GFF: Bridge over troubled liquidity
26 January 2017 Luxembourg
Image: Shutterstock
The merger of Deutsche Börse and the London Stock Exchange will create a vital liquidity bridge between the EU and UK financial markets, post-Brexit, attendees of the Global Funding and Financing Summit heard earlier today.
In his opening statement for the second day of the summit, Deutsche Börse board member Jeffrey Tessler stressed the importance of ensuring the continued free flow of cash and non-cash collateral across borders for the health of the securities lending and repo markets.
According to Tessler, combining the strength of the two exchanges would create a European juggernaut with one foot in London and the other in Frankfurt.
It was further suggested that creating such an entity is the only way of challenging the infrastructures emerging in North America and Asia. However, European regulatory watchdogs are also warning that such a dominant entity would unfairly smother local competitors.
The merger has successfully passed the voting stage of investors in both camps and the London Stock Exchange is currently in the process of shedding certain aspects of its business that the European Commission deemed to be incompatible with competition law.
Tessler also stated that the continuation of a firm connection between the two markets is crucial to the success of the EU capital markets union initiative.
The promise of access to the lucrative UK market will play a central role in enticing other markets to come to the table. Whether the political forces at work in the UK, which are currently pushing for a total break with Brussels initiatives, will allow this to continue is another question.
Separately, a panellist hailing from a large London-based international bank pointed to the disparity in international regulatory standards for what is considered to be eligible collateral as one of the biggest barriers to international trade in markets such as securities financing.
From a European lender's perspective, Brexit poses the significant long-term threat of allowing UK policymakers to pivot away from Europe toward the US as their main source of collateral metrics.
In his opening statement for the second day of the summit, Deutsche Börse board member Jeffrey Tessler stressed the importance of ensuring the continued free flow of cash and non-cash collateral across borders for the health of the securities lending and repo markets.
According to Tessler, combining the strength of the two exchanges would create a European juggernaut with one foot in London and the other in Frankfurt.
It was further suggested that creating such an entity is the only way of challenging the infrastructures emerging in North America and Asia. However, European regulatory watchdogs are also warning that such a dominant entity would unfairly smother local competitors.
The merger has successfully passed the voting stage of investors in both camps and the London Stock Exchange is currently in the process of shedding certain aspects of its business that the European Commission deemed to be incompatible with competition law.
Tessler also stated that the continuation of a firm connection between the two markets is crucial to the success of the EU capital markets union initiative.
The promise of access to the lucrative UK market will play a central role in enticing other markets to come to the table. Whether the political forces at work in the UK, which are currently pushing for a total break with Brussels initiatives, will allow this to continue is another question.
Separately, a panellist hailing from a large London-based international bank pointed to the disparity in international regulatory standards for what is considered to be eligible collateral as one of the biggest barriers to international trade in markets such as securities financing.
From a European lender's perspective, Brexit poses the significant long-term threat of allowing UK policymakers to pivot away from Europe toward the US as their main source of collateral metrics.
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