A major shift in global financial markets: the rise of New York and the reflection of Europe

In the long history of finance, the power at the centre of the market has often shifted. A hundred years ago, Britain, and especially London, was recognized as the heart of global finance. At that time, Britain had more than a dozen active stock exchanges, and the London Stock Exchange was undoubtedly the leader. But by 1973, many of these exchanges had chosen to merge with the London Stock Exchange to make better use of their deep capital appeal.

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In the 21st century, New York is rapidly consolidating its position as a global financial centre. One significant sign is the New York listing of British company Arm, which is five times oversubscribed. It is a clear signal that New York could become the new financial centre, marginalized and possibly digest exchanges in other regions such as Europe.

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So what drives New York's rise?

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Capital concentration: Many European IPO candidates now choose to list on the Nasdaq or the New York Stock Exchange. Despite their base in Europe, much of the ownership is concentrated in the hands of American venture capital.

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Market size: The U.S. stock market is huge, accounting for nearly 70% of the MSCI World Index. By comparison, Japan, Britain, France, Canada and Germany combined are less than 20 per cent.

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Economic growth: Since the global financial crisis, the US economy has been growing faster compared to the European Union and the UK, which is further confirmed by the level of corporate earnings.

What does this mean for Europe?

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First, Europe's financial markets risk being marginalized by New York. But policymakers are struggling to cope. For example, to encourage small and medium-sized companies to list domestically, the UK government has proposed a series of policies, including tax incentives, encouraging analysts to report and simplifying the listing process. This is a positive start, but Europe needs to do more.

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In order to maintain its position in global competition, Europe must ensure that its financial markets remain attractive, especially for domestic small and medium-sized enterprises. Moreover, the investor demand for strong regulation and an accurate prospectus should not be ignored.

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Finally, it is not just a European issue. As New York continues to rise, financial centres around the world need to self-reflect and adjust to ensure their importance and appeal in the new financial landscape.