EU to Introduce Rule Changes Directed at London’s Euro Clearing Business

The Financial Times reported today that the EU is developing rule changes that could see London stripped of one of its flagship financial businesses by enabling territorial restrictions on the clearing of some euro-denominated transactions even before Britain leaves the union.

Although the form of intervention is as yet undecided, the European Commission is reported to be considering backing legal changes to give the European Central Bank a remit over the location of key market infrastructure.

French officials are seeking to have restrictions on clearing included in legislative proposals scheduled soon after Britain initiates the formal Article 50 exit process next Spring. A move to restrict euro-clearing outside the eurozone is nevertheless said to be likely prior to Britain’s expected withdrawal from the EU in 2019.

Ongoing Concern

Defending London’s euro clearing business has become an ongoing concern with London being the world’s biggest centre for clearing euro derivatives, handling three-quarters of all transactions, with an average daily value of $573 billion, according to an Intercontinental Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term (ICE) paper.

According to the Financial Times: “Forced repatriation of euro clearing would deprive European banks of access to liquid trading and clearing facilities and create fragmentation, increasing costs considerably for banks and customers.”

Simon Kirby, the UK’s City minister, has also warned that the euro clearing business would probably move to New York if the EU attempted to undermine the UK’s dominant position, leaving Europe “worse off”.

France’s President François Hollande has, however, called for euro-denominated clearing to be relocated to the euro area after 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 whilst a French central bank official has pressed the commission to address the issue in light of Brexit through an update to EU rules on derivatives trading and clearinghouses set to be published by April. As yet, there has been no change of policy within the commission.