* LCH urges cross-border supervision of euro clearing
* Eurex dismisses industry margin estimate for clearing
* Talk that Brussels eyeing euro clearing volume cap
By Huw Jones
LONDON, June 7 Forced relocation of
euro-denominated clearing from London to the European Union
after Brexit would harm the bloc, and the focus should be on
increasing cross-border supervision, LCH said on
LCH, part of the London Stock Exchange, clears the bulk of
euro-denominated derivatives in Europe.
The EU is due on June 13 to say whether this activity should
be shifted to an EU state after Britain leaves the bloc in 2019.
LCH Group Chief Operating Officer Daniel Maguire said the
clearing house, which stands between two sides of a trade to
ensure its smooth completion, is already directly registered and
supervised in many countries. It has a clearing house in Paris.
Brussels is looking at several options, such as forced
relocation or an EU role in directly supervising LCH in London
where it is regulated by the Bank of England.
Maguire said it was very encouraging that the so-called
"enhanced supervision" option was on the table. "For global
markets it makes sense to move towards more enhanced oversight,"
he told a Futures Industry Association (FIA) conference.
There was talk among delegates at the event that Brussels
was leaning towards caps on the volume of euro-denominated
clearing that could take place outside the bloc without
Maguire referred to a recent speech by Christopher
Giancarlo, acting head of the U.S. Commodity Futures Trading
Commission, who said the United States could still supervise
clearers in London that handle dollar-denominated securities,
despite an ocean the size of the Atlantic between them.
"We should also think that the sea as big as the Channel is
not too big for us to get across and ensure you have the same
level of enhanced oversight," Maguire said.
"I definitely think there is a willingness to do that."
"We hope that over time there will be sensible debate,
cooperation and discussion, and a conclusion that keeps markets
together, which is to the advantage of the EU, and the real
economy, clients, members, central banks," Maguire said
It did not make sense for a global currency like the euro to
become "localised", he said.
This week the FIA warned that forced relocation of euro
clearing would lead to a near doubling of the $83 billion users
currently set aside in case of contract defaults.
Eurex Clearing in Frankfurt, which has said it
was ready to handle relocated euro clearing, dismissed this
"I think it's very far from a realistic number," Eurex
Clearing CEO Eric Mueller told the conference.
He also cautioned against dismissing arguments put forward
by the European Central Bank and others in favour of relocation.
"We as an industry need to find answers to the concerns,
instead of just saying, you know it's not a good idea," Mueller
"We need to work with those constituencies to find
answers... There is some understanding that things on the
oversight angle have to change."
(Reporting by Huw Jones; Editing by Adrian Croft)