Traders are ramping up warnings of disruption in financial markets from January without clear decisions on how the UK and EU will co-operate after the Brexit transition period ends.

Some derivatives trading may need to shift to the US unless the two sides can come to an agreement over so-called equivalence that would allow mutual recognition of regulatory standards, industry bodies say.

“There are still some glaring gaps that haven’t been addressed by either the UK or EU, including equivalence for trading venues,” said Scott O’Malia, chief executive of Isda, an industry association for the derivatives market.

Without equivalence, British and EU companies may have to trade some derivatives in the US, he added. “This will lead to fragmentation and a lack of efficiency for no apparent benefit . . . We need certainty as soon as possible.”

The EU and UK have agreed that the future relationship for financial services should be settled through each side assessing whether the other qualifies for access rights. That requires individual decisions on nearly 40 market activities, including audit standards, capital requirements and access to exchanges and clearing houses. The discussion is separate from trade talks, which are still under negotiation.

The UK this month announced it would press ahead with some equivalence determinations, allowing UK-based banks to use EU financial benchmarks, clearing houses and credit-rating agencies, and exempting them from a jump in capital they required to absorb losses linked to EU exposures. Brussels, however, has not reciprocated.

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