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City of London may exit the EU derivatives market

Summary

Early post-Brexit observations on the City of London Description video: The United Kingdom’s exit from the European single market on January 1 was orderly in the financial sector, in contrast to logistical hiccups in the cross-border trade for goods. Even […]

Early post-Brexit observations on the City of London

Description video:
The United Kingdom’s exit from the European single market on January 1 was orderly in the financial sector, in contrast to logistical hiccups in the cross-border trade for goods. Even so, it was a watershed moment of transition from a decades-long period during which the City of London benefited more than most from advances in European integration. This session will provide an opportunity to take stock.\n\nJoining this episode of Financial Statements were:\n\nHost:\nNicolas Véron, Senior Fellow, Peterson Institute for International Economics (PIIE)\n\nGuests:\nWilliam Wright, Founder and Managing Director of New Financial in London\nNathan Sheets, Chief Economist and Head of Global Macroeconomic Research at PGIM Fixed Income

City of London may exit the EU derivatives market

Banks in the European Union will have to use platforms to trade derivatives within the EU from January, the bloc’s securities supervisor said Wednesday. This could shut off the City of London, the world’s largest derivatives trading center.

The European Securities and Markets Authority (ESMA) has established the so-called EU derivatives trading obligations (DTO). They will come into force after the UK completely withdraws from the European Union. December, 31st.

The EU supervisory body said the DTO from January will not change from the original policy outlined last year, which means that EU investors will have to use an intra-bloc or non-EU swap trading platform that has already been granted In the meantime, there is no need to worry about it. ”«equivalence» or an appropriate permit such as USA.

This will mean that the London branches of EU banks are facing conflicting EU and UK demands on where to trade derivatives.

«ESMA acknowledges that this approach creates problems for some EU counterparties, especially for the UK branches of EU investment firms, the regulator said. – However, ESMA believes that EU partners can fulfill their DTO obligations by trading on EU marketplaces or relevant marketplaces in third countries, and this situation is primarily a consequence of the choice the UK made to implement the DTO».

Derivatives market players and the UK government have called on Brussels to provide equivalence to avoid conflict over conflicting DTOs or to find «fast decision» bypass legal means.

Until Brussels provided equivalence in derivatives trading.

City of London may exit the EU derivatives market

«Based on the current legal framework and in the absence of an equivalence decision from the European Commission, ESMA sees no opportunity to provide other recommendations», – follows from ESMA statement.