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According to the London Stock Exchange Group (LSE), forcing firms out of the capital in the euro derivative market could hurt business and spark a rise in costs for customers. In a report, the LSE insisted EU firms would have a competitive disadvantage to their international rivals if Brussels continues to pressure companies. The group said in a statement: “Restricting access to the EU economy and the euro would place EU firms in competitive disadvantage against their peers and would also increase risk to financial stability both in the EU and more widely.
“LCH fully shares the concerns raised by our customers: regulatory-driven market fragmentation will not produce any significant benefits either to market participants, financial stability or to national economies.”
The EU Commission is evaluating how interest rates in the stock exchange’s clearinghouse sector may be moved to Frankfurt.
With EU companies accounting for only 27.1 percent of clearing volumes in the sector in 2020, the group warned a European company would lose access to an international clearer.
Brussels has also indicated that it wants full oversight over large-scale activity by EU-regulated banks and assets managers.
Since Brexit, the EU has refused to grant financial equivalence to firms based in London.
This means some have relocated to EU markets in order to avoid using two sets of regulations.
The UK and EU did agree a memorandum of understanding in March to continue talks over financial services but did not agree on equivalence.
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7.27am update: EU’s plot to poach UK financial firms set to backfire
The London Stock Exchange Group (LSE) has warned the EU’s plot to poach UK firms is set to backfire.
If firms were to relocate to the continent in the euro derivative market, they claimed costs for costumers will rise.
With just 27.1 percent of EU firms trading in the clearing arm of the market, the group concluded firms would lose out and suffer an international disadvantage.
The EU is evaluating the movement of firms from London to Frankfurt as part of its post-Brexit plan for financial services.
The LSE Group said: “Restricting access to the EU economy and the euro would place EU firms in competitive disadvantage against their peers and would also increase risk to financial stability both in the EU and more widely.
“LCH fully shares the concerns raised by our customers: regulatory-driven market fragmentation will not produce any significant benefits either to market participants, financial stability or to national economies.”
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