While the political stances of both the UK and the EU are widely reported (for example here on Sky News), practical considerations for market participants becomes ever more important as the exit date approaches. There have been further developments since our last post here.
ESMA has been informing Trade Repositories, as well as others such as Credit Rating Agencies to be ready for different brexit scenarios. This article on the Reuters web site reports on this issue, and reports that ESMA has already reviewed contingency plans from TRs, and expects all plans to be in place by the end of the year. ESMA’s recently published work plan for 2018, found here, states that “the work on Brexit will be key for ESMA in 2018”. There are still many practical questions around trade reporting, both within the EU 27 and the UK, that will need to be resolved well before the deadline.
In the meantime, articles such as this one on The Independent site report that over 50 banks are in the process of applying for licences in non UK EU jurisdictions. Many others however have not started such a process. The ECB is advising banks to start the application process by the end of Q2 at the latest.
Andrew Bailey, Chief Executive of the FCA, has given this speech this week on “The future of the City”. The speech talks about London’s very long history as a financial trading hub, and how mutual recognition of regulatory standards serves the public interest. The speech then goes on to talk about both a possible transition and the end state, in terms of contract continuity, clearing, data collection and protection, risk management, and mutual recognition, as well as many other topics, all of which need to be fleshed out in the near future.
Internal Energy Market
On the energy side, many are in favour of remaining in the Internal Energy Market, although there may be issues with such a status if the UK were to leave the Single Market. This article on Clean Energy news looks at a recent public discussion, where it was generally felt that remaining in the IEM would be beneficial to all. The article goes on to discuss the issue of the ISEM market, soon to start across the Republic of Ireland and Northern Ireland, and the possible negative impact of leaving the IEM. Not all however, agree that the UK could stay in the IEM, as this could be seen as “cherry picking”.
This paper by Energy UK also argues for continuing closer ties to the EU, not only in terms of the IEM, but also the Emissions Trading Scheme and other climate related topics. This article on the Business Green web site looks at the paper, and also the consequences of possible EU counter measures, in environmental terms, of the UK no longer being aligned with the EU 27.
We need more information
While the politics continues, the nearing of the deadline means that market participants will need to take practical measures soon. The longer it takes for some certainty to appear, the more a “scenario based approach” will be necessary. Adopting such an approach for too long will create unnecessary spend and uncertainty, no matter what one’s stance is on the wisdom of Brexit. Timely details would therefore be welcomed by all.