EU, UK market watchdogs clash over no-deal Brexit share trading

By Huw Jones

LONDON (Reuters) - The European Union's markets watchdog published guidance on Tuesday identifying which shares investors in the bloc could no longer trade in London if there is a hard Brexit next week.

The move drew instant criticism from Britain's financial regulator, saying it risked disrupting markets.

Britain is due to leave the EU on March 29, but it has yet to agree a divorce settlement and "standstill" transition deal with the bloc. The UK is now expected to ask for a delay to Brexit.

The European Securities and Markets Authority (ESMA) published a list of 6,200 shares subject to the bloc's "trading obligation". This means they would have to be bought and sold on a platform based in the EU if Britain left the bloc without a deal.

It includes 14 shares listed in London but deemed to have enough trading "liquidity" on EU exchanges. EU investors could continue to buy and sell in London shares that are not on ESMA's list.

Without ESMA's guidance, EU investors could only trade shares listed on an EU exchange in the event of a no-deal Brexit.

ESMA said it was seeking to limit potential market disruption.

"ESMA wishes to highlight that the guidance provided in the public statement should only be applied in case of a no-deal Brexit occurring on 29 March 2019," the watchdog said.

"Should the timing and conditions of Brexit change, ESMA may adjust its approach and inform the public of any changes as soon as possible."

Britain's Financial Conduct Authority said ESMA's guidance meant that EU banks, funds and asset managers will not be able to trade some UK or EU shares in London, even where the UK is the home listing of the British or EU company.

It called for a comprehensive and coordinated approach to avoid potential disruption to market participants.

"We therefore urge further dialogue on this issue in order to minimise risks of disruption in the interests of orderly markets," the FCA said in a statement.

ESMA said it is mindful of the impact of a no-deal Brexit on EU market structures.

"Therefore, ESMA will consider, in light of possible market developments, whether to review its approach at the latest 12 months after the no-deal Brexit date," ESMA said.

(Reporting by Huw Jones, Editing by Gareth Jones, Editing by William Maclean)