Deutsche Boerse’s new boss eyes quarter of euro clearing after Brexit
Deutsche Boerse’s new boss has revived calls for euro clearing to be moved from London to mainland Europe after Brexit, as he took aim at the London Stock Exchange’s market share today.
Theodor Weimer, chief executive of the German stock exchange operator, said he wanted to claim a quarter of the euro clearing market from the capital at a press conference.
“It cannot be true that we are on the eve of Brexit but we don’t move euro clearing to continental Europe,” Weimer was quoted in the Financial Times as saying.
Read more: LSE chief: ECB's new euro clearing rules will cost investors €20bn
Weimer called it a “win-win situation” as market participants could “diversify their risks”.
Fragmentation of the market could diminish the benefits of netting risk, potentially raising costs for firms across Europe.
Barney Reynolds, partner at law firm Shearman Sterling, said the reignited call was “a commercial company pitching for business”.
“As long as the UK doesn’t somehow give it up, the EU can’t do much about it, without incurring significant damage, and it would create new systemic risk to allow it to move [to the EU] by adding more net exposure back into the system,” he said.
A change could involve the EU creating “a mini parasitical Euro clearing market”, which Reynolds said would push extensive additional costs onto EU users and consumers operating in euro, “because of a lack of multi-currency collateral synergies”.
He warned it would be “very dangerous” for global financial stability to allow it from a regulatory perspective.
A spokesperson for the City of London Corporation said:
Clearing fulfils a fundamental role for financial services in both the UK and EU. We can’t keep having a debate where the politics overshadows the clear and simple economic argument.
The priority should be that clearing houses can continue to function without posing risks to financial stability and for activity to take place where it can do so most efficiently for the benefit of end-users.
A year ago, Sir Jon Cunliffe, the deputy governor for the Bank of England who supervises financial stability, hit out at “currency nationalism”, saying it would be a step on a “road to the splintering of this global infrastructure”.
Cunliffe also said a forced move out of London could push up transaction costs for clearing house customers.
Miles Celic, chief executive of TheCityUK, has said euro clearing is dominated by the capital for a reason. “London has the scale, expertise and infrastructure to keep costs as low as possible,” he said last year.
Read more: Moving euro clearing away from London threatens global financial services
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