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.
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