The EU ponders moving euro clearing from London after Brexit

BREXIT has thrust a mundane, if crucial, bit of financial-market plumbing into the spotlight: the clearing of financial instruments. Clearing-houses sit in the middle of a securities or derivatives transaction, and ensure that deals are honoured even if one counterparty goes bust. In November a study commissioned by the London Stock Exchange (LSE) warned that if euro clearing was forced out of the City, 83,000 British jobs could be lost, and a further 232,000 affected. On May 4th the European Commission said it was looking into new rules for euro-denominated clearing. One option is relocation from London, an idea greeted in the City with a mixture of incredulity, disdain and fear.

In the wake of the financial crisis, the G20 group of big economies made it mandatory to settle most simple derivatives trades through clearing-houses. By 2016, 62% of the notional $544trn global over-the-counter derivatives market was settled in this way. Globally, London handles 37% of foreign-exchange derivatives…Continue reading

from Business and finance http://www.economist.com/news/finance-and-economics/21721949-tens-thousands-jobs-are-stake-britain-eu-ponders-moving-euro?fsrc=rss

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