Brexit: UK Regulator Offers Temporary Relief on Swaps Trading

The UK’s Financial Conduct Authority (FCA) has announced on Thursday that it will allow British companies to approach the European Union-based platforms for derivatives trading until the end of March 2021.

This decision came hours before the expiry of the 11 months long transition period of Brexit on December 31. Though the two parties have agreed on a deal for the divorce, London’s massive financial services did not receive much attention.

“We will consider by 31 March 2021 whether market or regulatory developments warrant a review of our approach,” the FCA noted.

No Deal for Financial Services

The British regulator’s announcement came to prevent any sudden disruption in the financial market after the reopening of the market next week. The decision was also pushed by the Bank of England's warning that the estimated impact of Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term on interest rate Swaps Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Swaps can be defined as a derivate contact composed of two parties that exchange to cash flow between two separate financial instruments.They are generally divided into two categories. This includes contingent claims (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Commodity price, equity price, interest rate, and foreign exchange rate are common variables used as one of the cash flows in swaps upon initiation. Different Types of Swaps Read this Term is worth $200 billion.

“Without mutual equivalence, some firms, in particular the branches of EU firms in London, will be caught by a conflict of law between the EU and UK DTOs,” the announcement pointed out.

“Where firms that are subject to the UK DTO trade with, or on behalf of, EU clients that are subject to the EU DTO, they will be able to transact or execute those trades on EU venues.”

Earlier, the regulators of both EU and Britain came up with rules on shares trading following the expiration of the transition deadline. While the Brits permitted companies to approach European Union exchanges for share trading, the ESMA restricted banks and asset managers executed their trades within the bloc.

Even though the regulators stepped in to temporarily offer relief to a few financial sectors, UK-based brokers remained among the worst hit. As Finance Magnates actively reported, many have withdrawn their European business, while others approached European regulators for licenses.