A forced relocation of euro clearing away from London could cost investors an extra €100bn (£77bn) in five years, the boss of the London Stock Exchange Group has warned.
Xavier Rolet also said that a move towards an “artificial, inefficient location policy [would] only hurt the European capital markets and real economy”.
The European Commission is currently holding a consultation on the future of the clearing of euro-denominated over-the-counter derivatives, due to complete at the end of next month.
Writing in the Times today, Rolet said that the London Stock Exchange would work with the commission to “preserve and enhance a regulatory system that monitors and reduces global economic risk” and that it supports the proposal to “enhance the supervisory regime due to Brexit”.
But he warned the commission against its location proposals, under which euro-denominated transactions would need to be cleared within the Eurozone.
“This would achieve the opposite of the G20 aims,” he said. “It would increase, not reduce, levels of systemic risk and increase costs for European companies, diverting capital away from the European economy.”
He added: “London clears 18 major currencies and these multi-currency netting efficiencies meant LCH saved its customers $21bn in capital last year. Strip out euro clearing and you lose these efficiencies, potentially increasing cumulative trading costs by €100bn over five years.
“If business left it would go somewhere with the scale to offer these efficiencies like New York, not Paris or Frankfurt. Despite this, US regulators allow the majority of the world’s US dollar swaps to clear here, due to sufficiently strong direct oversight of LCH’s activities.
“If Europe insists on trying to implement an artificial, inefficient location policy, it will only hurt the European capital markets and real economy. The rest of the global market will carry on.”