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UK and US strike post-Brexit derivatives deal

Derivatives trading and clearing between the UK and the US will continue uninterrupted when Britain departs the European Union (EU), regardless of the outcome of Brexit, confirmed the Bank of England.

The BoE confirmed that a deal it has agreed with the US Commodity Futures Trading Commission (CFTC) and UK regulator the Financial Conduct Authority (FCA) provides a “bridge over Brexit” to ensure financial stability.

The terms include UK equivalence for the US, which will allow American  trading venues, firms and CCPs to continue providing services in the UK and for British firms to access those services.

Existing regulatory relief granted to EU firms by the CFTC will be granted to UK firms upon Britain’s departure from the EU, regardless of the outcome of the Brexit negotiations. The BoE, together with the FCA and the CFTC has pledged to continue its cooperation post-Brexit. Work is also in progress to make the recognitions permanent

Commentary from the Bank

“As host of some of the world’s largest and most sophisticated derivative markets, the US and UK have special responsibilities to keep their markets resilient, efficient and open,” commented BoE governor Mark Carney.

“Market participants can be confident that the clearing and trading of derivatives between the UK and US will maintain the high standards of today when the UK leaves the EU.”

CFTC chairman J. Christopher Giancarlo added: “London is and will remain, a global centre for derivatives trading and clearing.

“These important measures provide a bridge over Brexit through a durable regulatory framework upon which the thriving derivatives market between the United States and the United Kingdom may continue and endure.”

Existing regulation allows UK firms and US entities to trade through an agreement between the EU and the US. The new arrangement, which effectively bypasses the EU, should enable London and New York – the world’s two largest financial centres for derivatives exchanges – to maintain business as usual when Brexit takes place on or after March 29.

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