Stock Traders Gain New Bellwether for Analyzing Brexit Talks

  • Bats Europe’s new Brexit index opens door to ETF listings
  • JPMorgan, KPMG also have created stock indexes for Brexit

Equity traders have a growing list of ways to track Theresa May’s divorce talks with the European Union.

One of the most recent is a pair of indexes started by Bats Europe, part of CBOE Holdings Inc. The gauges measure the 50 biggest U.K. stocks that are most tied to the British economy, and the 50 largest internationally focused peers. The firm says investors need new methods to size up British companies as Prime Minister May prepares to trigger Brexit on March 29.

“It’s a bellwether, and it’s about as good a place to start as any,” said Leigh Himsworth, who manages about $91 million of U.K. equities at Fidelity International in London. “We’re all going into uncharted territory.”

As two years of difficult trade negotiations between the U.K. and the European Union are set to begin, scrutiny of the impact on British firms is growing. KPMG has developed two stock indexes, and JPMorgan Chase & Co. also has one. MSCI Inc. has been monitoring populist sentiment as part of its stress testing for portfolios.

Bloomberg LP, the parent company of Bloomberg News, operates financial market analytic tools and indexes.

Luxury retailer Burberry Group Plc is among firms with revenue likely to be insulated from the U.K. economy, according to the Bats indexes, while insurance service firm Admiral Group Plc and retailer Next Plc are more vulnerable.

Bats says its indexes are unique because they use geographic revenue data compiled by FactSet Research Systems Inc. and are based on the same methodology as its other benchmarks, making it easier to compare them. The indexes will be offered free of charge, and Bats is hoping to win the interest of more than just financial professionals.

“This particular topic is so much in the public domain,” said Guy Simpkin, head of business development at Bats Europe in London. “It affects everybody, from corporates to proprietary trading firms and banks, to hedge funds, to the man on the street and all points in between.”

It also leaves the door open to creating exchange-traded funds tied to the indexes.

“We have strong relationships with ETF issuers,” Simpkin said.

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