Shortly after global brokerage and financial technology company BGC Partners, Inc. (NASDAQ:BGCP) released its financial results for the third quarter of 2020, the company filed the relevant 10-Q report with the Securities and Exchange Commission.

The report includes a warning that the UK exit from the EU could materially adversely impact BGC Partners’ customers, counterparties, businesses, financial condition, results of operations and prospects.

The UK formally left the EU on January 31, 2020, but its relationship with the bloc will remain in a transition period until December 31, 2020. During this period, the UK will, with some exceptions, remain subject to EU law. It will also maintain access to the EU’s single market.

The UK and EU are currently negotiating a trade deal which would determine the new bilateral trade relationship going forward. Such a deal and one including financial services currently looks unlikely, BGC Partners notes, and, if no deal is in place by the end of the transition period, absent mitigating legislative measures, this could hinder current levels of mutual market access.

While other trade deals are being considered, for example between the U.K. and the U.S., these may also prove challenging to negotiate and may not replace or compensate for a reduction, if any, in U.K. and EU trade at least in the short term. Further, the terms of a U.K. and EU trade deal may adversely impact the negotiation and terms of such other deals and vice versa.

Given the current uncertainty around the future trade relationship, the consequences for the economies of the U.K. and the EU member states as a result of Brexit are unknown and unpredictable. Given the lack of comparable precedent, it is unclear what the broader macro-economic and financial implications the U.K. leaving the EU with no agreements in place would have.

This uncertainty could adversely impact investor confidence, which could result in additional market volatility. Historically, elevated volatility has often led to increased volumes in the financial services markets in which we broker, which could be beneficial for BGC Partners’ businesses.

At other times, increased volatility has led to many market participants curtailing trading activity. Furthermore, any future trade deal might lead to a fragmented regulatory environment, which could disrupt BGC Partners’ operations, increase the costs of operations, and result in a loss of existing levels of cross-border market access.

BGC Partners explains that it has implemented plans to ensure continuity of service in Europe and continues to have regulated entities and offices in place in many of the major European markets. As part of its Brexit strategy, ownership of BGC Madrid, Copenhagen and Frankfurt & GFI Paris, Madrid and Dublin branches transferred to Aurel BGC SAS in July 2020.

However, the company warns:

“Regardless of these and other mitigating measures, our European headquarters and largest operations are in London, and these and other risks and uncertainties could have a material adverse effect on our customers, counterparties, businesses, prospects, financial condition and results of operations”.

BGC Partners’ revenues were adversely impacted in the third quarter of 2020 as a result of COVID-19 and its impact on the macroeconomic environment, including interest rates, FX, and oil prices. The company registered lower year-on-year secondary trading volumes in certain markets on its rates, FX, credit, and equity derivatives and cash equities businesses, while historically low prices across energy and commodities reduced demand for underlying product hedges.