When Brexit came one step closer to becoming a reality in 2018, Tradeweb was left with few options other than expanding its European presence beyond London. The US company, which runs platforms for fixed income, derivatives and ETF trading, was on the lookout for a European hub that would offer a business environment similar to that of London. The Dutch capital was an obvious choice, says Enrico Bruni, Tradeweb’s head of Europe and Asia business: “Amsterdam is home to many financial firms, so it was a natural fit for us.”
In January 2019, Tradeweb became the first foreign platform to get approval from the Dutch regulator to operate trading facilities from Amsterdam, replicating its UK regulatory status. Currently, the company’s Amsterdam office serves the liquidity needs of its EU clients.
Tradeweb is not alone in its post-Brexit trajectory. Following the Brexit referendum, many fintech companies, including MarketAxess, Klana, Azimo and CurrencyCloud, have increased their presence in the Dutch capital, either by expanding their offices or moving their European headquarters there. Many cite the friendly regulatory environment for fintech companies, still seen as pesky disruptors by incumbents in other jurisdictions, as a reason for their choice.
Amsterdam’s talent pool and reputation as a tech hub, with home-grown success stories such as payment service Adyen, help too. “Most people in the Netherlands are fluent in English, while the talent pool is remarkable with lots of technological expertise,” Bruni says. In 2020, the Netherlands topped the EF English Proficiency Index, a survey measuring English fluency globally. Around a tenth of the 200,000 people employed in the Dutch financial sector work for a fintech company, primarily in Amsterdam. “It’s only in the last five years that fintech has been growing in Amsterdam.
Before that, most fintech companies were focused on London as Europe’s fintech hub. But now there is less talent there, and following Brexit there is also a need for many companies to move somewhere else, ”says Suzanne Cox, Head of Foreign Investments at Amsterdam In Business, the foreign investment agency of the Amsterdam metropolitan area.
Many hope that Amsterdam will regain some of its 17th-century glory, when it was the world’s leading financial hub
For most firms moving from London, relocating is all about minimising damage rather than gaining an advantage; moving to a city where the infrastructure is already there is a no-brainer. “Amsterdam already had a very good financial ecosystem, so we didn’t need to build anything from scratch,” says Michiel Bakhuizen, a spokesperson for Netherlands Foreign Investment Agency, an organisation responsible for attracting foreign businesses to the country.
The city is conveniently located close to other European financial hubs and frequent flights are available from Schiphol Airport to all places that matter in European tech and finance. Amsterdam is also home to Amsterdam Internet Exchange, one of the world’s largest networks of digital traffic, while the Netherlands boasts Europe’s fastest average internet connection according to Opensignal, a mobile analytics company.
The Dutch capital is also making strides in other areas. This January, Amsterdam Euronext overtook London as Europe’s top share trading venue. Although temporary and largely symbolic, given London’s dominance of other markets, the shift has been hailed as “irreversible” by Stephane Boujnah, Euronext CEO, in an interview to AFP.
Amsterdam is also gaining ground in euro-denominated interest-rate swaps, a $135trn market, and in the first half of the year was trailing London as Europe’s top corporate listing venue, with the €3.2bn IPO of Polish parcel-locker firm InPost as the jewel in its crown. Many see the canal city as an emerging hub in niche but up-and-coming markets. In another blow to the City’s mojo, US-owned Intercontinental Exchange announced last February that it will move EU carbon trading from London to its Amsterdam-based ICE Index, the world’s biggest carbon trading exchange, due to the EU’s refusal to grant regulatory ‘equivalence’ to the UK’s financial rules.
Chicago-based Cboe Global Markets, one of the biggest exchange operators globally, will launch its equity derivatives trading hub in Amsterdam this September, while CME Group, a US-owned derivative exchange, has already shifted euro-denominated trading and clearing from London to Amsterdam.
Many banks are also increasing their foothold in the ‘Venice of the North.’ Natwest and RBS have moved some UK operations to Amsterdam, while non-European banks such as Australia’s CBA, US investment bank BlackRock and Japan’s Norinchukin and MUFG have picked Amsterdam as their EU base.
Despite these early successes, the Dutch are careful to shy away from triumphalism. “When we made an analysis from a company’s point of view back in 2016, we saw that Amsterdam was attractive for various financial services firms, but not all of them,” says Bakhuizen. With a cluster of trading platforms and payment companies already in the city, it was easy to attract more of the same. Beating other European financial hubs in some markets has proved more challenging. “We knew that Amsterdam wouldn’t be the place to be for investment banks, because the Netherlands has a banking bonus cap,” Bakhuizen explains, referring to a law capping bonuses to a maximum of 20 percent of salary.
A survey by the think tank New Financial found that of the 440 financial services firms that have moved jobs out of London, one out of three picked Dublin as their primary destination; Amsterdam attracted a tenth, although it’s catching up, while most investment banks opted for Frankfurt and Paris.
One advantage that makes Amsterdam stand out from its EU rivals is regulation. The dispute between the EU and the UK over equivalence has left many financial services firms in limbo. “The Dutch regulator, the Authority for the Financial Markets (AFM), has substantial experience in financial services and understands our space very well,” Tradeweb’s Bruni says. The AFM allows proprietary trading firms to trade directly with institutional investors without treating them as clients, a rare feature among EU regulators that cuts down red tape. “The Dutch regulator is strict, but also open-minded and much respected in Europe. So it’s not necessarily easier to get regulatory approval here, but if you do, you know that you will be taken seriously in Europe,” Cox from Amsterdam in Business says. Many fear that regulatory divergence between the EU and the UK will lead to fragmentation in European financial markets, with US and Asian markets picking up the spoils.
For Tradeweb, lack of equivalence means that EU-based banks cannot transact with their clients on its UK platforms, due to EU regulation. As a result, the company has seen trading activity shift to US venues, most markedly in euro swaps. “We believe that even though equivalence would simplify things and reduce fragmentation in the market, it is probably not as much of a priority as it once was. Instead, we could see fractious trading become more prevalent in the future,” Bruni says.
SPACs, the new battlefield
The Dutch capital is gaining momentum in an up-and-coming niche market: special purpose acquisition companies (SPACs), which use money raised from investors to acquire promising start-ups and help them go public. Although the market has slowed down after an unprecedented boom in the US in 2020 and early 2021, it is gathering pace in Europe. In the first half of the year, Amsterdam’s Euronext exchange was the leading European venue for SPAC listings.
It is already the go-to listing platform for European SPACs supported by famous sponsors, a crucial element for SPACs relying on the reputation of their backers to attract investor interest. Big shot sponsors like Bernard Arnault, CEO of the world’s biggest luxury group, and Ian Osborne, a prominent tech investor, have chosen Euronext to list their SPACs.
Many European countries are considering regulatory reforms to attract SPACs. The UK Financial Conduct Authority may loosen current regulatory restrictions, such as the suspension of share trading once a proposed acquisition has been announced. However, the Dutch regulatory framework is perceived as being closer to the US one, with hardly any SPAC-specific restrictions in place. “They are competitive from a regulatory point of view. It’s fast, easy and flexible to list there. Plus, Euronext is an integrated market – it’s part of the EU’s Capital Markets Union with connections to other European markets, which is not the case with London,” says Daniele D’Alvia, CEO of SPACs Consultancy, a London-based consulting firm, and author of a forthcoming book on SPACs.
With finance entering a new era due to the rise of disrupting technologies such as the blockchain and AI, many hope that Amsterdam will regain some of its 17th-century glory, when it was the world’s leading financial hub, before a series of economic crises and wars allowed London to gain the upper hand; the Dutch capital is home to the world’s first official stock exchange, as well as the first public listed company (the Dutch East India Company).
However, the Dutch don’t rush to celebrate, nor do they overestimate the benefits of Brexit. “For us, it’s a pity that Brexit is happening. We have never been in favour of it. We think we can be stronger working with the UK, rather than competing with them,” Cox says. “A lot of companies move operations to Amsterdam, Frankfurt or Dublin, but never leave London completely,” Bakhuizen says. “They diversify their strategy to be close to the markets where they operate. It’s a global game now.”