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Brussels to back euro clearing relocation after Brexit, warns Euronext

Euronext expects Brussels will recommend the City’s prized euro clearing business move into the EU after Brexit, leading the exchanges operator to enter discussions with London-based banks preparing for that outcome.

The European Commission will next month rule on how to police euro-denominated business outside the EU and is studying how to regulate overseas clearing houses — which act as middlemen in trades and ensure a deal is completed in the event of a default — that affect financial stability in the EU.

London dominates clearing of euro-related derivatives has a large share of fixed income and repo markets. Among the options is forcing it to be processed in the euro, which could benefit Paris-based Euronext.

Discussing the company’s first quarter earnings, chief executive Stephane Boujnah, said it was the likely outcome based on the current view of the European Central Bank.

“If the decision is taken to relocate, we will make sure this has the best impact on Euronext markets. This option is likely to prevail. The euro is their currency and 40-70 per cent is done in London. [Outside the EU] it will become an anomaly and we should expect some movement.”

Lee Hodgkinson, head of markets at Euronext, said there were around 15-20 London-based banks likely to be affected.

“They expect they will need to clear more business in the eurozone. We’re having some very interesting discussions. People are really talking about their plans.”

Euronext said first quarter revenue to March 31 was up 0.1 per cent year-on-year to €126.6m. In the same period operating profit before exceptional items fell 2 per cent to €66.7m. It also introduced a floor to its dividend policy, promising to pay out a minimum of €1.42 per share to shareholders.