London Stock Exchange chief: ECB's new euro clearing rules will cost investors €20bn

 
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Xavier Rolet said the ECB's new euro clearing rules will fragment the market (Source: Getty)

New supervision rules on euro clearing proposed by the European Central Bank (ECB) will cost investors €20bn (£17.8bn), the chief executive of the London Stock Exchange has said.

Xavier Rolet told a conference organised by the EU securities watchdog this morning that new clearing rules will cause the market to fragment.

Reuters reported that he said: “The potential proposal to fragment and separate the clearing of euro denominated derivatives would lead to a deteriorating execution price of somewhere in the region of €20bn in additional cost to EU based investors... per annum."

New supervision rules

Rolet's comments come after the ECB proposed new rules which would give it regulatory power over the euro clearing market, which is currently dominated by London.

Under the new rules, it would be able to monitor and address perceived risks associated with clearing that could affect its monetary policy, the operation of payment systems and the stability of the euro.

The proposals stepped up an escalating war between the City of London and its European counterparts over the euro clearing market.

Earlier this month Deutsche Boerse's clearing house, Eurex, unveiled a new programme under which its biggest customers will be rewarded with a share of its revenues.

Read more: Brexit and euro clearing relocation could force 40,000 City jobs into EU

What is euro clearing?

Clearing is the process through which financial transactions are settled, between the promise of a payment and the payment itself. Euro clearing refers to the clearing of euro-based transactions.

The clearing of euro-denominated derivatives, in particular, is big business for the City of London, which dominates an estimated 90 per cent of the market.

The ECB failed in 2015 in an attempt to require big clearing houses to leave London for the Eurozone after a three-year court battle.

However, the Brexit vote immediately reignited the issue, with politicians including then-French President Francois Hollande calling for it to be moved on to the bloc.

In June the ECB said it wanted to amend central banking rules to give it regulatory powers over the market, essentially allowing it to monitor and address perceived risks associated with clearing which could affect its monetary policy, the operation of payment systems and the stability of the euro.

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