Xavier Rolet, the chief executive of the London Stock Exchange, says that there is no “immediate threat” to the City of London’s status as the global centre for clearing euro-denominated currency trades, an issue that has been worrying traders and brokers in the City since Britain voted to leave the European Union seven weeks ago.
Speaking after the LSE announced its half year results on Thursday, Rolet said that any attempts to move the centre of euro clearing away from London “would require a treaty change. An EU treaty change is not an easy thing … so that is not impossible but at this time, for the moment, there is no immediate threat from that standpoint.”
Regardless of the huge crash in the pound since the referendum, London is at the heart of the global foreign exchange markets with more than $1 trillion (£747 billion) of trades taking place in the city every day, but that volume could be about to substantially drop now that Britain has voted to leave the EU.
Many in the City are concerned that London will lose its place as the hub of clearing euro-denominated trades. And given the enormous amount of money generated by Forex trades in Britain’s financial centre, that’s hardly surprising.
Speaking in Brussels at the end of June, French president Francois Hollande argued that now Britain has voted to leave the EU the City will no longer be able to clear euro-denominated trades.
“The City, which thanks to the EU was able to handle clearing operations for the eurozone, will not be able to do them,” he said, according to a Financial Times report at the time. “It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson.”
Hollande’s view is one backed up by Germany’s financial regulator, which has also said that London will no longer be the center of euro-denominated trading once the UK leaves the EU. The European Central Bank has wanted to stop British operations from clearing euros for many years, leading to a fierce court battle over the issue in 2015.
Despite this, Rolet sought to calm any fears about the immediate potential for clearing to leave the UK, noting how incredibly complicated the negotiations for taking away clearing would be. “Negotiations will be incredibly complex. I don’t expect a swift resolution, it will take time. European industry also depends on the ‘money pump’ that the City represents … sides have an overriding interest in stability in the short to medium term, and a settlement that works for both sides.”
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