EU: London to clear euro derivatives by June 2025

The European Union decided on Tuesday to extend the possibility for British companies to carry out clearing transactions in euros until June 30, 2025, with bloc officials insisting, however, that this is the last extension given.

The settlement sector has become a point of contention between the United Kingdom and the EU, as the Union seeks to regain control of euro transactions in order to build its “strategic autonomy” in the capital markets.

The London Stock Exchange-based LCH unit of the British capital clears about 90% of euro interest rate derivatives, which are widely used by companies in the EU to insure against unexpected movements in borrowing costs.

Mered McGuinness, head of financial services at the European Commission, even said she would propose measures to reduce “our over-reliance” on large clearing companies based outside the bloc but also to improve the attractiveness of European liquidators, while at the same time they will strengthen their supervision as trading volumes increase.

The EU was forced to extend its clearing license to LCH and two other London-based clearing companies, ICE and LME Clear, as it failed to persuade banks and their customers to move their operations from London to Eurex’s stock fairly quickly. Deutsche Boerse in Frankfurt.

The abrupt end to cross-border clearance would cause market turmoil, with EU officials approving the extension, but say three years is enough for the transition and no further extension will be needed.

“The end of the road is clear, there will be no extension after three years,” an EU official said.

Eurex derivatives exchanges reported on Tuesday that the average daily clearing volume of interest rate swaps rose to a record 276 billion euros ($ 314.75 billion) in January, representing a 22% market share.

“In the long run, the euro must be liquidated in Europe,” said German MEP Markus Ferber, adding that London had benefited from the EU’s inaction.