Are European trading desks still competitive in a post-Brexit, pre-FRTB world?

What post-Brexit trading volumes reveal about Europe’s competitiveness

Following the United Kingdom’s departure from the European Union, the competitive dynamics between London and EU trading desks have continued to evolve. Equity trading volumes on continental platforms, such as Euronext, have gradually risen. In April 2025, Euronext reported record trading activity across its European venues, reflecting growing institutional participation in EU-listed assets. Meanwhile, European regulators have pushed for greater onshoring of key capital markets activities to reduce reliance on non-EU financial infrastructure.

In derivatives markets, particularly euro-denominated interest rate swaps, EU-based central counterparties (CCPs) have modestly increased their market share. According to European Central Bank and ESMA reports, euro swap clearing in the EU remains small relative to London’s LCH, which continues to handle the majority of global volume. However, the direction of regulatory travel remains consistent: gradual migration of financial infrastructure to the bloc.

For EU-based trading desks, the dual challenge now lies in consolidating this market share while preparing for major regulatory changes, including the 2027 implementation of the Fundamental Review of the Trading Book (FRTB). The long-term competitiveness of EU desks will depend on how effectively they respond to both Brexit-era dislocations and Basel III capital reforms.

How have clearing dynamics shifted since Brexit?

Clearing has become a focal point in post-Brexit financial realignment. In 2022, the European Commission proposed that banks demonstrate “active accounts” with EU-based CCPs for euro-denominated trades. The goal was to foster strategic autonomy and reduce systemic exposure to third-country CCPs. In parallel, the Commission extended equivalence for U.K.-based clearing houses, including LCH and ICE, through June 2028, recognising their continued importance to global markets.

Despite these efforts, structural migration from London to the EU has been slow. Clearing location depends not only on regulatory mandates but also on deep liquidity pools, netting efficiency, and client familiarity. For now, London remains the dominant hub for euro swaps, but trading desks are increasingly weighing counterparty, margin, and capital implications when executing across CCPs.

Market observers believe that once the FRTB is enforced—particularly its treatment of non-EU clearing exposures—desk-level economics could shift further in favour of EU-based CCPs.

Are trading desks relocating within Europe?

Following Brexit, global banks were required to expand operational capabilities across multiple EU cities. Frankfurt, Paris, Amsterdam, and Dublin saw increases in front-office presence, driven by regulatory expectations around substance and supervisory access. The European Central Bank’s “desk-mapping” exercises required that banks demonstrate that material risk-taking activity was conducted from within the EU.

However, operational reality is more nuanced. While official relocations have occurred, much of the strategic decision-making, structuring, and pricing for global products continues to reside in London. Many EU-based desks function within a hub-and-spoke model, where core risk functions remain centralized while execution and compliance are distributed.

This structure highlights a persistent advantage for the U.K.: its deep talent pool, market connectivity, and institutional experience in managing complex portfolios. Despite policy pressure, London remains the default center for many high-value capital markets activities.

How is ESMA shaping the post-Brexit trading landscape?

The European Securities and Markets Authority (ESMA) has played an increasingly active role in realigning EU market structure. In February 2024, it recommended that the European Union transition to T+1 settlement by October 2027, mirroring efforts in the U.K. and United States. It also called for stricter oversight of “letterbox entities” and outlined reporting obligations to ensure meaningful onshore activity.

These efforts are designed to support financial stability and regulatory convergence. However, they also increase compliance burdens for trading desks. Shifting to T+1 will require investment in real-time settlement workflows, intraday liquidity forecasting, and pre-funding models—especially for desks that operate across borders.

As institutions prepare for FRTB, the layering of ESMA’s transparency mandates and settlement reforms presents a complex roadmap. Compliance teams and trading heads will need to coordinate across multiple fronts to stay aligned with supervisory expectations.

What challenges do trading desks face before FRTB kicks in?

Scheduled for EU-wide implementation in January 2027, the FRTB will overhaul how trading desks measure market risk and allocate capital. It introduces Expected Shortfall as the new risk metric and requires that internal models be approved at the trading desk level—subject to strict backtesting and P&L attribution criteria.

These changes will hit desks with bespoke, illiquid, or complex exposures the hardest. Instruments with non-modellable risk factors will carry heavier capital charges, and the cost of maintaining internal model approval could outweigh benefits for low-volume desks. At the same time, EU regulators already implemented revised boundary rules in 2025, requiring banks to draw clearer lines between trading and banking books.

The cumulative impact of these reforms is significant. Trading desks must integrate new models, restructure product offerings, and upgrade infrastructure—all while navigating post-Brexit market fragmentation and compliance with CCP and settlement mandates.

What are trading desks doing to stay competitive?

To maintain competitiveness in this environment, EU trading desks are focusing on three strategic pillars. First, institutions are deepening relationships with EU-based clearing houses and investing in collateral optimisation and multi-CCP connectivity. This not only future-proofs operations under FRTB but also improves regulatory optics.

Second, desks are streamlining risk-taking by focusing on high-liquidity, low-capital products. This reduces exposure to volatility in capital charges and simplifies model approval processes. Third, technology investment continues to accelerate—particularly in areas such as P&L attribution tools, Expected Shortfall simulation engines, and real-time compliance monitoring.

Some banks have also begun consolidating operations across select EU hubs to reduce duplication and focus liquidity. Institutions that integrate regulatory, operational, and capital planning holistically are more likely to maintain pricing power and execution agility in the coming FRTB era.

What do institutional observers say about Europe’s competitiveness?

Opinions remain mixed. While Europe has succeeded in attracting some volume and infrastructure away from London, structural gaps remain. The City of London continues to dominate in areas such as FX, interest-rate derivatives, and structured credit. EU trading desks, by comparison, face higher compliance costs, fragmented market venues, and regulatory complexity.

However, recent signals from Brussels and ESMA are seen as constructive. Extending equivalence for U.K. CCPs until 2028 provided breathing room for market continuity. Meanwhile, ESMA’s alignment with global T+1 settlement plans demonstrates a willingness to match international standards rather than isolate the bloc.

The true test will come post-2027. If EU reforms succeed in attracting liquidity and enabling competitive pricing, trading volumes will continue to grow. If not, desks risk becoming compliance-driven outposts rather than revenue-generating hubs.

What will determine European trading desk competitiveness?

Competitiveness will hinge on three interdependent factors. First, whether EU-based CCPs can scale up to absorb greater clearing volume without raising margin or operational risks. Second, how effectively desks implement T+1 and FRTB together, without impairing liquidity or trade flow. Third, whether the EU can harmonise supervisory practices and reduce cross-border operational friction for pan-European banks.

Firms that treat regulatory change as an opportunity rather than a constraint—by simplifying products, automating risk management, and investing in scalable tech—will have a structural advantage. Institutional adaptability will matter just as much as capital strength.

What lies ahead for EU trading desks?

With Brexit realignments largely in place and the 2027 FRTB deadline fast approaching, EU trading desks stand at a pivotal juncture. The coming 18 months will test their ability to manage regulatory overlap, infrastructure upgrades, and evolving capital constraints.

If successfully navigated, these shifts could lay the foundation for a stronger, more integrated European capital market—one less dependent on legacy relationships and better equipped for systemic resilience. But success is not guaranteed. Only desks that evolve in tandem with regulatory transformation will retain their strategic relevance in the post-FRTB era.