EU watchdog proposes derivatives fix in case of no-deal Brexit

LONDON (Reuters) – The European Union’s markets watchdog has proposed a temporary fix to avoid uncleared derivatives contracts worth trillions of euros being disrupted if there is a no-deal Brexit next March.

FILE PHOTO:Protesters participating in an anti-Brexit demonstration march sit at the base of Nelson’s Column, in Trafalgar Square, in central London, Britain October 20, 2018. REUTERS/Henry Nicholls

The European Securities and Markets Authority (ESMA) said the changes it was proposing would give banks one year to “repaper” or shift their uncleared, over-the-counter derivatives positions from London to the EU.

Such moves would not trigger the requirement to clear those contracts. Counterparties can begin taking steps to shift contracts – which requires permission from the end-customer – but make any action conditional on a no-deal departure, ESMA said.

The fix falls short of the “grandfathering” that industry has called for, whereby EU regulators would allow contracts spanning years to run to maturity even if Britain left the bloc without a deal.

ESMA said a general grandfathering was not appropriate and, given the urgency of the matter, it would not be holding a public consult

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