Friday, 22 July 2016

Watch Out London, Amsterdam Is Coming to Get You

In World Economy News 22/07/2016

Amsterdam is taking a different approach from other European cities to lure London’s post-Brexit business: It’s focusing on quietly targeting specific sectors like clearing, fintech and high frequency trading.
“Within that financial sector, there are parts, niches, clusters that will move to Europe and for which Amsterdam is really good,” Kajsa Ollongren, the Dutch city’s deputy mayor in charge of economic affairs, said during an interview at her office last week. “I’m not working on getting all those big banks over here.”
Since the Brexit vote, European capitals and business interests have made open overtures to flaunt other cities to The City. Paris sent four thousand British executives alove letter explaining why they should come to the French capital, while a truck carrying a billboard saying: “Dear start-ups, Keep calm and move to Berlin” was spotted in London. Dublin plans to make its case via an advertising drive that promotes its English-language prowess.
That’s not Amsterdam’s style, Ollongren said. Instead, she has focused on personally lobbying financial institutions in the U.K. and added staff at the city’s unit to attract businesses from abroad and plans to woo them with facts and figures. Amsterdam’s main selling points in her view: the Dutch capital’s location provides a gateway to the rest of Europe and its digital connectivity attract a high-quality European talent pool.
Top Court
Ollongren is focusing on winning only certain businesses as she’s not convinced London’s banking business as a whole will pack up and leave the city. Clearing has been cited as one of the likeliest businesses to do so as the European Central Bank has had its eye on requiring euro trades be cleared in the euro area, though the European Union’stop court ruled against it before the Brexit vote.
With clearinghouses alone, a lot of money is at stake. The business — on which traders rely to guarantee they get the price agreed at execution — accounts for $928 billion in the U.K. for euro-denominated derivative trades, dwarfing the $19.6 billion that change hands in the Netherlands.
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Bonus Culture
The profile of the type of people who work in the industry also fits with the finance culture of the country, according to Ollongren. The Netherlands has been particularly tough on fighting excesses in the banking sector by Dutch nationals since the global financial crisis — instituting caps on banker bonuses of no more than 20 percent of fixed salaries and making employees take an oath to uphold confidence in the industry.
People who work in clearing “are not the guys with the large bonuses and the fast cars,” Ollongren said. Instead, they are, “very solid, very reliable, very important. We’re good at that. I think it would be fantastic.”
Of course, as the U.K. has yet to invoke article 50 which would start the process of exiting the EU, it could still take years for the U.K. and the EU to negotiate the split and any relocation isn’t likely to happen any time soon. The EU court ruling also said the ECB doesn’t have the competence to regulate securities trading, suggesting that acquiring that ability might require EU lawmaker action.
Ollongren is also focusing on promoting Amsterdam’s digital connectivity. That prowess makes it a good location for high frequency trading and fintech companies focusing on bitcoin and blockchain technology, she said. In recent years, Amsterdam has established itself as a powerhouse in the world of electronic trading. Flow Traders NV raised 599 million euros ($660 million) in an initial public offering and its competitors, Optiver BV and IMC BV, are among the largest in the world.
Still, selling a city that has been tough on finance may be difficult. Finance Minister Jeroen Dijsselbloem this month went out of his way to remind people that the banker bonus culture of London isn’t welcome in the Netherlands. While the bonus rules and the oaths don’t apply to non-Dutch nationals, they’re not exactly a welcome mat to the industry, experts said.
‘Unreliable Environment’
That will impact on Amsterdam’s attractiveness for financials, Arnoud Boot professor of corporate finance and financial markets at the University of Amsterdam said.
“In general, our government is predictable, regulation is relatively transparent, the accessibility is great and language is not a problem,” Boot said. However, the attitude toward bonuses is an indication of the “negative political sentiment. And that sentiment confirms an unreliable environment” for the industry.
Ollongren is not deterred. The city’s history as a center for trade have created a culture where people look beyond borders with a global view, providing an additional incentive to base global businesses there.
“It’s not about Amsterdam, not about the urban conglomeration it’s not about the Netherlands. It’s about Europe,” she said. “People, companies who come to Amsterdam think about a European market. That’s the Dutch and the Amsterdam mentality. It’s always at a European level. The gateway to Europe.”

Source: Bloomberg