Facing Brexit uncertainty, U.K. and U.S. regulators are making arrangements to avoid disruption in the global derivatives markets.
A collection of regulators — including the Bank of England, the U.K.’s Prudential Regulation Authority and its Financial Conduct Authority, and the U.S. Commodity Futures Trading Commission (CFTC) — issued a joint statement today that sets out the steps they’re taking to ensure that trading and clearing in derivatives markets isn’t disrupted by the U.K.’s planned exit from the European Union (EU).
While the U.K. is slated to exit the EU at the end of March, no agreement is in place to govern the process, which has the potential to thrust markets into turmoil.
In their statement, the authorities stress they’re “taking measures to ensure the U.K.’s withdrawal from the EU, in whatever form it takes, will not create regulatory uncertainty regarding derivatives market activity.”
Those measures include a pledge of continued supervisory co-operation for cross-border oversight of derivatives markets, updating various cross-border agreements, extending regulatory relief and comparability assessments, and issuing new substituted compliance and exemption orders. Additionally, U.K. regulators confirmed that U.S. trading venues, firms and central counterparties will be able to continue providing services in the U.K.
“Derivatives can seem far removed from the everyday concerns of households and businesses, but they are essential for everyone to save and invest with confidence,” said Mark Carney, governor of the Bank of England, in a statement.
“As host of the world’s largest and most sophisticated derivative markets, the U.S. and U.K. have special responsibilities to keep their markets resilient, efficient and open,” he said. “The measures we are announcing today will do that. Market participants can be confident that the clearing and trading of derivatives between the U.K. and U.S. will maintain the high standards of today when the U.K. leaves the EU.”
Christopher Giancarlo, chairman of the CFTC, said London will remain a global centre for derivatives trading and clearing, and that the measures “provide a bridge over Brexit through a durable regulatory framework upon which the thriving derivatives market between the United Kingdom and the United States may continue and endure.”