Brussels plot to Shift City of London’s lucrative clearing marketplace to the Continent. This is anti-competitive, European investors warned.
Investors submitted a response to the European Commission’s proposals. They claimed that the draft law was detrimental to the goal of a clearing market efficient and prohibited free choice.
Since 2008’s financial crisis, clearing houses have been integral to the financial system as intermediaries in derivatives trades between banks.
European Fund and Asset Management Association, whose members manage around EUR30 trillion (PS26.4 Trillion) in assets, stated in the letter that they were opposed to forced relocation policies.
The bloc proposed that EU-based companies be required to clear trades within the single marketplace and that higher charges should be imposed on those who continue to clear through the UK.
These reforms will increase the appeal of EU clearinghouses and reduce reliance on UK-based competitors post-Brexit.
Investors could be forced to open accounts at EU clearing houses, which could lead to business leaving London-based clearinghouses.
According to the EFAMA, asset managers should be able to choose their clearinghouse if they are fulfilling their fiduciary obligations to act in client’s best interests.
The report stated that asset managers will have to open accounts in clearing houses across the EU and UK, which could lead to investors being subject to additional subscription fees and the need for a dual-clearing system.
London was to be closed to banks and money managers located within the bloc by January 2020.
The EU has repeatedly extended this deadline due to post-Brexit concerns over financial stability, and reducing access products including mortgages.
After failing to convince clearers based in the UK to shift to the continent, Brussels granted them permission to offer services to EU customers through June 2025.