CM18: When clearing and Brexit are in the news, it’s usually bad news
11 October 2018 Amsterdam
Image: Shutterstock
When clearing and Brexit are in the news, it’s usually bad news, according to a representative from LCH at the 12th Annual Collateral Management Conference.
The speaker went on to discuss clearing’s reputation both within and beyond securities finance.
He said: “Most people think clearing is mandated and is not the greatest thing on Earth, but people have come to realise the benefits of clearing, especially given that today, globally, 70 to 80 percent of the world’s derivatives are now cleared.”
People have come to realise the benefit, more now than compared to 25 years ago, and there are economic drivers around this, he said, naming Brexit as the main economic driver currently.
The speaker clarified three initiatives that LCH is trying to implement and/or trying to achieve in the run-up to the Brexit deadline and beyond.
He said: “LCH is applying for authorisation as a third country central counterparty (CCP) under the European Market Infrastructure Regulation”, but he said the challenge there is: “as long as the UK is not a third country, we can’t really apply, the timeline is a challenge".
The second point, he said, was a question of that timeline. He stated: “We want to make sure European members and clients benefit from, and have access to, global pools at LCH—to clear where they want to clear.”
“[LCH] is optimistic—regulators are recognising our challenge. The Bank of England has already granted temporary recognition to European CCPs for three years after Brexit.”
Thirdly, he affirmed: “Not allowing Euro clients access to LCH or other UK CCPs, will see fragmentation of markets”, of which he warned, could “lead to higher cost and risk to financial stability.”
The speaker went on to discuss clearing’s reputation both within and beyond securities finance.
He said: “Most people think clearing is mandated and is not the greatest thing on Earth, but people have come to realise the benefits of clearing, especially given that today, globally, 70 to 80 percent of the world’s derivatives are now cleared.”
People have come to realise the benefit, more now than compared to 25 years ago, and there are economic drivers around this, he said, naming Brexit as the main economic driver currently.
The speaker clarified three initiatives that LCH is trying to implement and/or trying to achieve in the run-up to the Brexit deadline and beyond.
He said: “LCH is applying for authorisation as a third country central counterparty (CCP) under the European Market Infrastructure Regulation”, but he said the challenge there is: “as long as the UK is not a third country, we can’t really apply, the timeline is a challenge".
The second point, he said, was a question of that timeline. He stated: “We want to make sure European members and clients benefit from, and have access to, global pools at LCH—to clear where they want to clear.”
“[LCH] is optimistic—regulators are recognising our challenge. The Bank of England has already granted temporary recognition to European CCPs for three years after Brexit.”
Thirdly, he affirmed: “Not allowing Euro clients access to LCH or other UK CCPs, will see fragmentation of markets”, of which he warned, could “lead to higher cost and risk to financial stability.”
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CM18: Nearly 60 percent of audience have not outsourced their collateral process
CM18: Nearly 60 percent of audience have not outsourced their collateral process
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