Investors could be forced to double the amount of money they post with banks to clear trades if European authorities follow through on threats to force the clearing of euro-denominated business out of London.
The chief executive of the Futures Industry Association said that the total amount of collateral that traders would have to put up if the market became more fragmented would rise from $83 billion to $160 billion as he warned against moves to end the City’s dominance of euro clearing.
“It’s important that we allow market forces to determine the appropriate location for euro clearing,” Walt Lukken, boss of the FIA, said at an industry conference.
More than half a trillion euros-worth of financial euro-denominated financial products are cleared through London every day. The European Central Bank has made clear that it believes the business should move within the eurozone.
Jeff Sprecher, boss of Intercontinental Exchange, owner of the New York Stock Exchange, said that Britain would need to take steps to keep financial services business in London. “To a certain extent, the UK has taken our presence here for granted,” he said. “It feels pretty good right now in the face of Brexit to have [a] continental European presence ready to accept business.”
