By Huw Jones
LONDON (Reuters) -Forcing asset managers to shift clearing of their euro derivatives trades from London to the European Union would be anti-competitive, split markets and increase costs, Europe’s investment funds industry body said on Tuesday.
The EU’s executive European Commission has proposed that asset managers and banks in the EU open an “active account” with an EU-based clearing house to shift some clearing from London Stock Exchange Group (LSEG) and ICE to Deutsche Boerse in Frankfurt to end heavy post-Brexit reliance on UK clearers.
The European Fund and Asset Management Association (EFAMA), whose members manage close to 30 trillion euros ($32 trillion) in assets, said the EU draft law undermines the objective of an efficient clearing market and stops free choice of clearers.
“We are opposed to any forced relocation policy as this will have a negative impact from a cost perspective on end-investors,” EFAMA said in a statement.
Brussels is allowing UK-based clearers to continue serving EU customers until the end of June 2025, though continued access is likely in some form after then.
Jennifer Robertson, a head of unit in the Commission’s financial services unit, told a QED conference on Tuesday that EU market participants would have to “clear a portion, not all euro derivatives, in active accounts”.
The measures proportionately address excessive risks to EU financial stability from heavy reliance on London for clearing, Robertson said.
LSEG cleared 1.5 trillion euros in euro rate swaps on March 20.
But Corinna Schempp, head of EU policy at FIA, a derivatives industry body, said active accounts were a “bad idea, don’t do it. It’s not increasing the attractiveness of the EU as a place to do business”.
Julien Jardelot, head of European government relations at LSEG, whose London LCH unit dominates global euro rates swaps clearing, said over 80% of trades were from non-EU clients in any case.
Erik Mueller, CEO of Deutsche Boerse’s Eurex clearing arm in Frankfurt, added: “I am not advocating for a world where we prevent access to my competitors… I am a firm believer in competition and two is better than one.”
EU states and the European Parliament have joint say in approving the draft law.
Brita Hammar of the EU’s Swedish presidency, said points raised by EU states included how relocation of clearing could affect competitiveness of EU market participants, and exactly how EU regulators would decide on the amount of clearing that must move.
“We don’t have a basic definition of what is excessive risk,” Hammar said.
($1 = 0.9314 euros)
(Reporting by Huw JonesEditing by Mark Potter)
