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Brexit: Financial Regulators in U.K. and U.S. Move to Maintain Derivatives Trading

February 25, 2019, 11:26 AM UTC

Derivatives trading in the U.K. currently takes place according to European Union rules. So what happens after Brexit—particularly if it’s a sudden, hard Brexit on March 29?

Given the importance of the London and New York markets, that’s a particularly important question for clearing and trading between the U.S. and U.K. On Monday, regulators on both sides of the Atlantic tried to calm nerves by saying everything will continue to run smoothly.

The U.K.’s Bank of England (BoE) and Financial Conduct Authority (FCA) issued a joint statement with the U.S. Commodity Futures Trading Commission (CFTC) to say the CFTC would continue to give regulatory relief to U.K. firms after the fateful date, and the British authorities would let U.S. trading venues, firms and registered central counterparties continue to provide services in the U.K.

“As host of the world’s largest and most sophisticated derivative markets, the U.S. and U.K. have special responsibilities to keep their markets resilient, efficient and open,” said Bank of England Governor Mark Carney. “The measures we are announcing today will do that. Market participants can be confident that the clearing and trading of derivatives between the U.K. and U.S. will maintain the high standards of today when the U.K. leaves the EU.”

CFTC Chairman J. Christopher Giancarlo said the measures would “provide a bridge over Brexit through a durable regulatory framework upon which the thriving derivatives market between the United Kingdom and the United States may continue and endure.”

With less than five weeks left before the Brexit date, Theresa May on the weekend decided to delay the British Parliament’s “meaningful vote” on the deal she’s struck with her EU counterparts—a deal that those on the other side are unwilling to reopen unless the U.K. gives way on certain issues. The vote was due to take place this week but will now happen ‘by March 12’, which is just 17 days before the Brexit date.

May’s decision has provoked outrage back home and in the EU, with many accusing her of trying to run down the clock, so as to force lawmakers to back her deal if they want to avoid a catastrophic no-deal Brexit. With parliamentarians from May’s Conservative Party and the opposition Labour Party having broken away to join a group of non-aligned centrists, the prime minister is under severe pressure to delay the Brexit date or face further defections.