NewBrexit seen dragging US into trillion dollar battle for clearing business in swaps
Clearinghouses a lynchpin in trillions of dollars in commercial transactions
The European Union’s battle over London’s financial services sector risks dragging an unexpected player into the fray: Uncle Sam.
That’s what could happen if French or German leaders attempt to pry away the some US$533 trillion of swaps cleared by the London Stock Exchange Group Plc’s LCH unit annually.
In a sign of how badly the EU wants London’s financial turf post-Brexit, talks are already underway within the EU to limit euro clearing outside their jurisdiction, a move that would affect the US, too, LSE chief Xavier Rolet said Wednesday.
Rolet has said New York, where LCH also holds a clearing license, is the only financial centre that could practically clear interest-rate swaps. A move to the US financial hub would potentially pit leaders like French President Francois Hollande against peers in Washington -- meaning the EU would be in a battle against the world’s largest economy as it seeks to negotiate a new relationship with the UK.
“The fact that clearing was raised immediately by some as an area that they saw as vital to repatriate or migrate out of the UK shows the importance of that business,” LSE Chief Executive Officer Rolet told a House of Lords committee on Wednesday.
