In 5 months’ time, the UK will no longer be part of the European Union. With no deal agreed at this stage, many are now preparing for a “hard Brexit” scenario. There have been a few developments since our last post on the topic here.

EMIR
The UK Government has now published a draft Statutory Instrument (SI) for the transposition of EMIR to the UK rule book which can be found here. It comes with this explanatory page, which highlights many important aspects of the proposed rules. For example, it states that in the event that no UK based Trade repository (TR) is approved before the start date, it is possible to suspend UK EMIR reporting for up to a year. However, the rules around backloading are still to be defined.

Supervision of third country entities by EU institutions and other financial impacts
The discussion over who should supervise certain activity such as Euro clearing where it takes place outside of the EU accelerated when ESMA published this letter to the European Commission, suggesting that EU institutions retain direct oversight on such entities. This received push back from several places, including in this speech made by Charles Randell, chair of the FCA. Chris Giancarlo, the Chair of the CFTC, has also warned against these proposals, and threatened possible retaliation, as reported here on the Telegraph web site. This has not altered the EU direction, as reported here in an article on the Reuters web site. This article on the Factset web site looks at further speeches relating to this topic.

In terms of permissions and access to clearing, this article on the Reuters web site hints that a temporary regime may be agreed by the EU to avoid a “cliff edge” effect in terms of contract continuity and clearing access. Concern on this topic has also been expressed by the CFTC here.

ETS replacement
Yesterday, the budget presented by Phillip Hammond, the UK’s Chancellor of the Exchequer, included a plan to replace the Emissions Trading Scheme in the UK with a carbon tax set at 16 GBP per tonne of carbon emitted, in the event that the UK has to leave the ETS. This is seen as a temporary measure, as reported in this article on the Bloomberg web site.

As the Brexit deadline approaches, we can expect more “hard Brexit” announcements, and maybe more news on a deal.