Surprise? ESMA Dominated by Brexit

Market participants need pragmatism now to avoid paying the penalties of political procrastination.


Anyone hoping for a break from Brexit would have found respite hard to find at this month’s ESMA ‘State of European Markets’ conference in Paris.

For many EU 27 delegates, there appears to be a hardening of attitudes on the reliance on London in a post-Brexit world. This covers everything from where companies raise capital to where parts of market infrastructure are located. Perhaps not surprising, since the assumption that London would be part of the EU has been hard-wired into much of the original drafting of European legislation; hence Markus Ferber’s explicit statement that open access to any centre outside the EU would be reviewed (ie will change).

Delegates were unanimous in asserting that continuing uncertainty regarding the shape of transition is highly detrimental to market participants: procrastination by politicians is incompatible with planning in the real world.

  • Brexit ‘worst case assumption’ plans should be invoked very soon, if not already underway.

The subject of euro clearing was effectively ducked.

  • Despite (the now out-going) Xavier Rolet’s valiant attempts to defend SwapClear, we expect some migration of euro clearing to the EU 27, coupled with ‘super-equivalence’ for any UK CCPs.

In summary, with the potential for fragmentation and loss of open access, ESMA’s mission to safeguard the stability of the EU’s financial system becomes increasing challenging.

The future State of European Markets may well depend on a combination of pragmatism and innovation.

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