European Capital Markets

Should the EU Shut out the City of London?

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With the UK leaving, Europe’s major hub of non-bank capital will soon be outside the EU’s regulatory purview. The EU will need to decide whether to keep London at arm’s length while pursuing an inward-looking strategy, or instead open up its market to London and the rest of the world.*

Market liquidity is essential to the creation of an efficient and effective capital market. Capital markets enable credit providers (investors) to price the credit they provide as short-term (because the bond they own can be sold tomorrow), whilst issuers get long-term funding (since they are indifferent to the fact that the bond has been bought and sold). The deeper and more liquid the market, the more effectively this process works.

Liquidity, in turn, is provided by dealers. In particular, dealers who are prepared both to buy and sell securities in their own name, and to promise to buy and sell ...

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Revue Banque Nº838bis