Executives from the London Stock Exchange and Deutsche Boerse groups, whose plans for a mega-merger broke down earlier this year, clashed over euro clearing relocation policy today.
Matthias Graulich, chief strategy officer at Deutsche Boerse’s Eurex Clearing, said that new European Commission plans to enhance EU supervision of the London-dominated market do not go far enough.
Speaking at a Financial News debate, reported on by Reuters, Graulich argued that the plans do not give EU regulators sufficient power to defend the euro in the event of a crisis.
He said: “If the fire is starting, the fire fighting is not with the EU regulators or ECB, but with the Bank of England.”
Daniel Maguire, chief operating officer of the London Stock Exchange Group’s clearing house LCH, hit back, telling the same event: “We are the fire fighters. The last thing you need at that point is a multitude of regulators saying what we can and can’t do.”
The pair also clashed over estimates on the cost to banks of relocating euro clearing activities from London.
Maguire suggested that market fragmentation would drive trading costs up by billions of euros, but Graulich accused him of “pulling out a number” not based on realistic assumptions.
The European Central Bank (ECB) failed in an attempt to force euro clearing activities into the Eurozone in 2015. The debate was fired up again by the UK’s vote last year to the leave the EU.
Last month, the European Commission laid out proposals for a shake-up of the clearing market for euro-denominated derivatives, opening the door for forced relocation away from London.
The changes to the European Market Infrastructure Regulation (Emir) would give greater powers to regulators and tighten rules for “systemically important” clearing houses operating outside of the European Union.
The commission could then “decide”, upon request by the market regulator and in agreement with the relevant central bank, the ECB, that the clearing house needs to establish itself within the EU.
LCH dominates the market and is therefore an obvious target.