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EU to temporarily recognise London clearing houses

BrexitThe EU is to preserve access to the three UK clearing houses after the Brexit transition period expires at the end of December.

The UK currently dominates the European market for derivatives clearing and processes of the bulk of the €735 trillion market in swaps and futures clearing.

The pan-European financial regulator Esma said that the three London clearing houses – ICE Clear Europe Limited, LCH Limited, and LME Clear Limited – will be recognised as third country counterparties and will be eligible to provide their services in the EU for 18 months after the end of the transition period in December.

In addition, the European Commission said it had decided to grant the status of “equivalent” to the UK’s current regulatory and supervisory framework applicable on counterparties. However, the decision will only remain in force until the end of June 2022.

The decision gives Esma the time to conduct what it calls “a comprehensive review of the systemic importance of UK counterparites and their clearing services or activities to the union and take any appropriate measures to address financial stability risks”.

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