AS THEY PREPARE for Brexit, many of London’s financial firms have begun to move some staff, or operations, to the continent. But financial contracts, notably derivatives, are difficult to uproot. London’s clearing-houses, which ensure that a contract is honoured even if one side goes bust, are globally important. As fears of an acrimonious Brexit have risen, so too have those of havoc. Now European Union regulators have unveiled contingency plans.
Clearing-houses have grown vastly in significance since the financial crisis, after which the G20 group of economies made it mandatory to settle most simple derivatives trades through them. London’s three big clearing-houses handle vast amounts of derivatives, and much of the trading cannot be done elsewhere. LCH, London’s largest clearing-house, clears interest-rate swaps with a notional value of over $ 340trn, making up 95% of the world’s total. LME Clear (part of the London Metal…
