Strengthening Europe’s Position In Global Capital Markets

The European capital market remains fundamentally distinct to the US, and Europe lags behind the US in many regards, for example, the use of equity to finance firms, the prevalence of venture capital, and the relative share of IPOs.

However, through London, Europe’s capital market has established a world leading position in derivatives trading, most notably in FX and commodity asset classes.

After a prolonged period of gradual harmonisation across European institutions, laws and regulations, Brexit, and the rise of other nationalist and protectionist movements across the globe signal a move in the opposite direction.

This shift could have dramatic effects on Europe’s capital market, which has been at the forefront of globalisation in recent decades. Without sound leadership and political compromise, Europe’s capital market could become more fragmented and illiquid, limiting its ability to perform the functions by which capital market support the real economy and surrendering a competitive advantage to capital market in other parts of the world.

European policy-makers have taken initial steps to overcome regional barriers and to promote capital market integration, such as the Capital Markets Union project. But the headwinds from Brexit and the growing enthusiasm for protectionism mean that they must re-double their efforts.

To assist them, this report outlines six principles that should guide the development of Europe’s capital market, and recommends specific policy initiatives that will help to satisfy these principles. If adopted, Europe’s capital market will be more liquid, transparent and efficient, and better able to support the real economy.

Six principles to guide the development of Europe’s capital market


Capital markets key statistics, 2016

Primary market Equity funding (% of GDP) 73% 56% 147% 98%
Corp. debt funding (% of GDP) 82% 78% 114% 45%
Secondary markets Equity turnover velocity 83% 96% 146% 126%
Equity turnover (% of GDP) 60% 50% 210% 120%
Corp. debt turnover velocity 25% 22% 80% n/a
Corp. debt turnover (% of GDP) 20% 17% 91% n/a
Derivatives Notional value traded (x cash securities) 35x 22x 28x 12x
Notional value traded (x GDP) 78x 43x 98x 23x
Market share of global FX market 51% 11% 20% 26%
Market share of global commodity market 25% 2% 46% 29%


Click on the blue boxes to check the Medium and High values

Note: Europe includes EU28 countries as well as Norway and Switzerland
Source: Oliver Wyman analysis

Overview of global IPO activity, 2016

Note: Cross-regional flows are only illustrated for Europe, the US and Asia. Asia excludes India
Source: Dealogic, EY Global IPO Trends Q4 2016

Composition of corporate funding, 2016

Note: CM = Capital Market
Source: WFE, Economic Intelligence Unit

Strengthening Europe’s Position In Global Capital Markets