Support for Britain over bid to halt clearing centre switch

BRITAIN won backing from its European Union partners yesterday to prevent parts of its financial services sector potentially having to relocate to the eurozone.
Christian NoyerChristian Noyer
Christian Noyer

Britain is already taking the European Central Bank to the bloc’s highest court for its policy of requiring clearing houses which help process a significant amount of euro-denominated transactions to be based in the single currency area.

London-based LCH.Clearnet is a major clearer for instruments denominated in euros.

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Yesterday, EU ambassadors formally endorsed a preliminary deal they reached last Thursday on updating the bloc’s MiFID securities trading rules to take into account advances in technology and lessons from the financial crisis.

Britain, as part of agreeing to that deal, called for a new clause to be inserted and this was backed by ambassadors at yesterday’s meeting.

The clause says no action taken by any regulator or the European Securities and Markets Authority (ESMA) should discriminate against any member state as a venue for the provision of investment services and activities in any currency.

EU finance ministers are set to rubberstamp the MiFID deal on Friday, opening the way for negotiations with the European Parliament on a final text to take effect in 2014 or later.

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Ambassadors agreed that Britain’s clause could be revisited during those negotiations following concerns expressed by countries such as France.

The deal marks a coup for Ireland in the final two weeks of its presidency, after the draft law was bogged down in disagreements for nearly two years.

In April, Bank of France Governor Christian Noyer cranked up the pressure on Britain when he said the trading of derivatives and other products denominated in euros in the financial markets should be backed up by support systems – such as clearing houses – based in eurozone coun- tries.

Mr Noyer, who also sits on the European Central Bank’s governing council, said in a Bank of France overview of global derivatives market reforms that the processing of foreign currency-denominated instruments with a “systemic dimension” for the issuers must be located in the relevant currency area.

Large volumes of euro-denominated transactions are executed and cleared in London.