The European securities regulator is to recognise UK clearing houses in order to limit market disruption in the event of a no-deal Brexit.
Britain dominates euro clearing, a multibillion-pound market that settles business and trade conducted in the EU currency, which could leave London as a result of Brexit.
The European Securities and Markets Authority (Esma) said it has recognised LCH, ICE Clear Europe and LME Clear and they will be able to continue to provide services to firms based in the European Union if Britain leaves the bloc without a deal.
The move comes with Parliament in deadlock over Brexit, having rejected in Prime Minister Theresa May’s deal, and with just over a month to go until Britain’s scheduled departure from the EU on March 29.
Esma said it has recognised UK clearing houses to “limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU”.
The regulator also plans to recognise UK central securities depositories – financial institutions that hold stocks or bonds which can be easily transferred – with the process ongoing.
Earlier this month, Esma and the Bank of England reached a preliminary deal to recognise UK clearing houses and central securities depositories in the case of a no-deal Brexit.
Michael Voisin, global head of capital markets at law firm Linklaters, said the move by Esma is positive but that there is still no equivalent measure for UK-based trading venues.
“This is a very positive and welcome step, removing the remaining element of uncertainty relating to EU27 clearing member access to UK clearing houses.
“We note that there is still no equivalence decision in relation to UK trading venues and a lack of clarity around EU27 client access to UK CCPs (central counterparties), both of which continue to impact EU27 market participants negatively.”
Rival European cities are currently vying to break London’s dominance over euro clearing. The European Commission put forward proposals in 2017 which would impose stricter supervision of clearing houses by EU central banks and Esma, and in some cases force bigger organisations to move operations to the bloc.
However, some City figures have indicated that to move euro clearing would be costly and complex.