London tightens grip on foreign exchange trading as Brexit nears

Far from suffering under the economic and political uncertainty wrought by Britain’s journey towards leaving the European Union, London is strengthening its grip on currency trading, the crown jewel of the city’s financial industry.

A boom in new financial technology jobs is helping London to offset a decline in traditional trading roles as the industry becomes ever more automated, though it may not compensate for Brexit-related losses in other financial sectors.

Financial analytics firm Mosaic Smart Data has doubled the number of developers and quantitative analysts it employs since 2018 at its London base, where nearly 40 now crunch numbers to help banks trade foreign exchange and bonds.

Technological and regulatory trends little impacted by Brexit are driving more forex flows into a single, centralised trading hub, largely to London’s benefit, interviews with bank executives, investors and central bank officials show.

London’s share of global daily forex turnover has rocketed to a record 43% - from 37% in 2016 - as it stole market share from New York and Asian hubs, according to a Bank of International Settlements survey last month. London has long led in forex thanks to its convenient time zone and cutting-edge trading infrastructure. But the news surprised many who had predicted Brexit would drive an exodus of banks and traders from London, or at least arrest its growth, while cities such as Hong Kong and Singapore were seen benefiting from a boom in local currency activity.

“London is hard to beat. The depth and diversity of the skill pool here is unrivalled,” Matthew Hodgson, the founder of Mosaic, one of a clutch of new fintech companies tapping into the forex industry, told Reuters. Mosaic employed a handful of staff from a shared office around the time Britain voted to leave the EU.

“There is a network effect for talent, the FX liquidity and the clustering of institutions,” he said, predicting London’s advantage was “likely to have staying power” despite Brexit. Big banks including Citi, BNP Paribas, Deutsche Bank, Goldman Sachs and UBS base their global forex heads in London.

And some banks have expanded their presence in recent years.

Dutch bank ING, for instance, chose London to centralise its forex trading operations, previously scattered across various cities. ING’s global forex and rates boss Gary Prince said it was efficient to run more business out of the British capital.

Reuters