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24 September 2018

Bloomberg: Brexit prompts JPMorgan, Deutsche Bank to use Paris for trades

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LSE’s French clearinghouse is winning business from London as finance firms switch to clearing trades within the European Union to avoid being disrupted by Britain’s departure from the bloc next year.

JPMorgan Chase & Co. and Societe Generale SA were approved to clear client trades through LCH this summer, and fund managers such as Frankfurt-based Union Investment and Helaba Invest have decided to send their trades to Paris.

“If at one stage there’s a regulatory decision that we have to make use of a central clearer that’s also continental European based, LCH SA gives us the biggest flexibility,” Christoph Hock, head of multi-asset trading at Union Investment, said in an interview.

Hock said Deutsche Bank AG, Union’s clearing bank, will soon be ready to clear on LCH SA. A Deutsche Bank spokesman declined to comment.

Brexit Looming

With Britain’s exit from the EU just six months away, financial-services companies, including Europe’s biggest banks, are activating plans that they hope will minimize the disruption from a no-deal Brexit. Top of their list is ensuring that they can continue to trade with clients on both sides of the North Sea.

LCH Ltd. in London, by far the world’s largest clearinghouse, stands to lose some swaps business as fund managers switch new trades to Deutsche Boerse AG’s Frankfurt-based Eurex Clearing. Continental Europe-based asset managers may find themselves cut off from LCH Ltd. on March 30 next year, but they will definitely still have access to Eurex.

The French arm of LCH stands to benefit from the same trend. Continental European firms that trade CDS need a Brexit-proof alternative to Intercontinental Exchange Inc.’s London-based ICE Clear Europe, the dominant clearinghouse for European CDS. LCH SA in Paris will allow them to continue clearing their trades even if the worst happens in the Brexit talks. [...]

Full article on Bloomberg

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