The EU is set to throw the City of London an 18-month lifeline to continue clearing euro derivatives after Britain’s unfettered access to the bloc ends in January, an EU draft document showed.
When the UK left the EU in January and continued access under transition arrangements which are set to end on Dec. 31, meaning EU banks would not be allowed to use clearing houses such as the London Stock Exchange’s LCH and ICE Clear Europe in 2021.
The European Commission declined to comment on Tuesday.
Although a low margin business, clearing is a critical foundation for global financial markets, ensuring trillions of dollars in swap trades complete safely.
London’s clearing houses help cement the capital’s status as the world’s biggest centre for trading derivatives, adding to its historic attractiveness as a base for global banks.
Brexit has already prompted some to shift hundreds of jobs to EU hubs, and lobby groups have warned that more could leave if euro clearing shifts to the euro zone.
LCH clears the bulk of euro-denominated interest rate swaps that are used by companies across the EU to insure themselves against adverse moves in borrowing costs.
See full article here