LONDON – American and British regulators said on Monday that derivatives trading and clearing activities between the United States and the United Kingdom won’t be affected by a no-deal Brexit after a series of joint measures were agreed to ensure trading continuity.
The US Commodity Futures Trading Commission (CFTC), the Bank of England (BoE) and the UK Financial Conduct Authority (FCA) said they had agreed to coordinate to ensure smooth market functioning if Britain leaves the European Union (EU) on March 29, as currently scheduled, whether or not a deal is agreed.
The CFTC said it will extend the regulatory relief currently granted to EU firms to UK firms at the moment of Brexit.
Meanwhile, British authorities have confirmed that US firms will continue to be able to provide services in the UK under a temporary recognition regime in the case of a no-deal Brexit, ahead of permanent rulings on regulatory equivalence.
“London is, and will remain, a global center for derivatives trading and clearing,” CFTC Chairman J. Christopher Giancarlo said. “I am pleased to announce these important measures. They provide a bridge over Brexit through a durable regulatory framework upon which the thriving derivatives market between the UK and the US may continue and endure.”
The agreement was welcomed by Philip Hammond, the UK’s treasury chief.
“The action we have taken today with our partners in the US will ensure that markets can continue to thrive without disruption, and is yet another example of the special relationship between our two countries,” Hammond said.
The prospect of a no-deal Brexit initially raised concerns that trillions of pounds worth of derivative contracts would have to be moved from London to continental Europe, harming market liquidity. However, European regulators last week assured derivatives traders within the EU that they would give immediate formal recognition to the largest London clearing houses in the case of a no-deal Brexit.