The European Union plans to extend its collaboration with U.K.-based clearinghouses, allowing them to process derivatives trades on the European market until 2028.
The European Commission proposed extending the authorization for clearing EU trades through U.K.-based firms until 2028. Initially, this collaboration was expected to end by June 30, 2025, according to Financial Times.
U.K. clearinghouses currently process approximately $3.5 trillion in daily derivatives trades, with the bulk handled by the London Clearing House (LCH) and Intercontinental Exchange (ICE).
Olof Gill, European Commission Spokesperson for Economic Security, Trade, Financial Services, and Customs, stated that the initiative’s primary objective is to ensure financial stability, a critical prerequisite for the development of the Savings and Investments Union (SIU), which aims to establish a unified financing market within the EU. Gill also highlighted that LCH and ICE are systemically important for the EU’s financial stability.
EU member states have five days to contest the European Commission’s proposal. However, experts believe it’s unlikely, as the EU lacks the necessary infrastructure to handle the volume of transactions currently processed by the U.K.’s central counterparties (CCP).
In February 2024, the European Parliament and the EU Council reached a preliminary agreement on a clearing package intended to reduce the bloc’s reliance on U.K. clearinghouses and strengthen Europe’s internal capital market. However, the initiative stalled, leaving U.K. clearinghouses as a systemic pillar of the EU derivatives market.
In May 2024, U.S. traders in traditional financial markets gained access to cryptocurrency derivatives launched on the Chicago Board Options Exchange (Cboe).
