London clearing house LCH has said it would be willing to accept more direct oversight of euro trades from Brussels after Brexit.
LCH, which is majority owned by the London Stock Exchange, handles roughly 75% of the world’s euro-denominated derivatives.
It could be hard hit if the EU forcibly repatriates euro clearing when the UK leaves in 2019 – one option suggested by the European Commission in a recent communication.
Dutch stock exchange Euronext has already said it will move its clearing business from LCH’s Paris operation to ICE Clear Netherlands.
Speaking at the IDX derivatives conference in London on June 8, LCH chief operating officer Daniel Maguire said he would be happy for the company to register directly with Brussels to allow EU supervision of euro dealing.
“It was very encouraging to see in the European Commission’s proposal that is one of the options they are considering,” he said. “Markets, and the way they operate, are global… it makes more sense to keep that infrastructure together but to move to some level of enhanced oversight.”
FIA, the global trade body for futures and derivatives markets, said any forced relocation of euro-denominated cleared derivatives would be a disruptive and expensive approach.
“It’s important we allow market forces to determine the appropriate location for euro clearing,” said Walt Lukken, president and CEO of FIA.
“Forced relocation would fragment liquidity, increase systemic risk, and raise costs for the end-users that rely on these markets for hedging and managing their exposure to risk. Instead, appropriate safety, soundness, and confidence in clearing could be achieved through enhanced oversight or recognition with far less cost or disruption to markets.”
FIA noted that forced relocation could nearly double margin requirements from €74bn to €142bn.
“FIA believes the Commission’s suggestion of recognition and enhanced supervision are more effective ways to protect financial stability than forced relocation of the clearing of euro-denominated products,” said Lukken.
A decision is expected by the Commission on June 13.