Brexit: Now What? Part III

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McHrozni said:
Maybe, unless of course one of the lawmakers decides to make it difficult, as is the case here.

If Euro-denominated business leaves London that's up to 100,000 London City jobs that will move to the continent. That's quite strong incentive for EU to pursue legislative action that will see those jobs move. UK is lobbying hard against it, but the arguments it puts forward are, well, pathetic to put it mildly: "It will cause disruption to the market and cause it to fragment!!1".

This is true, sure. But if ECJ doesn't have sovereignty over the Euro clearing the potential for disruption is much greater and fragmentation of the market will cause, at worst, some inefficiency.

Should clearing move to Paris EU kills several more birds with one stone - strengthening France at a crucial time when it needs reforms and reinforcing the hand of one of the most pro-EU leaders at again a critical time for the union and the Euro and it wouldn't even fragment the market. Can one of our brave Brexiteers (if we still have any) say what will UK offer in return for not pursuing this goal?

McHrozni
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Bendy bananas are coming back! 1-1. Your move

;)
 
The Don said:
Will someone please tell me when I can start to expect Brexit-related good news ? :(
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Have you not read the leaked Labour manifesto. ;)

We will scrap the Conservatives' Brexit White Paper and replace it with fresh negotiating priorities that have a strong emphasis on retaining the benefits of the Single Market and the Customs Union - which are essential for maintaining industries, jobs and businesses in Britain
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McHrozni said:
If Euro-denominated business leaves London that's up to 100,000 London City jobs that will move to the continent. That's quite strong incentive for EU to pursue legislative action that will see those jobs move.
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It's is also very hard to write legislation to make the international financial markets do what you want without imposing capital controls. Hence the original Eurodollar market developing in London.
 
Aber said:
It's is also very hard to write legislation to make the international financial markets do what you want without imposing capital controls. Hence the original Eurodollar market developing in London.
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It's a one-off case and highly specific issue. EU could, for example, demand at least 80% of Euro-denominated clearing by any major bank (and define what a major bank is) is done in countries under ECJ jurisdiction and Euro as the national currency. Banks would then be forced to do their clearing in Frankfurt, Paris, Amsterdam, Dublin and elsewhere rather than in London and the market would be forced to move.

McHrozni
 
Aber said:
It's is also very hard to write legislation to make the international financial markets do what you want without imposing capital controls. Hence the original Eurodollar market developing in London.
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I'm not sure about that. Obviously complex issue but part of the strength of the EU bloc is that they have ways and means of enforcing such things through the need to have access to their market.

They can legislate that any bank operating in the eu must do x and while they can't stop banks doing x most will comply or risk fines or exclusion from the Eu.
 
McHrozni said:
It's a one-off case and highly specific issue. EU could, for example, demand at least 80% of Euro-denominated clearing by any major bank (and define what a major bank is) is done in countries under ECJ jurisdiction and Euro as the national currency. Banks would then be forced to do their clearing in Frankfurt, Paris, Amsterdam, Dublin and elsewhere rather than in London and the market would be forced to move.
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As I said, you just change the instruments being traded to be £ denominated (and have an FX contract on the side to balance it up) and you escape the rules.

It's also difficult to make such rules so that they only affect London, and not also New York and Tokyo/Singapore.
 
Aber said:
As I said, you just change the instruments being traded to be £ denominated (and have an FX contract on the side to balance it up) and you escape the rules.
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Yes, or just use a small bank or ...

The thing is, the market will follow the path of least resistance. If the path of least resistance is to relocate London business to the continent, this is precisely what is going to happen. It might take a few years, perhaps up to a decade, but it's going to happen. EU is in no rush to grab all the London City business over the next year or two, it doesn't have the infrastructure to do so. It will be happy with crumbs for now while it prepares the groundwork for the steaks.

UK has to prevent this in some way, but EU was opposed to London clearing so much Euros when UK was a member of the EU. With UK out of EU financial regulation and out of ECJ jurisdiction, it's going to happen one way or another. In their pathetic quest to boost 13% of British economy, the brave Brexiteers may well wreck the 82% of the economy the country relies on.

It's also difficult to make such rules so that they only affect London, and not also New York and Tokyo/Singapore.
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No, the 80% (or whatever other) limit is there for exactly this issue. EU is fine with comparatively minor offshore financial centers dealing in Euro, so New York, Tokyo and Singapore won't be affected.

McHrozni
 
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McHrozni said:
UK has to prevent this in some way, but EU was opposed to London clearing so much Euros when UK was a member of the EU. With UK out of EU financial regulation and out of ECJ jurisdiction, it's going to happen one way or another. In their pathetic quest to boost 13% of British economy, the brave Brexiteers may well wreck the 82% of the economy the country relies on.
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My understanding is that they are talking about business done through clearing houses. These tend to be natural monopolies, so it becomes a lot more binary, either the main clearing house is in London or it is not.
 
Aber said:
My understanding is that they are talking about business done through clearing houses. These tend to be natural monopolies, so it becomes a lot more binary, either the main clearing house is in London or it is not.
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Yes, if it is better for the clearing house to move from London, it will move.

I presume you're fine with pound business being cleared through Paris, right?

McHrozni
 
This article is probably rather relevant:

http://www.independent.co.uk/news/b...put-shrink-third-month-row-2017-a7729631.html

Separate data from the ONS showed Britain's goods trade deficit with the rest of the world widened to £13.441bn, bigger than the median forecast of £11.8bn in the Reuters poll of economists.

That took the total trade deficit - including Britain's surplus in services - for the first quarter to £10.540bn, more than double the shortfall in the fourth quarter.

This suggest another possible motive for early elections. Theresa May needs a large majority in order to maintain a stable government.

McHrozni
 
McHrozni said:
Yes, if it is better for the clearing house to move from London, it will move.

I presume you're fine with pound business being cleared through Paris, right?
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Both are unlikely. I have no problem with business being done in France being cleared there; it's just unlikely that the market will move.

As I said its complicated:

The boss of the US derivatives regulator has warned*European officials hoping to control euro-clearing *post-Brexit that they face*a "decision that needs to be made with care" as the battle for*the $1 trillion*market*heats up.*
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http://www.internationalskeptics.com/forums/newreply.php?do=newreply&p=11833810
 
McHrozni said:
This suggest another possible motive for early elections. Theresa May needs a large majority in order to maintain a stable government.
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On the other hand, latest BoE forecasts:

Bank policymakers trimmed their forecast for UK growth this year to 1.9pc due to slower household spending growth. While this is down from 2pc in its February projection, growth is still expected to be higher than 2016, when the economy grew by 1.8pc.
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The other issue for the banks is actually whether if they move can they take their people with them, if they do this pre finalisation of the talks then free movement rules apply, if they do it post then they could find themselves in a nightmare of residency and work permit rules. The latest report from Deloites suggest that this is also a key driver for the decisions being taken.
 
Newtons Bit said:
Aren't UK real estate prices, particularly in London, already overpriced because they are so popular as investments?
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House prices in London have actually been falling for a little while but they continue to rise in the suburbs and Home Counties.
 
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