London keeps central role in euro clearing

EU rivals step up efforts to attract business: Maguire

LONDON, Feb 13, (RTRS): London has kept its central role in clearing euro financial transactions ahead of Brexit, but European Union rivals have stepped up efforts to attract business, the CEO of the London Stock Exchange’s clearing arm LCH said on Wednesday.

Euro clearing has become a political battleground since Britain voted in 2016 to leave the EU. LCH dominates clearing in euro-denominated instruments such as debt repurchase agreements and interest rate swaps from its base in Britain and increasingly from its French subsidiary.

Britain is due to leave the EU next month, but the bloc will allow EU customers to continue using LCH for up to a year if Britain departs with no transition deal.

“We have seen no discernible change in behaviour of customers, banks, asset managers,” LCH’s Daniel Maguire told a parliamentary committee.

“If you look at market share, volume and facts, there hasn’t been a material shift in volumes,” Maguire told a House of Lords committee hearing.

“What we have seen is discernible change in marketing. Competitors are definitely leveraging Brexit uncertainty to fuel their competitive aspirations.”

Deutsche Boerse’s Eurex has launched a programme of sweeteners to attract clearing in interest rate swaps from London, where LCH clears more than 90 percent of these derivative contracts used to protect against unexpected moves in borrowing costs.

Clearing involves passing stock,

bond, derivative and repo trades through a third party backed by a default fund to ensure completion of the transaction even if one side of the deal goes bust.

Banque de France Governor Francois

Villeroy de Galhau said in November that while LCH would “centralise” clearing of euro repo trades at its Paris subsidiary in 2019, he wanted to see interest rate swaps cleared in the French capital as well.