The impact of the U.K.'s departure from the bloc could be acute for the business of clearing derivatives contracts, an esoteric yet vital piece of the global financial infrastructure. Post-global crisis reforms mean that the bulk of over-the-counter derivatives trades, such as interest rate and foreign-currency swaps, must be routed through central counterparties, or clearinghouses, and roughly three-quarters of the trade in euro-denominated interest rate swaps takes place in London, some $574 billion a day.
"The reality is that there are still a lot of unknowns. But what is now known is that we are one step further along the road to
euro clearing being forced away from the U.K. to the EU, if or when the EU decides that is the right thing to do," said Masoud Zabeti, head of the finance and banking disputes group at law firm Mishcon de Reya
"The way I see it, this draft law lays down the necessary legal framework and foundations to force relocation if and when that decision is taken.
"We are dealing with a political decision at the end of the day," Zabeti added, pointing to comments in May by German Finance Minister Wolfgang Schäuble that most (although not all) euro clearing should happen within the bloc.
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