Brexit Agreement Reached to Bolster London Derivatives Clearing

(Bloomberg) -- The Bank of England and European Union regulators agreed to cooperate on oversight of clearinghouses, in the latest move by authorities to prevent problems stemming from a no-deal Brexit scenario.

Key Insights

  • The agreement between the BOE and European Securities and Markets Authority is a key step for London-based clearinghouses to handle business from clients in the EU
  • The deal will help business continue at the London Stock Exchange Group Plc’s LCH Ltd., clearinghouses run by the London Metal Exchange and Intercontinental Exchange Inc., as well as securities depositories based in the U.K.
  • The EU will have the legal tools to oversee these firms, and ESMA said it intends to take further steps before the U.K. is scheduled to leave the EU at the end of March

Dig Deeper

  • The EU has previously said it wants to preserve the ability of firms in the bloc to access key infrastructure in London and that failing to do so could pose risks to the financial system
  • The agreement on Monday follows a similar step taken between the U.K. Financial Conduct Authority and ESMA last week
  • The EU derivatives market hosts trades worth a notional 660 trillion euros ($755 trillion), according to ESMA

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