Amsterdam Is Where It’s At. Can Paris and Frankfurt Stop It?
(Bloomberg Opinion) -- Barely weeks after the U.K.’s exit from the Europe Union, Amsterdam is gaining kudos as a major European venue for stocks. It may all be a matter of perception — but perception counts in the markets.
The Dutch capital has been chosen for two high-profile listings in recent days. It was also the lead venue for European share trading in January, according to U.S. market infrastructure group Cboe Global Markets Inc.
The city’s sudden dominance in European equity transactions goes back to Brexit contingency plans drawn up months ago. Both Cboe and the London Stock Exchange Group Plc’s Turquoise platform chose the Netherlands as their alternative site for EU share trading. Once Boris Johnson’s Brexit trade deal landed without including financial services, Amsterdam share volumes were bound to accelerate as London’s came down.
Perhaps the Netherlands is benefiting from historic ties represented by Anglo-Dutch businesses such as Royal Dutch Shell Plc and Unilever Plc. Crucially, English is widely spoken. Amsterdam is also a hub for high-frequency trading firms with all the network infrastructure that calls for.
Whatever the reasons, the jump in volumes is likely to be more than a one-off gain in a thinly profitable area. It creates the impression the Dutch market is becoming deeper and more liquid. Now that Brexit is a reality, companies mulling listing venues will probably first ask: U.K. or continental Europe? If there is a bias to answering Europe, Amsterdam then becomes a stronger contender alongside Paris, home to EU market regulator ESMA, and Frankfurt, headquarters to the European Central Bank.
Some eye-catching new issues reinforce the mood. Media conglomerate Vivendi SE is considering a demerger of record label Universal Music Group into a Dutch listing, eyeing a 30 billion-euro ($36 billion) enterprise value. Former UniCredit SpA boss Jean Pierre Mustier, luxury-goods billionaire Bernard Arnault and French asset manager Tikehau Capital SCA are planning a special-purpose acquisition company in Amsterdam targeting fintech and other financial firms.
A tolerance of dual-class voting structures in the Netherlands could be one factor. Dutch governance is arguably friendlier to managers than ordinary shareholders. Meanwhile, the country’s AEX index has payments firm Adyen NV near the top, a helpful fintech peer for the types of companies Tikehau’s blank-check vehicle may be looking to take public.
None of this makes Amsterdam the hands-down favorite to become Europe’s top financial center dominating all asset classes. Where firms have set up Brexit contingency operations in the EU, it makes sense to keep extending that bridgehead. Frankfurt and Paris benefit from these dynamics too. Cboe is planning to launch a European derivatives exchange in Amsterdam in the first half of 2021, but right now its business in the city employs only around 100 people. A Netherlands rule capping bonuses at 20% of salary remains an obstacle to Amsterdam’s expansion as a finance hub.
But in new stock offerings at least, the momentum behind Amsterdam could feed on itself. The EU’s other financial centers need to make their pitch quickly. And for U.K. policymakers examining whether to loosen the country’s post-Brexit listing regime, the dilemma is becoming increasing clear: Change, or watch the business go elsewhere.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.
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