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Weekly Debate: How Will The Euro-denominated Clearing Change?

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Editor’s Remarks:

Last week, Mario Draghi came under pressure to take a view on whether euro-denominated clearing would remain in the City of London following the Brexit vote in June. The UK claims that by moving the clearing process to Frankfurt, the move would separate the clearing process from the 16 other currencies, threatening the euro’s role as an international currency. The transfer would also be expensive and subject to move rigorous regulations from within the EU bloc. However, prominent forces from within the European Union have been calling for euro-denominated clearing to move to operate inside the single currency area. One such man is Francios Hollande, who demands that stripping the City of its equities and derivatives trading will serve as a lesson to those nations who may wish to exit the Union. The ECB has attempted to remove the City’s right to clear Euros before and have been keen to do so ever since. Brexit should see the issue brought back, and if London loses its right to euro-denominated swaps, the City will lose a third of the global interest rates derivatives market, taking with it thousands of jobs. Staying in London with more regulation seems to be the most viable option, but Brussels needs present a warning to far right wing movements that are taking storm across Europe. Expect fluctuations of the Sterling as decisions are taken on perhaps the most important consequence of the Brexit vote.

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