[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/eps/ecmiwp/13483.html
   My bibliography  Save this paper

Over-the-counter interest rate derivatives: The clock is ticking for the UK and the EU

Author

Listed:
  • Thomadakis, Apostolos
Abstract
Over-the-counter (OTC) derivatives markets, in particular interest rate derivatives (IRD), have grown significantly in recent decades and now constitute a systemically important component of financial services activity. The UK plays a central role in clearing derivatives, both at a global and EU level. It is the single biggest venue for OTC derivatives activity and is even larger in terms to euro-denominated IRD contracts clearing. Yet, the fact that a large share of euros is traded, and will be traded after Brexit, in a non-euro area country raises questions about the regulation and supervision of such markets and the sustainability of liquidity provision, particularly during a time of financial turmoil. The burning question is thus whether the clearing of euro-denominated derivatives can remain in London or should be moved to the eurozone. With the aim of shedding light on this issue, this report explores the OTC IRD market and the UK’s role in it, and examines the potential costs of a relocation policy of CCPs after Brexit. It argues that there are aspects of the Commission’s proposal that require further attention and clarification. The easiest approach might be to establish a location policy to require systemically important CCPs to be located within the eurozone, but this would be an error of judgement. The report highlights the urgent need for an impact assessment of the fragmentation, risks and costs of such a move. It concludes that the best hope of addressing the risks of clearing post-Brexit is for heightened supervision, deep cooperation and clear coordination between the EU and the UK, rather than a potentially forced relocation of services currently provided by UK firms to the EU.

Suggested Citation

  • Thomadakis, Apostolos, 2018. "Over-the-counter interest rate derivatives: The clock is ticking for the UK and the EU," ECMI Papers 13483, Centre for European Policy Studies.
    • Handle: RePEc:eps:ecmiwp:13483
    as

    Download full text from publisher

    File URL: https://www.ceps.eu/publications/over-counter-interest-rate-derivatives-clock-ticking-uk-and-eu
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lannoo, Karel & Thomadakis, Apostolos, 2020. "Derivatives in Sustainable Finance," ECMI Papers 29791, Centre for European Policy Studies.
    2. Thomadakis, Apostolos, 2021. "2020 ECMI Statistical Package: key findings," ECMI Papers 32242, Centre for European Policy Studies.
    3. Gleisner, Love & Thomadakis, Apostolos, 2018. "Recent Developments in European Capital Markets: Key findings from the 2018 ECMI Statistical Package," ECMI Papers 14015, Centre for European Policy Studies.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eps:ecmiwp:13483. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Margarita Minkova (email available below). General contact details of provider: https://edirc.repec.org/data/cepssbe.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.