At a lively debate in central London with over 200 leading industry participants, it was clear that leaders within the clearing markets are in some disagreement over the re-location policy that has been proposed in the wake of the EU referendum. Attended by senior executives from the banking markets and financial press, the panellists included Daniel Maguire, COO of the London Clearing House; Matthias Graulich, chief strategy officer of Deutsche Boerse's Eurex Clearing in Frankfurt and Caroline Meinertz, partner from Clifford Chance.
Daniel Maguire, COO of the London Stock Exchange said that “trading costs would rise by billions of euros if clearing was fragmented. We are taking something that is fundamentally working and we are going to break it up so the cost is going to go up.’’ But Matthias Graulich thought the plans don't go far enough as they give little room for EU regulators to take action to defend the euro when a currency fire-alarm rings at a clearing house.
The debate continued with a key focus on margin calculations and there was some concern from clearing house members about interference from central banks in setting margins. Caroline Meinertz of Clifford Chance thought that the joint regulated approach could create a blueprint for future discussions.
The debate concluded with no real resolve and it is clear that the lengthy negotiations are set to continue. It seems that as the regulators and the European Central Bank provide more information on specific rulings, the industry will need to be agile in its action.
Many firms are looking at change management programmes to ensure the organisational design and legal entity structures are in place but we will no doubt see some operations being moved to EU locations before any real decisions have been made on clearing.
The Brexit government negotiators will need to ensure clearing is at the top of the agenda on both sides of the channel.
Eames are working with a number of banking and insurance organisations on EU/Brexit change management programmes. Contact me for more information on how we can support you: firstname.lastname@example.org.