Yahoo Finance ‘Anti-competitive’ Brussels plot to shift City clearing houses slammed by investors
A plot by Brussels to shift the City of London’s lucrative clearing market to the Continent is anti-competitive and will increase costs, European investors have warned.
In a submission to the European Commission in response to its proposals, investors said the draft law undermined the objective of an efficient clearing market and prevented free choice.
Clearing houses serve as middlemen in derivatives trades between banks and have become integral to the financial system since the 2008 crisis.
The European Fund and Asset Management Association (EFAMA), whose members oversee around €30 trillion (£26.4 trillion) in assets, said in the letter: “We are opposed to any forced relocation policy as this will have a negative impact from a cost perspective on end-investors.”
The bloc has proposed that EU-based firms should be forced to clear trades within the single market and impose higher charges on those that continue to clear through the UK.
The reforms are designed to increase the attractiveness of EU clearing houses and end reliance on UK-based rivals post-Brexit.
Forcing investors to open accounts with EU clearing houses could result in business moving away from London-based clearing houses.
The EFAMA said that asset managers must be able to freely choose their clearing house if they fulfil their fiduciary duties to act in the client's best interest.
It added that forcing asset managers to open accounts with clearing houses in both the EU and the UK will mean investors face the burden of extra subscription costs and setting up a dual-clearing system.
Banks and money managers based within the bloc were supposed to be shut out of London from January 2020.
However, the EU repeatedly pushed this deadline back following post-Brexit concerns about financial stability and reducing access to products, including mortgages.
Brussels has granted UK-based clearers permission to continue offering services to EU customers until the end of June 2025, after failing to convince them to voluntarily shift business to the continent.
