The effects of Brexit keep migrating financial organizations out of London to a location that is more welcoming of the EU such as Amsterdam. Most UK brokers found it practically impossible to retain European business clients with the loss of passporting rights, thus they had to open new headquarters or subsidiaries in EU member states. Amsterdam was a good place to be because it had a good financial system in place, there were English speakers, and the regulatory environment was relatively easy under AFM.
Operation costs in Amsterdam can usually be more attractive compared to other European financial centres such as Frankfurt or Paris. Offices are still much more affordable than comparable places in London, and Dutch corporate tax systems and investment policies make it economically viable for many companies to migrate. The accessibility of the city to the key markets of Europe and the good transport connection are other practical advantages that contribute to compensating the inconvenience of transferring the well-established operations.
The issues with regulatory transition have also compelled brokers to reinvent compliance teams and adjust their current processes to adhere to the AFM requirements. Firms that shift their regulatory framework to Dutch regulation will have to find their way through varying capital adequacy regulations, client protection requirements, and reporting requirements that do not necessarily fit their old operational modalities perfectly. Such a process of adjustment usually takes months and is costly in terms of legal counsel and system reengineering.
The financial district in Amsterdam has also been growing fast to house new companies with some of the leading brokers already having a large presence in the Amsterdam financial district. The arrival of London refugees has been a competitive workforce to the experienced traders, compliance officers, and technology specialists that have knowledge on both the UK and the European regulatory frameworks. Some of the things that have been done by the local universities have been the formation of special courses that are supposed to prepare the younger generation to be experts in the field of financial services.
The technology infrastructure has also been strengthened as Amsterdam is becoming a major trading hub in Europe. Fiber optic connectivity, data center capacity, and low-latency trading systems must be upgraded continuously to support the many relocated firms. The Dutch government has extensively laid efforts into funding this technological growth with the understanding that it will pay off in the long term as a destination for relocating a forex broker.
Cultural integration introduces continuous difficulties to the British companies that are modifying the Dutch business culture and employment regulations. The language barriers, varying working styles as well as local regulatory expectations need to be handled carefully to ensure continuity in operational efficiency in the periods of transition. The solution that has been discovered by many companies is to hire local talent so as to fill in these cultural differences and still have links to their original operations in London.
The issue of market access is a key determinant of which companies select Amsterdam among the other European substitutes. The Netherlands has good trading relations with major financial hubs as well as good relations with major currency markets in the world that brokers who have moved must be connected to enable them to effectively attend to their clients. The pragmatic aspects of the regulation as proposed by AFM without the high degree of bureaucracy is attractive to firms that want certainty of regulation following years of uncertainty caused by the Brexit process.
Since significant migrations started, the competition of European cities in financial services relocations intensified. Amsterdam competes directly with Dublin, Frankfurt, and Luxembourg regarding forex brokering business, offering incentives for a forex broker seeking EU operations, each having varying benefits in terms of tax, regulation, and cost of operation. Generally, this competition has enriched the moving companies in terms of better incentive packages and simplified approvals.
The long-term effects of this geographical change are still in the process of evolving with the trend of most companies setting up operations permanently outside of London. The forex trading skills concentration in Amsterdam has the potential to eventually establish network effects that could make the city become more appealing to the remaining operations in London. Nonetheless, certain brokers are continuing to operate with two footprints where they have certain services in London but open up EU-based operations in the Netherlands to target different client segments.