The European Commission’s decision to extend temporary equivalence for UK central counterparties (CCPs) until 30 June 2025 represents a crucial development for the clearing industry. This extension provides stability for market participants who have faced ongoing uncertainty since Brexit, ensuring that UK-based CCPs such as LCH can continue servicing EU clients without disruption. Maintaining equivalence helps safeguard market continuity and mitigates the risk of fragmentation, which could have posed significant challenges for liquidity and risk management.
Christian Lee, clearing expert at Davies, speaks to Julia Schieffer at DerivSource and describes the move as a major positive for London’s financial centre. “I think this is a significant boost to the City and LCH in particular. The risk of market disruption has clearly influenced this decision and the status quo for OTC clearing is being maintained. Nevertheless the concerns major buy and sell side participants have regarding concentration of risk means that alternative EU based solutions will co-exist with LCH.”
His comments highlight the balancing act regulators face: preserving stability while addressing concentration risk. Although LCH remains dominant, EU authorities are expected to continue developing domestic clearing options to reduce reliance on UK infrastructure. This dual approach reflects broader strategic objectives around financial resilience and autonomy.
Ultimately, the extension offers breathing space for firms and policymakers alike. It underscores the interconnected nature of global markets and the importance of pragmatic regulatory decisions in maintaining confidence and continuity across the clearing ecosystem.
Read the full article here on DerivSource.