The London Stock Exchange Group has admitted that part of the €1tn-a-day London market for clearing trades denominated in euros could justify tougher oversight from the EU or even move outside the UK.
In a response to proposals from the EU, the company, whose clearing house, LCH, is at the centre of a political tussle over future City business, indicated that supervision of the cash market for bonds and repo, or repurchase agreements “could form part of a specific discussion”.
The LSE also argued that clearing of interest rate swaps, which has ignited a politicized transatlantic battle since the UK voted for Brexit in 2016, was not of systemic relevance to the EU and could be supervised within existing frameworks.
“Asset classes should be treated in a completely different manner and call for different supervisory solutions,” the LSE told the commission. Brussels wants new powers to monitor overseas clearing houses it sees as posing potential systemic risks to EU markets. It has stepped back from demanding euro-denominated business be relocated to the EU, but kept the threat in reserve.