London is truly a global financial center. Discussions with industry professionals and with those associated with key London exchanges simply emphasized a key point—financial services play an outsized role in London and in the U.K. economy. Financial services are the largest sector component within the large cap, U.K. equity indices.
The essential need for the U.K. to stay on the cutting edge in costs, technology, and trading are not lost on those connected to the London exchanges. This clearly provides opportunity, as nearly all global financial institutions will connect to London. However, it exposes the U.K. economy and financial markets to financial shocks. Also, the risks associated with the referendum for the U.K. to leave the European Union or for Scotland to leave the U.K. highlight the financial market risks when politics overwhelms economics.
My first impression from prior research is that multi-country, multi-currency trading and management is messy for trading and clearing. My discussions did not dissuade me from this view, but I also came to appreciate the opportunities associated with these complexities for the exchanges, but also for the U.K. economy and financial markets.
Special thanks to Brennan Staheli, Daniel Doxey, and the Lunt Capital team for their contributions to this report.