UK watchdog leaves options open after Brexit trading spat with EU

Reuters
FILE PHOTO: A river boat cruises down the River Thames as the sun sets behind the Canary Wharf financial district of London, Britain, December 7, 2018. REUTERS/Simon Dawson/File Photo

By Huw Jones

LONDON (Reuters) - British and European Union market regulators should look beyond public sparring this week over share trading to the "bigger picture" of future relations after Brexit, a senior British regulator said on Thursday.

The Financial Conduct Authority lashed out on Tuesday when the EU's European Securities and Markets Authority (ESMA) said that if there is a hard Brexit next week, EU investors must trade 6,200 named stocks, including 14 UK shares, in the bloc and not in London.

A UK exchange boss described ESMA's move as a "land grab".

The FCA was not "at the table" when ESMA was drawing up its statement because it cannot take part in discussions on Brexit, Nausicaa Delfas, the FCA's head of international, told Reuters on Thursday.

The UK watchdog supervises Europe's biggest market and must now decide whether to reciprocate if Britain leaves the bloc without a deal, meaning a ban on UK investors using exchanges in the EU.

The FCA is keeping its powder dry for now.

"We will have to just have to assess the situation as it develops, we will have to look at what our options are," Delfas said, declining to elaborate or say if ESMA's statement had taken the FCA by surprise.

Industry officials say the clash does not bode well for UK financial market access to the EU after Brexit.

Britain is likely to depend on the EU's equivalence system, meaning it would have to stay aligned with the bloc's rules. Delfas said Britain will be fully equivalent as it leaves the EU given it currently applies all the bloc's rules, meaning Brussels has no reason to cut off London.

"I think we have to step back and look at the bigger picture. The reality is that we are the most equivalent country in the world," Delfas said.

"Our markets are so interconnected that these sorts of issues not only have an impact on the UK but on the EU as well. It's in the EU's interests to find us equivalent as well."

FCA chief executive Andrew Bailey has urged the EU to keep markets open after Brexit.

Jonathan Herbst, global head of financial services at law firm Norton Rose Fulbright, told a conference on Thursday that ESMA's "blunt, political statement" raised the question of what happens if the EU does not reciprocate Britain's open markets stance after Brexit.

"Our approach is to maintain open markets. We are guided by our objectives which is to make markets work well," Delfas said.

(Reporting By Huw Jones, editing by Lawrence White)