Inside the Dutch Effort to Win Business From Brexit Britain

(Bloomberg) -- At the arrivals hall of Amsterdam’s Schiphol airport, drivers bearing placards jostle with relatives to greet the 68 million passengers who pass through every year. For a select group of visitors, the Dutch government has lent a helping hand arranging the chauffeur service.

The visitors are senior managers at U.K.-based trading firms and venues, who need to decide whether the Dutch city will be their EU home when Britain leaves the bloc next March.

The drivers ferry visitors between meetings with everyone they need to know to set up in the city; property brokers, supervisors and executives at Amsterdam’s cluster of big speed traders all feature on the agenda.

The meetings are paying off: Cboe Global Markets Inc., the owner of the largest equity-trading venue in Europe, said Tuesday that it has chosen the Dutch city. Aquis Exchange Plc, which also runs a stock-trading venue, will choose between Amsterdam and Paris in the coming weeks, a person with knowledge of the matter said.

TP ICAP Plc, the world’s largest interdealer broker, is weighing Amsterdam or Dublin, according to another person. Paris is also an option, a different person said.

Close to Customers

Cboe’s shortlist also comprised Amsterdam and the Irish capital, according to Mark Hemsley, president of the company’s European business. “We looked at proximity to customers such as brokers, market-makers and buyside. We also have a big derivatives franchise and the Dutch regulator has a history in those markets,” he said in an interview.

A spokeswoman for Aquis declined to comment, as did a TP ICAP spokesman. In a memo to employees today, TP ICAP Group Strategy Director Mihiri Jayaweera said the company remains in talks with European regulators about the location of its hub.

For its part, London Stock Exchange Group Plc has applied for additional licenses in Amsterdam to ensure its Turquoise stock-trading platform can continue servicing European customers after the U.K. quits the EU.

Companies such as Tradeweb, MarketAxess Holdings Inc. and NEX Group Plc, which run trading venues known as multilateral-trading facilities, have already chosen Amsterdam as their post-Brexit base. Bloomberg LP, the parent of this news organization, has also selected it as the EU base for its trading venues, a spokeswoman confirmed.

Friendly Regulator

The competition between Amsterdam and rival financial centers has reached its end game. The Dutch Authority for the Financial Markets, which has a reputation as a market-friendly watchdog, set a deadline of July 1 for firms to seek approval if they want a guarantee of being regulated in time for Brexit.

Read More: Amsterdam’s Secret Brexit Sauce Is a Friendly Regulator

The Economic Affairs Ministry has led the effort to attract business to Amsterdam, approaching firms directly about using the city as a European hub, spokesman Michiel Bakhuizen said. When a company wants to visit, the central government and city authorities arrange a program of meetings.

The ministry also arranges meetings for visitors with Amsterdam’s major trading firms. Dennis Dijkstra, the co-chief executive officer of Flow Traders NV, Europe’s largest trader of exchange-traded funds, met with TP ICAP, Tradeweb and MarketAxess during their visits to the Netherlands.

“With the MTFs, we speak to all of them,” Dijkstra said. “It helps grow the industry. The closer they are the better.”

Tax Breaks

The Netherlands has already convinced the EU to move the European Medicines Agency, which employs 900 people in London, to Amsterdam from 2019. It also has extensive tax breaks for newly arrived expats, who pay no income tax on 30 percent of their salary for eight years after their arrival.

While the incentives are strong, few of the companies involved have said how many people they will relocate. Firms would like to move as few people as possible and the minimum of resources to limit duplication. But the AFM will have the final say on what needs to move.

“One of our priorities is to maintain a level-playing field between the platforms,” said Valérie Allard, who works on the AFM’s Brexit team. “We assess license applications by institution. We look at their services among other things; how many services they will provide from here to Dutch or EU27 clients.”

If the Cap Fits...

One negative for the Netherlands is its bonus cap. The Dutch government capped bonuses at 20 percent of salaries, far below the 200-percent limit in the rest of the EU. MTFs have to impose the cap on their employees, but speed traders do not, at least not until 2020.

Dutch regulators had exempted firms that only trade using their own capital from the bonus limit, only to be overruled by EU regulators. The European Commission is now recommending an EU-wide exemption for proprietary traders.

The Economic Affairs Ministry said it could “neither deny nor confirm” providing drivers at the airport. Amsterdam’s local government declined to comment about its tactics to attract firms from the U.K.

©2018 Bloomberg L.P.

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