Brexit Impact on Trading Location: Global OTC IRS Markets – Q1 2023 Review

US Races Ahead of EU in Post-Brexit Euro Swaps Trading

As Brexit continues to dent London’s historic dominance of euro swaps trading, the majority of on-venue business is fleeing to Wall Street, not Europe.

New data from OSTTRA MarkitWire found London trading venues’ share of the euro interest rate swap market slipped to just 14% in March. In the same period, US market share of on-venue euro swaps was 51%, the highest recorded share. In contrast, EU venues had just over a third (35%) – their lowest share since December 2020.

The findings are the latest sign of the repercussions on the City from Brexit, which cut off access to most London trading from the bloc. The data shows a continual downward drift since the UK officially left the Single Market back in January 2021. So far this year, the UK venues’ average is just 15%, down from 16% in 2022, and 17% in 2021. Prior to leaving the EU, UK market share for euro interest rate swaps trading was north of 70%.

“While market share is certainly one aspect of this post-Brexit story, market access is the other,” according to Kirston Winters, Chief Risk Officer at OSTTRA. “Certain EU and UK banks, as well as EU and UK investment managers, have significantly reduced market access for transactions that are subject to an EU or UK derivatives trading obligation.

The reality is that many clients in the UK are unable to trade on EU venues, and vice versa. This means that to trade certain derivative products on UK venues, firms must either stay in their home market or utilise a US swaps execution facility (SEF) venue to gain broader liquidity, unable to access the other European market available. The swap markets may have previously been truly global, but it is now very much fragmented.”


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