Spencer Attacks Attempts to Move London Clearing as ‘Ludicrous’By
French, German politicans have claimed clearing belongs in EU
Moving clearing to Paris would ’damage marketplace,’ CEO says
Michael Spencer again came out swinging against European Union politicians attempting to pry euro-denominated clearing from London to the continent.
“What the Europeans are discussing doing is really sad and ill-informed,” Spencer, chief executive officer of NEX Group Plc, said during a call to discuss the company’s full-year results. “The notion that for some reason the euro has to be cleared in the EU is ludicrous. It’s preposterous and ill-informed. I personally find the debate retrograde and really nationalistic.”
Since the Brexit vote last year, French and German politicians have argued that London should be prevented from clearing euro-denominated swaps after the U.K. leaves the bloc. London’s dominant role in clearing euro derivatives is seen as one of the most vulnerable dominoes in the City and will be fought over in the Brexit negotiations.
Spencer made similar attacks last month, saying the ramifications of moving clearing from London are “dangerous” and “alarming.”
Germany has backed off its demands recently -- the country’s top banking supervisor last week cautioned EU policy makers against forcing clearing from the U.K. But France, which has made the loudest demands to strip London of its title as world clearing hub, would also lose out if it succeeded in repatriating clearing to the remaining 27 EU member states, Spencer said.
“This is a project driven very much by French politicians,” Spencer said. “We will have an inefficient liquidity pool around Paris clearing. They will have damaged the marketplace. The Europeans genuinely do not know what they are talking about.”
Spencer on Monday dared EU leaders to repatriate euro-denominated clearing from the U.S., saying they would never try to snatch clearing of euro derivatives away from Chicago because they fear how the U.S. would retaliate.
London dominates both the clearing and trading of over-the-counter euro derivatives contracts. Some $574 billion of euro-denominated interest-rate contracts change hands every day in the U.K., according to the latest data from the Bank for International Settlements. By contrast, the U.S. trades $6.8 billion a day of the derivatives.
At the start of May, the European Commission published proposals that would require London’s clearinghouses to remain within the EU’s legal framework after Brexit. London Stock Exchange Group Plc majority owns LCH, the world’s largest clearinghouse.