Post-Brexit finance fight puts everyone at risk

Post-Brexit finance fight puts everyone at risk

The post-Brexit war over financial services “” and to what degree Europe can lure business away from the City of London “” is far from over. The latest battle is derivatives clearing. But compromise is possible and would serve everyone best. Set up in the aftermath of the global financial crisis, central counterparty clearing houses (CCPs) act as middlemen between institutions trading derivatives, minimising counterparty risk. So if one party were to default, CCPs should still have access to collateral and liquidity to prevent a domino effect of subsequent blow-ups, as happened when Lehman Brothers went bankrupt in 2008. Though not big money spinners per se, CCPs are part of an industry that surrounds more than $1 quadrillion worth of derivatives. The EU wants to gain control of this key cog of financial plumbing, which has long been London's crown jewel and a symbol of its primacy in the sector. There is really only one name in the clearing game: Britain's LCH Group, the largest interest-rate swap CCP in the world, controls 90% of the clearing in dollars, which is by far the most liquid and deepest market, and 90% of the clearing in euro derivatives. Now that Britain has