Brexit’s derivatives spat needs urgent fix: Banks

Bloomberg

The world’s biggest banks pressed policy makers to pass an urgent Brexit fix to ensure European traders’ access to London derivatives clearinghouses and avoid rupturing 61 trillion pounds ($78 trillion) in contracts.
The industry’s top lobbying associations told the European Commission, the European Union’s executive arm, that it must act fast or risk turmoil when the stopgap solution elapses in March.
The call echoes pressure on the EU from the Bank of England, which has said firms might need to move business out of London as early as next month unless there is clarity.
“We respectfully but urgently request the Commission to provide this confirmation well in advance of the end of December 2019,” the FIA, which represents banks, brokers and other firms in the derivatives markets, said in a letter.
The International Swaps and Derivatives Association, the Association for Financial Markets in Europe and 11 other industry bodies also added their
signatures.
The groups’ members include the biggest derivatives traders in the world, including JPMorgan Chase & Co, Goldman Sachs Group Inc and Deutsche Bank AG.
A spokeswoman for the Commission said it could act quickly and adopt a decision in a short time frame if needed.
With the state of Brexit still uncertain and the UK in the throes of an election campaign, the financial industry is pleading for continuity in several areas of the markets that
don’t yet have a Brexit roadmap.
The London Stock Exchange Group Plc’s clearinghouse for interest-rate swaps is the world’s largest host of such trades, making it a crucial hub for hedging risks.
Clearinghouses stand between the two sides of a derivative wager and hold collateral, known as margin, from both in case one defaults.