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The London Stock Exchange will move its European government bond trading from London to Italy before Britain’s exit from the European Union next March, it said on Monday.
The LSE’s electronic government bond trading platform, known as MTS Cash, trades a daily average of €13.4 billion ($15.31 billion) of bonds. About 20 per cent of this will shift to Milan, while trading in British government bonds will remain in London.
London is a major centre for trading and clearing euro-denominated securities, but the EU and the European Central Bank want to move it to the euro zone where they can regulate it directly, given that Britain will not be an EU member state from March.
A shift would also allow cross-border trading to continue if Britain were to crash out of the bloc without a deal. MTS Cash became part of the LSE group when the exchange bought Borsa Italiana.
A source close to the matter said the move would be effective from March 1, 2019. The source also said MTS chief executive Fabrizio Testa recently wrote to clients to reassure them that the move and Brexit would not affect the functioning of markets.
A second source said new regulations were being currently discussed with debt management offices of the countries whose bonds are affected by the move. The switch by MTS, first reported by the Financial Times , mirrors a similar move by BrokerTec, which accounts for a large chunk of trading in government bonds from the rest of Europe.
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