European regulators have stepped up preparations for the risk that the UK leaves the EU abruptly at the end of the month, issuing a licence to ensure that investors in Irish markets can continue to settle trades in London.
The European Securities and Markets Authority confirmed on Friday it had approved EU customers to use a central securities depository known as Euroclear UK & Ireland, which lies at the heart of daily market operations.
The agency also approved DTCC, the US post-trade group, to run a derivatives trade repository in the 27-country bloc, as part of the EU’s efforts to contain the potential upheaval from a hard Brexit.
In recent weeks regulators have reached agreements on clearing and have been approving trading venues on both sides of the channel. Steve Grob, chief marketing officer for ION Markets, a trading technology group, said it was too late for companies to wait for the outcome of political discussions.
“Everyone has made their arrangements. The European businesses are going to happen anyway as people are committed,” he said. “But Brexit is one deadline after another — when you get to the next chapter of the story people are going to reassess their choices.”
Central securities depositories are an unglamorous but vital part of the market where trades are settled. The Irish bourse uses a UK depository and about €182bn of Irish securities, mainly corporate securities and exchange traded funds, sit in London. Ireland, uniquely among the EU, does not have its own depository and without the permit the country would have been left stranded.
Esma, the main markets supervisor, said its approval should “avoid any negative impact on the Irish securities market”.
Brussels will allow Ireland to use UK market infrastructure, but only until March 2021, while the assets are moved to the eurozone.
Esma also issued a permit for DTCC, the world’s largest derivatives repository, to run an EU-based arm in Dublin.
The repositories were established after the crisis to help authorities spot leverage building up in the financial system. The data warehouses store information on swaps and futures deals and are mainly run by exchanges. Europe oversees six such repositories, with most of them based in London.
The regulator also confirmed that Bloomberg, the New York-based financial information provider, had withdrawn from running a repository. The company said its decision was not related to Brexit, and it would focus on data services instead.
Several trading venues and exchanges are still awaiting authorisation from national EU regulators to operate in the EU, in the event of a no-deal Brexit. They include CME Group’s BrokerTec, which trades sovereign debt and short-term loans known as repurchase agreements, CBOE Europe and Turquoise, the share trading venue run by the London Stock Exchange Group.
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