Nasdaq Europe to lure derivatives clearing from post-Brexit London
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Nasdaq Europe has said it will expand derivatives clearing to include euro interest rate swaps (IRS) in the coming months, in the latest move by European Union market operators to pull business from London following Brexit.
Even before Britain left the EU in 2020, London had long irked Brussels with its dominance of clearing in IRS, contracts widely used by companies to hedge against adverse moves in borrowing costs.
Clearing is a critical part of financial markets’ plumbing, ensuring a transaction is completed even if one side goes bust.
London’s dominance in clearing has helped it remain a major global financial centre by building up a deep pool of liquidity. Britain is trying to make its financial sector more globally competitive, after it was largely severed from the EU due to Brexit.
An EU law now being finalised will require banks in the bloc to have an “active account” at EU-based clearers for euro denominated IRS transactions, to reduce reliance on the London Stock Exchange Group (LSEG), and to give EU regulators direct oversight of transactions linked to the bloc.
EU permission for banks in the bloc to continue using London for clearing derivatives is also due to expire in June 2025, piling further pressure to shift business across the Channel.
Nasdaq Clearing has begun talking to clients about launching clearing in euros, and Danish and Norwegian crown IRS to take on LSEG by offering multi-currency clearing, said Chief Executive Patrik Lohr.
“From a technical perspective we’re ready,” Lohr told Reuters.
Nasdaq already clears IRS in Swedish crowns and expanding to other currencies will allow customers to net more positions within a single clearer to save on collateral.
“With this we have a more complete offering for the Nordic clients,” Lohr said.
Nasdaq Europe, part of the U.S. Nasdaq exchange and operator of seven European stock exchanges in the Nordic and Baltic countries, says it has just under 10% market share in clearing Swedish crown IRS.
