ICE says EU contracts will shift from U.K. to Netherlands; Traders had warned of cost and risk in post-Brexit London
Intercontinental Exchange Inc.
plans to move its 1 billion-euro ($1.2 billion) daily market for
European carbon emissions contracts to the Netherlands from London in a
blow to the U.K.’s attempts to build a green finance powerhouse after
Brexit.
Stuart Williams, president of ICE Futures Europe,
said the decision to shift the business into the European Union will
help traders and investors “manage climate price risk in the most
cost-effective and seamless manner.”
The market is a key plank of the EU’s efforts to combat
climate change. Volumes for futures and options contracts have more than
doubled since 2015, ICE said in a statement Monday. The trades will
continue to be cleared through ICE’s London business.
The shift comes after the Brexit transition period ended on
Dec. 31, cutting off access to most London trading from the bloc and
jolting several major markets. European equities have moved to Amsterdam
and Paris from London, while some derivatives contracts have shifted
out of Europe altogether in favor of Wall Street platforms.
The
development is a setback for the U.K.’s government’s bid to become a
center for sustainable finance. In his vision for financial services
after Brexit, Chancellor of the Exchequer Rishi Sunak has said he wants
the U.K. to be a “world leader in the use of green finance,” and that
Britain is preparing to issue its first green gilts.
At
issue for the carbon market is the lack of an “equivalence” decisions
from the EU that would have made it cheaper and easier for traders to
continue dealing in London. Lobby groups for energy firms pressed
Brussels at the end of last year to take urgent action to resolve the
matter, arguing they would face a “stark choice” of paying more in
collateral to do business in London or else restrict their ability to
manage risks.
While EU and U.K. policy makers are discussing how
to cooperate on financial services going forward, Brussels has signaled
it’s in no rush to grant broad access to London through equivalence
decisions. The realities of leaving the EU have “come home to roost” for
Britain, Mairead McGuinness, the EU’s financial services commissioner, said on Bloomberg TV last month.
Bloomberg
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