Brexit will give the derivatives market a nasty headache


FOR all the talk of banks deserting London as Britain’s departure from the EU looms, relatively little attention has been paid to the derivatives market. Yet this is a crucial area of business for British-based banks. The City handles a big chunk of the market, including 39% of the market in interest-rate derivatives alone, where global daily turnover averages $ 3trn. The rest of the EU accounts for just 9%. Brexit seems sure to cause significant disruption. Mark Carney, the governor of the Bank of England, recently warned that the very “legal validity” of pre-existing derivatives contracts could be put into question.

Brexit-related discussion of derivatives has tended to focus on the role of clearing-houses, which ensure that a contract can be honoured even if one side goes bust. Since the financial crisis, most countries have made it mandatory to clear derivatives trades. LCH, a clearing-house in London, clears over 50% of interest-rate swaps across all currencies; London houses…

The Economist: Finance and economics

Post Author: martin

Martin is an enthusiastic programmer, a webdeveloper and a young entrepreneur. He is intereted into computers for a long time. In the age of 10 he has programmed his first website and since then he has been working on web technologies until now. He is the Founder and Editor-in-Chief of BriefNews.eu and PCHealthBoost.info Online Magazines. His colleagues appreciate him as a passionate workhorse, a fan of new technologies, an eternal optimist and a dreamer, but especially the soul of the team for whom he can do anything in the world.

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