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NEW: The #EU& #39;s markets regulator has just put the City of London on notice that it will vet whether clearinghouses #LCH and Ice Clear should have to shift activities into the #EU to serve European customers. A QUICK THREAD ON WHAT THIS MEANS: 1/
1) This is all bound up with the EU& #39;s internal debate over how far it should continue to rely on the City after #Brexit, and on what terms. Something @Sam1Fleming @staffordphilip and I explored here: https://www.ft.com/content/dd7e6828-f603-47bf-bdd7-61e9dcb5f9ac">https://www.ft.com/content/d... 2/
2) Clearing houses like Ice Clear and LCH are an especially sensitive point because they play a crucial role in managing risk, and because the EU is almost completely reliant on London for handling euro-denominated swaps. Check out this recent @EU_Commission doc:
3) But the EU is in a bind: the Bank of England and the @ecb have warned that cutting ties to UK clearing would risk financial stability. The EU& #39;s solution was to adopt a law in 2019 (EMIR.2.2) allowing @EU_Commission to force clearing to relocate: https://ec.europa.eu/commission/presscorner/detail/en/IP_19_1657">https://ec.europa.eu/commissio...
4) The @EU_Commission moved to operationalise that law last week, in tandem with adopting measures to protect EU companies& #39; access to London clearing for the next 18-months: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_1713">https://ec.europa.eu/commissio...
5) Think about that for a sec: #UK clearing is so important to the #EU that is it both a) preserving access and b) threatening to cut off access. The topsy-turvy nature of this is summed up in #ESMA& #39;s press release today:
6) Reading that paragraph: it looks as if something is so important to the #EU that they must sever ties to it. It& #39;s a bonkers situation, but it& #39;s oddly in tune with the #EU& #39;s push for greater strategic autonomy. And with the bloc& #39;s mantra that things must change after #Brexit.
7) Check out @MichelBarnier in this speech in June. The #EU& #39;s credo now is not just about preserving financial stability, it& #39;s about seeking greater independence from London as a point of principle. ENDS https://ec.europa.eu/commission/presscorner/detail/en/speech_20_1037">https://ec.europa.eu/commissio...
