The shape of any final Brexit deal will have far-reaching consequences for ISDA’s members and the broader derivatives market. This is the opening white paper in a series that will examine Brexit related issues, and highlight the need for a smooth transition.
One of the highest profile issues for the financial sector post-Brexit is central counterparty (CCP) location. The vast majority of EU clearing currently takes place in London, but there are suggestions that EU regulators might introduce a location policy for euro-denominated swaps to be cleared in the EU.
ISDA highlighted the issues associated with a possible location policy in a letter to EC vice-president Valdis Dombrovskis. For example, a location requirement for euro-denominated swaps could increase risk and costs in the EU and raise overall initial margin levels by 15%-20%. ISDA urges both the UK and EU to agree on post-Brexit transitional provisions for contracts under English law to reduce complexity and costs for all market participants.