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UK, US strike deal on life post-Brexit
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Britain and the United States agreed yesterday to maintain how multi-trillion-dollar financial transactions are carried out between the two countries after Brexit, aiming to avoid market uncertainty when the UK leaves the EU.
“Market participants can be assured of the continuity of derivatives trading and clearing activities between the UK and US, after the UK’s withdrawal from the EU,” said a joint statement by authorities in both countries.
“UK and US authorities are taking measures to ensure the UK’s withdrawal from the EU, in whatever form it takes, will not create regulatory uncertainty.”
The UK and US carry out trades of derivatives — securities whose value is based on an asset such as currencies, stocks and commodities — worth a combined US$2.4 trillion daily, Bank of England governor Mark Carney told a press conference in London.
British finance minister Philip Hammond yesterday said that “the US and UK are fundamental to the smooth functioning of the world’s multi-trillion-pound derivatives markets, with around 97 percent of the centrally cleared interest rate derivatives market located in London.”
“The action we have taken today with our partners in the US will ensure that markets can continue to thrive without disruption, and is yet another example of the special relationship between our two countries,” he added.
Carney meanwhile explained that while “derivatives can seem far removed from the everyday concerns of households and businesses ... they are essential for everyone to save and invest with confidence.”
“As host of the world’s largest and most sophisticated derivative markets, the US and UK have special responsibilities to keep their markets resilient, efficient and open,” Carney said.
Derivatives trades pass through clearing houses, or intermediaries between the buyer and seller.
US Commodity Futures Trading Commission Chair J. Christopher Giancarlo, said London would remain “a global center for derivatives,” and that the deal provides “a bridge over Brexit.”
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