City of London working to limit Brexit disruption

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Businesses and regulators are making last-minute arrangements to avoid disruption when the UK leaves the EU’s single market next month, with Paris increasing a new mall for Goldman Sachs and a double listing for the pillar’s Segro du FTSE 100.

The US investment bank announced on Tuesday that it would create a hub in the French capital for Sigma X, its private European marketplace for stock trading. On the same day, Segro carried out a double listing of its entire share capital on Euronext Paris to protect its portfolio structure after the end of the Brexit transition period on January 1. The UK real estate investment fund has EUR 6.2 billion in assets across the EU.

On Monday evening, European regulators also finalized a late change aimed at avoiding the chaos of £ 15 billion in derivative contracts held between UK and European counterparties.

These measures reflect growing anxiety over financial market deals after the expiration of Britain’s post-Brexit transition period, especially as Brussels has remained silent on City of London access.

The UK government and the EU are stuck in intensive negotiations over their trade relations from January. But discussions of mutual access to financial markets on either side are separate and covered by regulators. Much of it will depend on a series of so-called equivalence decisions covering different countries and financial products.

John Berrigan, the European Commission’s top financial services official, warned last month that the end of the transition period would be an “inevitably fragmented event”.

“We need to keep repeating our message to market participants to be ready,” he said, stressing the risk of “market volatility” as the financial system adjusts.

A lack of equivalency decisions would not exclude UK banks, investors and trading venues from the EU market, but it could create loopholes and drive up costs.

Goldman said his new arrangements in Paris would help avoid disruption. “We want to ensure that our clients continue to have access to all of our major sources of liquidity after Brexit,” said Liz Martin, global co-director of electronic futures and equity trading at the bank.

The bank will maintain its presence in London for Sigma X, which manages around 0.4% of total European equity trading, but the Paris site will allow it to reach all EU clients after the UK deadline. United.

Despite the committee’s reluctance to present its plans, European regulatory agencies decided Monday evening to facilitate the transfer of thousands of illiquid and old derivative contracts from the City to the EU.

In a joint statement, the EBA, Esma and Eiopa, which oversee the banking, trading and insurance sectors in Europe, said they would allow banks and asset managers to transfer their old open derivative transactions held in London to EU subsidiaries without triggering new regulatory requirements.

The move aligns the EU with the UK, which has already legislated to allow EU banks to continue to manage contracts.

Roger Cogan, head of European public policy at Isda, a trade association, said the move was “very welcome” as it allowed banks to continue providing basic services such as contract changes. “It is also useful for the reorganization efforts of market players related to Brexit,” he said.

The committee said its UK equivalency assessments must be “forward looking” and take into account any UK plans to deviate from EU rules. Brussels said it needed more information despite the UK government providing 2,500 pages of responses to EU questionnaires earlier this year.

EU diplomats say the Union’s position reflects a mix of negotiating tactics, as Brussels seeks leverage in negotiations over the two sides’ future relations and a political agenda to become more independent from the city after Brexit.

In an effort to move the process forward, UK Chancellor Rishi Sunak announced in November certain equivalency decisions that will ensure, for example, that EU-based exchanges, clearing houses and financial indices can continue to be used by UK customers. But the EU has made it clear that it does not intend to immediately return the favor.

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