As we approach the end of the Brexit transition period on the 31st December 2020, the European Union (EU) is set to provide an 18-month lifeline for access to London-based clearing houses in order to extend the clearing of euro derivatives and to ensure financial stability in the markets.
An EU draft document which has been out for consultation among EU member states since 14th September 2020, indicates that the European Commission has proposed that access to London-based clearing houses will remain unhindered until the middle of 2022, following Brexit later this year.
The document, quoted by Reuters; states that this ‘time-limited’ temporary access will provide additional time to eurozone-based clearers in order to “further develop their capacity to clear relevant trades”. The document also states that the derivatives industry is expected to develop a “clear process” to reduce its exposure to systemically important clearing houses in the UK after Brexit.
EU member states had until the 18th September 2020 to review the European Commission’s draft proposal and it is expected to be adopted this month.
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