Friday, June 16, 2017

EU Pushing To Transfer Euro Trading From UK to Europe

The European Union, a bastion of bureaucratic wisdom lacking practical trading experience, is pushing forward with plans to take control over the clearing of euro-denominated derivatives. This largely political move could force firms to move from London to the EU after Brexit.

The EU's desire to maintain strings of control everywhere despite a warning from history that economies and markets cannot be controlled provides yet another example of the body's lack of trading experience. Value of the Euro as money lies in its acceptance by other nations. Nations want flexibility and freedom, not oversight, rules, and strings of control. Increased regulation under the guise of order would most likely raise margin requirements and reduce the overall number of transitions as 'money' finds cheaper places to trade. This is the message to the bureaucrats, yet I doubt they're listening.

Headline: Derivatives body warns EU against moving euro clearing from London

Shifting clearing of euro-denominated derivatives from London to the European continent would require banks to set aside far more cash to insure trades against defaults, a cost that would be passed on to companies, a global derivatives industry body says.

The European Union's executive European Commission is due to publish a draft law on Tuesday on how the clearing of euro denominated financial instruments should be handled after Brexit. Clearing stands between two sides of a transaction to ensure its safe and smooth completion.



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