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Brexit could take toll on London ETFs

Brexit could drive up ETF costs and impact competition in the UK
Brexit could take toll on London ETFs

Exchange traded fund (ETF) providers could face higher costs and investors might have less choice of ETFs if Brexit (a UK exit from the European Union) brought with it the end of single-market trading agreements whereby Ireland and Luxembourg domiciled funds are automatically granted access to the London Stock Exchange.

Currently any 'undertakings for the collective investment in transferable securities' (Ucits) regulated fund listed in one European Union (EU) member state is automatically granted a passport for trading on the London Stock Exchange. This means that providers are able to domicile and list more cheaply and quickly in Ireland, but also get permission to trade in London, rather than being forced to list separately in each country the ETF trades in.

An end to Britain's membership of the single market could mean the end to such passporting agreements, throwing into uncertainty the trading requirements, regulations and permissions for ETF providers wanting to sell funds into the UK. That, in turn, could have an impact on the cost of funds - if ETF providers chose to pass on higher UK listing fees to consumers. It could also have an impact on the choice of funds and competition in the market if ETF providers are put off listing in London.

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