Euroclear Said to Formulate No-Deal Brexit Plan for Shares

(Bloomberg) -- Euroclear is pushing authorities to allow it to continue settling Irish shares in the U.K. if Britain crashes out of the European Union without a deal, according to people with knowledge of the matter.

Ireland -- the only European Union member without its own central securities depository -- has relied on Euroclear’s U.K.-based operation, called Crest, to settle trades since the 1990s and the dawn of electronic financial markets. Once the U.K. leaves Europe’s single market, and after the accompanying loss of financial passporting rights, Crest probably won’t be able to continue providing that service.

The European Commission, the EU’s executive arm, has said equivalence procedures for clearing and securities settlement can be “swiftly deployed” to prevent a market rupture if the U.K. quits the bloc in March without a deal or transition period.

If there’s no deal, Euroclear wants the European Securities and Market Authority to allow it to continue to settle Irish shares on that basis, according to the people, who asked not be identified because the matter is private. That would likely be a temporary fix while a longer-term solution is worked out.

In response to questions, Euroclear said it’s seeking further information on the timing and process of working within temporary equivalence structures.

“Our understanding is that this provides a route for potential continued settlement of Irish securities by Euroclear UK & Ireland immediately post-Brexit,” the company said. “Continued provision of Irish securities settlement remains subject to matters” beyond the firm’s control, it said.

The current fix from the European commission “would obviously have to be a temporary solution, for a period of no more than a year or so,” Bank of France Governor Francois Villeroy de Galhau said in Paris on Friday. The continued market access for U.K. firms should be “tied to a strict timetable” for the adoption of new EU rules on clearinghouse supervision, he said.

Euronext NV favors moving the settlement of Irish shares to Brussels after Brexit in the longer term. While Irish securities and some exchange-traded funds are settled in Crest, Irish government bonds are settled at Euroclear Bank in Brussels. Euronext is awaiting the response of Irish authorities to that plan, according to one of the people.

©2018 Bloomberg L.P.