London keeps euro clearing role ahead of Brexit, but rivals are circling

Mark Johnson's picture
by Mark Johnson

The City of London has managed to keep its central role in clearing euro financial transactions ahead of Brexit, but rival financial hubs in the European Union have stepped up efforts to attract business, Daniel Maguire, CEO of the London Stock Exchange’s clearing arm, LCH, said on Wednesday.

Euro clearing has become a political battleground since Britain voted in 2016 to leave the EU, the Reuters news agency reported. LCH is the main player for clearing transactions in euro-denominated instruments such as debt repurchase agreements and interest rate swaps.

A while the UK is due to leave the EU next month, EU customers will be allowed to continue using LCH for up to a year if Britain departs with no transition deal.

“We have seen no discernible change in behaviour of customers, banks, asset managers,” LCH’s Daniel Maguire told a parliamentary committee.

“If you look at market share, volume and facts, there hasn’t been a material shift in volumes,” Maguire told a House of Lords committee hearing.

“What we have seen is discernible change in marketing. Competitors are definitely leveraging Brexit uncertainty to fuel their competitive aspirations.”

Reuters noted that Deutsche Boerse’s Eurex has launched an initiative to attract clearing in interest rate swaps from London. Currently LCH clears more than 90 per cent of these contracts, which are used to protect against unexpected moves in borrowing costs.

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