Derivs - People and Markets

Germany’s financial regulator this week cast further doubt on the planned merger between Deutsche Börse and the London Stock Exchange by objecting to a London headquarters for the group in the wake of the United Kingdom’s vote to leave the European Union.

Clearing looks set to be one the first areas of London’s dominance as a financial centre to be challenged, following last week’s vote to leave the European Union, with uncertainty over the future of euro business putting pressure on central counterparties based in the UK to relocate their clearing operations elsewhere.

The Singapore Exchange (SGX) has extended the period of exclusive discussions with the Baltic Exchange for a proposed cash offer to acquire 100% of the shipping-based bourse.

The United Kingdom's vote to leave the European Union sent traders, lawyers and trade associations into overdrive this week as they sought clarity on whether contractual changes for derivatives will be required, what form they would take and how they could be modelled.

Balanced mutual funds and risk parity funds were among those most wrong-footed by the UK voting reject EU membership last week, according to equity analysts, while leveraged exchange traded funds amplified the market fallout of the vote.

US and Asian regulators should hold fire on imposing margin rules on uncleared swaps to allow Europe to catch up, said the International Swaps and Derivatives Association (ISDA).

What began as a week of turmoil for European credit and equity markets amid Brexit uncertainty is ending on a full circle return with no immediate signs that that the UK will begin a formal exit from the EU soon and amid rumours on Thursday that the ECB will relax the terms of its bond repurchase programme.

The UK’s decision to quit the EU has dealt an immediate hit to currencies, credit and equities, but also puts key components of the European derivative market in doubt.

European credit spreads enjoyed a unanimous rally on Thursday as the odds of the UK leaving the European Union receded.

A British vote to leave the European Union could lead to the reopening of a spat between the Bank of England and the European Central Bank over clearing euro-denominated trades. Last year, the UK won a court battle in the European Court of Justice, keeping the right to clear euro-denominated trades outside the eurozone.

The European Commission will likely go against a recommendation made by the regulator that penned the Markets in Financial Instruments II standards, in a bid to ensure liquidity in the bond and derivatives markets isn’t damaged by the rule’s implementation, GlobalCapital understands.

Bonds, derivatives and other non-equity instruments will be subject to the automatic phase-in of pre-trade transparency reporting requirements, despite pushback from elected officials, a top regulator said on Tuesday.