The European Commission, the EU’s executive arm, has to provide legal certainty on the clearing of trillions of dollars of derivatives contracts before Christmas or the U.K. firms will have to notify their EU members to close out their positions, two of the people said. That echoes the Bank of England’s call for the EU to spell out its plans by mid-December.
The commission wrote to LSE, Intercontinental Exchange Inc. and the London Metal Exchange last week to assure them that all the necessary measures will be in place and effective on March 30, the U.K.’s first day outside the EU. “These efforts adequately address the identified potential risks” and “remove any legal argument” about the need for clearing members to close out positions, according to one of the emails seen by Bloomberg.
The emails didn’t provide the legal certainty that the the U.K. clearinghouses need, the people said. Ideally, they’d like to have an official decision on the books this month, the people said, requesting anonymity to discuss the private talks with the commission.
Spokespeople for LSE, ICE, LME, the European Commission and the BOE, which supervises the clearinghouses, all declined to comment. [...]
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