BRUSSELS (Reuters) - The European Union is considering legislative measures to move London’s euro-denominated clearing business to the euro zone, but the changes would apply only after Britain leaves the bloc, an EU official told Reuters on Thursday.
London dominates clearing of derivatives denominated in euros, mainly via the London Stock Exchange’s (LSE.L) LCH.Clearnet business - a dominance that the European Central Bank has tried to reduce in the past, only to find its attempt blocked by the EU’s top court.
Talks to move the multi-billion-euro business to a euro zone city, such as Frankfurt, have gained new impetus since Britain voted in June to quit the EU, with advocates arguing that euro-denominated derivatives should not be cleared outside the EU.
Legislative proposals to force a move from London to the continent may come in the next months, the EU official said on condition of anonymity, to make sure that in case of Brexit the business could immediately be transferred to the euro zone.
But the official added that, although preparations may start before Brexit, the actual moving of the clearing business would occur only after Britain left the EU.
British Prime Minister Theresa May has said formal Brexit negotiations could start by the end of March. They could be over by October 2018, according to the EU chief negotiator, Michel Barnier.
EU officials said any decision on clearing would be part of negotiations with Britain about the country’s future relations with the EU, and it was premature to speculate on what might be proposed.
Rules governing derivatives clearing in the EU are set in the European Market Infrastructure Regulation (EMIR), which the EU executive commission is currently reviewing with the aim of “simplifying and improving the existing rules”, a Commission spokeswoman said.
She added that the main elements of EMIR, on mandatory clearing and margining for non-cleared derivatives, have only recently come into operation.
“Any other EMIR-related issues may be further assessed and developed in due time, taking into consideration future developments,” the spokeswoman said.
Reporting by Francesco Guarascio; Editing by Mark Trevelyan