSP Limited (AFDL), which is authorized as an ARM and APA by the UK FCA and will continue to provide these services to UK clients. CME’s EBS electronic trading platform handles over $100 billion daily in spot FX volumes.
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“The establishment of the new Amsterdam-based entity will ensure that CME Group’s BrokerTec and EBS venues and CME Regulatory Reporting services (formerly NEX Regulatory Reporting) can continue to service their EU27 clients, regardless of the outcome of the UK’s withdrawal from the EU,” the company said in a statement.
Dutch Effort to Win Business
NEX Group, which was sold to Chicago’s CME for $5.6 billion last year, had previously announced plans to choose Amsterdam as a new base to prepare for the UK’s departure from the European Union.
The CME’s unit isn’t alone in planning for the worst. Bloomberg, Tradeweb, MarketAxess and almost every sizable trading venue have already chosen Amsterdam as their post-Brexit base, while Thomson Reuters is seeking authorization to relocate its foreign exchange MTF from London to Dublin.
The Dutch regulator set a deadline until July 1 for firms to seek approval if they want a guarantee of being regulated in time for Brexit. It is important to note that under the new regulations, for any and all institutions that fall under the MiFID II regime, financial instruments can only be traded on the new MTFs.