Asset managers, banks call on EU to cost plans to grab euro clearing from London
By Huw Jones
LONDON (Reuters) - Asset managers, hedge funds and banks on Thursday called on the European Union to properly cost its plans to force market participants to shift derivatives clearing business from London to mandatory accounts in the bloc.
London Stock Exchange Group's LCH and ICE in London have long dominated parts of the euro derivatives market, but the EU wants direct say over this activity measured in trillions of euros to ensure financial stability after Britain's departure from the EU.
The cross-industry call in a joint statement said the proposals to bolster euro denominated derivatives clearing in the EU would damage the bloc's capital market.
"They would make EU firms less competitive and would have a negative impact on the derivatives market, EU clearing members and their clients, EU investors and savers, and the Capital Markets Union," the statement from four industry bodies on Thursday said.
The EU has singled out three derivatives contracts, short term interest rates, interest rate swaps, and credit default swaps, all heavily cleared in London, that it wants built up in accounts at clearers like Deutsche Boerse in the bloc.
Derivatives industry bodies ISDA and FIA, hedge fund and alternative investments association AIMA, and EFAMA, which represents the EU's asset management industry, said the plans would be costly to implement.
The plans, in the form of a legislative proposal from the European Commission (EC), need approval from EU states and the European Parliament to become law.
"We believe the EC should substantiate the risk of clearing through tier-two CCPs (central clearing parties) based outside the EU and provide a robust cost-benefit analysis of the proposed active account requirements," they said.
A strategy based on organic growth and market-driven solutions would best support the competitiveness of EU clearing houses in a global clearing marketplace, they added.
(Reporting by Huw Jones; Editing by Mark Potter)