Until recently Euro clearing was an obscure corner of the financial markets that mattered mostly to the people who worked in it and their clients.
Clearing is part of the plumbing that keeps financial markets churning along.
Clearing houses stand between the parties to big financial trades and speed up what can be complex transactions. In extreme cases they keep assets moving even if one of the parties collapses or defaults.
London dominates the sector, processing around €500m of trades a day, five times more than the nearest competitor. That has long irked European authorities – especially since clearing is a magnet for other financial activity that brings highly paid jobs.
The ECB previously mounted an unsuccessful legal battle to force clearing out of London.
The UK saw off that challenge then, but Brexit puts it back on the agenda in a big way.
The EU moved this week to bring in new laws giving European authorities powers up to and including forcing clearing into the EU.
As far as they’re concerned the euro is Europe’s currency, so it sets the rules. They are wrong. If firms that own euro denominated assets want to trade in London, because it works for them, that should be their own business.
Forcing business to relocate to places where the market is less developed or less efficient smacks of tearing up the plumbing because the plumber has the wrong accent.
With the free-market-oriented UK exiting the Union, that interventionist mindset is set to become ever more dominant in EU policymaking.
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