CM18: When clearing and Brexit are in the news, it鈥檚 usually bad news
11 October 2018 Amsterdam
Image: Shutterstock
When clearing and Brexit are in the news, it鈥檚 usually bad news, according to a representative from LCH at the 12th Annual Collateral Management Conference.
The speaker went on to discuss clearing鈥檚 reputation both within and beyond securities finance.
He said: 鈥淢ost 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鈥檚 derivatives are now cleared.鈥�
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: 鈥淟CH is applying for authorisation as a third country central counterparty (CCP) under the European Market Infrastructure Regulation鈥�, but he said the challenge there is: 鈥渁s long as the UK is not a third country, we can鈥檛 really apply, the timeline is a challenge".
The second point, he said, was a question of that timeline. He stated: 鈥淲e want to make sure European members and clients benefit from, and have access to, global pools at LCH鈥攖o clear where they want to clear.鈥�
鈥淸LCH] is optimistic鈥攔egulators are recognising our challenge. The Bank of England has already granted temporary recognition to European CCPs for three years after Brexit.鈥�
Thirdly, he affirmed: 鈥淣ot allowing Euro clients access to LCH or other UK CCPs, will see fragmentation of markets鈥�, of which he warned, could 鈥渓ead to higher cost and risk to financial stability.鈥�
The speaker went on to discuss clearing鈥檚 reputation both within and beyond securities finance.
He said: 鈥淢ost 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鈥檚 derivatives are now cleared.鈥�
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: 鈥淟CH is applying for authorisation as a third country central counterparty (CCP) under the European Market Infrastructure Regulation鈥�, but he said the challenge there is: 鈥渁s long as the UK is not a third country, we can鈥檛 really apply, the timeline is a challenge".
The second point, he said, was a question of that timeline. He stated: 鈥淲e want to make sure European members and clients benefit from, and have access to, global pools at LCH鈥攖o clear where they want to clear.鈥�
鈥淸LCH] is optimistic鈥攔egulators are recognising our challenge. The Bank of England has already granted temporary recognition to European CCPs for three years after Brexit.鈥�
Thirdly, he affirmed: 鈥淣ot allowing Euro clients access to LCH or other UK CCPs, will see fragmentation of markets鈥�, of which he warned, could 鈥渓ead to higher cost and risk to financial stability.鈥�
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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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