Corporate Advisory

Brexit – ESMA to grant Clearing licenses in no-deal

EU regulators have given derivatives traders in the bloc the crucial go-ahead to continue routing trades to the City’s biggest clearing houses in a no-deal Brexit scenario.

The decision, which was expected, will come as a relief to EU banks and investment managers as the UK hurtles towards its official Brexit date of March 29 without a withdrawal agreement in place.

ESMA said on February 18 it would give immediate formal recognition to LCH, ICE Clear Europe and LME Clear in a no-deal Brexit.

The clearing houses are controlled by the London Stock Exchange, Intercontinental Exchange, and Hong Kong Exchanges and Clearing’s London Metal Exchange and sit between trillions of dollars of trades to guarantee their completion in the event that one side defaults.

The Paris-based regulator said it wanted to “limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU”

ESMA is still working through the process required to provide the UK’s central securities depository — Euroclear UK and Ireland — with recognition. CSDs are used to settle securities trades.

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