Thu Dec 20th, 2018 at 09:59:43 AM EST
As the World Turns ...
○ BoE warns EU that £41tn of derivatives at risk after Brexit | FT - Oct. 9, 2018 |
Europe makes contingency plans for clearing-houses after Brexit | The Economist - Nov. 29, 2018 |
AS THEY PREPARE for Brexit, many of London's financial firms have begun to move some staff, or operations, to the continent. But financial contracts, notably derivatives, are difficult to uproot. London's clearing-houses, which ensure that a contract is honoured even if one side goes bust, are globally important. As fears of an acrimonious Brexit have risen, so too have those of havoc. Now European Union regulators have unveiled contingency plans.
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Clearing-houses have grown vastly in significance since the financial crisis, after which the G20 group of economies made it mandatory to settle most simple derivatives trades through them. London's three big clearing-houses handle vast amounts of derivatives, and much of the trading cannot be done elsewhere. LCH, London's largest clearing-house, clears interest-rate swaps with a notional value of over $340trn, making up 95% of the world's total. LME Clear (part of the London Metal Exchange) is near-irreplaceable for precious-metals traders. ICE Clear Europe handles half of the world's oil-futures contracts, and is typically the only place to go for those linked to the Brent benchmark.
○ EU 'no deal' prep means City avoids cliff-edge fears | City A.M. |
Among its 14 measures to minimise disruption, the Commission confirmed reports that EU firms would be granted temporary access to London clearing houses for a period of 12 months after 29 March.
The no-deal measures also include plans to allow hauliers to carry freight by road into the EU for nine months without applying for permits and for British airlines to fly into and out of the EU but not within the bloc.
UK citizens living in the EU will also continue to be considered legal residents after Britain leaves on 29 March, the European Commission said today.
○ Brexit: European Commission implements "no-deal" Contingency Action Plan in specific sectors
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