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Trading Firms Pick Amsterdam Over London as Brexit Bites

  • Electronic markets operator Tradeweb joins Radix, Hard Eight
  • Dutch regulator favors speed traders, platforms, firms say

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Two U.S. algorithmic-trading firms are picking Amsterdam over London as the location for their first European office, reinforcing the Dutch city’s standing as an expanding financial hub post Brexit.

Radix Trading LLC and Hard Eight Trading LLC, both Chicago-based prop trading firms, have chosen to base their European operations out of Amsterdam. The moves come as Tradeweb LLC, a New York-based operator of electronic-trading platforms, said on Thursday it, too, has decided on Amsterdam for its European base.

Brexit has put London’s position as the region’s financial center into question because companies fear that leaving the European Union might harm their ability to do business in any of the other 27 member states. U.S. firms are also rushing to comply with the overhaul of financial regulation known as MiFID II, which requires firms that make markets in European securities and derivatives to have a physical location in an EU member state. MiFID kicks in on Jan. 3.

“We considered several possible locations for our European office and chose Amsterdam because of the combination of experienced regulators, high-quality talent and good infrastructure,” Benjamin Blander, a managing member of Radix Trading, said in an email.

Read more: the Amsterdam firm that accounts for one third of ETF trading

While Frankfurt is rapidly becoming the location of choice for banks like Morgan Stanley and Citigroup Inc., the city of bicycles and the home of the world’s oldest stock exchange sees itself as better positioned than other continental European cities to attract proprietary or high-frequency traders.

The U.K. vote to leave the EU and the presence of Amsterdam’s three major algorithmic traders -- Optiver BV, IMC BV and Flow Traders NV -- have added to the city’s allure as a financial center. The Netherlands’ financial markets authority is more used to dealing with computerized traders than its continental European counterparts, said Katten Muchin Rosenman LLP’s Neil Robson.

“If a prop-trading firm is established in the Netherlands as a local, the Netherlands has a relatively comfortable capital treatment,” said Robson, a London-based partner at the firm. “They already have a prop-trading community there and you’re not teaching the regulator what to regulate.”

Tradeweb, which runs one of the busiest venues for European government bonds, also praised Amsterdam’s favorable regulatory set-up while expressing worries about market access once the U.K. leaves the EU.

“We do not know what’s going to happen with Brexit,” Enrico Bruno, Tradeweb’s head of Europe and Asia business, said in an interview. “This is a critical point: how will access to markets work in the post-Brexit world? We are planning for the outcomes to be different from what they are today.”

Bloomberg LP, the parent of Bloomberg News, competes with Tradeweb in operating trading platforms.

Hard Eight Trading chose the Dutch city because “it was just a lot cheaper,” said Francis Wisniewski, one of the trading house’s co-founders.

Brexit is a big concern for firms wanting access to EU markets, said Michael Thomas, a partner at Hogan Lovells.

“We do not know what the cross-border regime between the EU and the U.K. will be going forward,” Thomas said. “It puts them on a more stable footing if they have a local regulated presence in the EU.”

Still, some U.S. algorithmic traders have opted for a London office to comply with the MiFID rules, according to Robson.

“A good number still came to the U.K. notwithstanding Brexit, saying ‘We’ll let the other firms take a view on getting established elsewhere in the EU. We’ll set up in the U.K. It’s easy and relatively quick,’ ” Robson added. “They’ll take a view on getting established elsewhere in the EU once they know what Brexit means.”

— With assistance by Ellen Proper

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