Fringe EU countries like Poland have NO chance of attracting the big electronic trading institutions away from London
Poland’s Deputy Prime Minister Mateusz Morawiecki has gone to London to attempt to lure firms away from London and invest in Poland for back office operations. Many pundits consider this a post-Brexit attempt to move institutional business from London to Poland, something that will absolutely never happen. Here is why
Polish Deputy Prime Minister Mateusz Morawiecki has made his way to London, which, in case it has slipped his mind, is the world’s largest financial center, the Square Mile being home to the lion’s share of the most sophisticated non-bank institutional FX business that serve the entire world’s electronic brokerage ecosystem with aggregated Tier 1 liquidity, which in turn is provided by major global banks which nestle along the Docklands at Canary Wharf, handling 49% of all interbank FX order flow for the world.
Mr. Morawiecki may have good intentions in that he wishes to open his nation’s economy to the Western markets even further, his trip to London being to meet several banks and hedge fund managers in order to present Poland as an attractive place to set up middle office, back office and IT operations.
This, in turn, is being viewed as an attempt by, of all places Poland, which has absolutely no developed financial markets economy and no place on the world stage as a mainstay of infrastructural and topographical genius with regard to electronic market infrastructure, connectivity to the world’s largest liquidity streams or any such large scale brokerages with their own proprietary systems and global client bases, to attract banks to move their operations to Poland from London post Brexit.
How on earth this can even be a consideration is perplexing in the extreme.
The very few brokers that exist there are very domestic market-centric and still use MetaTrader 4 and aggregated liquidity from third party providers, most of which are themselves retail brokerages rather than Prime of Primes, thus placing all orders via the dealing desk of another retail brokerage.
Absolutely no Polish banks process any FX order flow or participate in the delivery of interbank Tier 1 liquidity to the prime brokerage sector, and there is no presence whatsoever of electronic trading desks within Poland.
Perhaps the most ironic aspect of this and the way that it is being portrayed by the mainstream media and armchair pundit is that Poland may be able to benefit from the outcome of the UK referendum to leave the EU by attracting banks.
I beg your pardon?
Banks will remain in London, as will the non-bank electronic trading sector because of the completely London-centric nature of the technology and highly refined trading infrastructure that the entire global business relies on, as well as the experienced senior executives that operate London’s entire business ecosystem, how the relationships between bank and prime brokerage, prime brokerage and aggregator, aggregator and integration and bridge provider and eventually brokerage correlate and interlink, and of course the longstanding nature of the retail FX business that takes such liquidity, itself being made up of companies with their roots right at the inaugural years of the retail business, with their own in house trading platforms and dedicated hosting on trading servers which are in Slough, not Warsaw.
TMX Atrium, one of the large infrastructure and connectivity providers invested in points of presence between London and Moscow three years ago, followed by London and Frankfurt and London and Paris. The common denominator here being London, and of those European cities, Warsaw is notable by its absence.
The mass media hyperbole surrounding Mr. Morawiecki’s impending meetings with banks and hedge funds in London and the mere suggestion that this is an attempt to attract banks away from London and into Warsaw is absolute pie in the sky. At least Mr. Morawiecki himself is a bit more realistic.
“It will be certainly a difficult task but we want to show how attractive Warsaw and Poland are” Mr Morawiecki told TVN24. Yes. And the sky is blue.
The mere suggestion that some of the more well recognized financial hubs like Paris, Dublin and Frankfurt, all of which cannot hold a candle to London, are already considering pitching for firms that they consider are disappointed with the referendum result is banal. Poland isn’t bidding to attract the most lucrative front-line jobs because it’s outside the euro area, but that is not relevant. The Pound zone, and specifically Central London is really all that is relevent when it comes to all levels of the interbank and institutional financial industry in the west.
Singapore and Hong Kong in Asia, London in the west. End of consideration.
Mr Morawiecki is actually approaching the banks and hedge funds that he is meeting in London from the right angle, emphasizing the benefits of Poland as a location for support staff, but stating that the country has a “fantastic pool of skilled labor” is stretching things just a little. A skilled workforce in the Eurozone which understands the global financial sector well? Cyprus yes. Poland no.
Yes, Poland’s economy is in reasonable condition compared to regional norms, but it cannot be compared with that of London, nor can its good business ethic, and understanding by government officials, banks and industry leaders of how to structure a global, modern, electronic banking or institutional business as an end to end solution that serves the world. London is the FinTech center that develops the world’s banking technology, largely because of its proximity to the very banks that are paving the way forward.
The very FinTech that is either in house, within the large banks and has been for over 25 years, and the new, Silicon Roundabout FinTech which is made up of astute Millennials building solutions, including middle office and back office, for banks and institutional firms with their towers casting a shadow on the offices of these entrepreneurs. The rest of the technology that is not conducted in house, is often provided by long term agreements with British divisions of professional services consultancies including Accenture, Fujitsu-Siemens, Capita and Serco whose solutions architects have vast experience extending several decades.
Add to this the jetisoning by Britain of Europe’s moribund economy and outmoded approach to business, lack of technological prowess and myriad of bailed-out and completely unaligned states that play absolutely no part in any financial markets economy, and the savings that Britain will make by having no longer to put bread on their table, and that should be enough to cement only one capital as the center for the commercial banking and institutional financial sector – London. Back office jobs and all.