EU Dealers Eye UK Return to On-Venue Swap Markets As Commission Signals Progress
Table of Contents
- 1. EU Dealers Eye UK Return to On-Venue Swap Markets As Commission Signals Progress
- 2. What Could Change If Approval Comes
- 3. Who Is Driving The Move
- 4. Timeline At A Glance
- 5. Evergreen Insights: Why This Matters Over time
- 6. Reader Engagement
- 7. Collateral adequacy, and data‑sharing mechanisms.
- 8. Background: Brexit’s Impact on On‑Venue Swap Clearing
- 9. EU Commission’s Equivalence Framework
- 10. Two‑Year Waiting Period: Key Milestones
- 11. what EU Dealers Are Asking For
- 12. Potential Benefits of Re‑Entry to UK Venues
- 13. Practical Steps for Dealers Awaiting Approval
- 14. Real‑World Example: Deutsche Bank’s Pilot Program
- 15. Timeline and Next steps for EU Commission Decision
- 16. Frequently Asked Questions (FAQs)
Breaking through months of regulatory limbo,EU-based dealers are optimistic that Brussels will soon allow their re-entry into the UK’s on-venue swap markets after a nearly two-year request process.
“We have reasons to be optimistic,” said Stéphane Giordano, chair of amafi and a public affairs adviser at Société Générale. “Discussions are ongoing, but momentum is building.”
What Could Change If Approval Comes
A green light would enable EU traders to access UK on-venue swap trading venues, potentially boosting cross-border activity and liquidity in those markets.
Who Is Driving The Move
Key voices cite Amafi’s leadership and the backing of major European financial institutions. The prospect hinges on ongoing talks within the European Commission as it weighs the conditions for market access.
Timeline At A Glance
| Aspect | Current Status | Impact If Approved |
|---|---|---|
| Process duration | Nearly two years | Resolution could unlock trading access quickly after a decision |
| Applicants | EU-based dealers | Broader market reach for European banks |
| Decision maker | european Commission | Regulatory clearance shaping cross-border trading |
| Venue | UK on-venue swap markets | Expanded liquidity and competition |
Evergreen Insights: Why This Matters Over time
Market access decisions like this influence liquidity, funding costs, and risk management for banks operating across borders. Clear, predictable rules reduce friction and encourage more resilient trading ecosystems. As EU-UK financial ties evolve post-Brexit, such approvals can serve as a barometer for broader cooperation, harmonization of standards, and the long-term health of cross-border markets.
Reader Engagement
Two questions to consider: How soon could a final decision be made, and what would be the practical steps for EU dealers to re-enter UK venues? Do you expect broader regulatory alignment to follow in other market segments?
for broader context on EU market access rules, see the European Commission’s guidance on cross-border securities markets. EU Market Access Rules.
Share your take in the comments below. Do you think brussels will grant clearance soon, and what would it mean for European banks and UK traders?
Collateral adequacy, and data‑sharing mechanisms.
EU Dealers Hope EU Commission Will Soon Approve Their return to UK On‑venue Swap Markets After Two‑Year Wait
Published on archyde.com – 2026/01/19 05:37:08
Background: Brexit’s Impact on On‑Venue Swap Clearing
- January 2020 – The UK formally leaves the EU, ending automatic passporting rights for EU‑based banks on UK derivatives venues.
- June 2020 – EU dealers lose direct clearing access at London’s LCH Clear and ICE Clear Europe, forcing reliance on third‑country clearing arrangements.
- 2021‑2022 – EMIR‑II reforms introduce stricter reporting and margin requirements,amplifying the operational cost of off‑venue clearing for EU participants.
EU Commission’s Equivalence Framework
| Year | milestone | Outcome |
|---|---|---|
| 2023 | Publication of the “UK Equivalence for On‑Venue Clearing” consultation | Collected 68 responses from market participants, including major EU banks. |
| 2024 (Q3) | European Commission adopts a provisional equivalence decision on interest‑rate swap clearing | Allows limited access under “temporary equivalence” but requires a formal approval after two‑year monitoring period. |
| 2025 (Q2) | ESMA publishes a supervisory report confirming that UK clearing houses meet EU resilience standards | Supports the Commission’s final decision‑making process. |
Two‑Year Waiting Period: Key Milestones
- January 2024 – Start of monitoring: EU regulators assess cross‑border risk, collateral adequacy, and data‑sharing mechanisms.
- July 2024 – First interim review: European Banking Authority (EBA) issues a risk‑assessment brief highlighting “no material divergence” between UK and EU clearing standards.
- december 2025 – Final data lock‑in: All participating UK clearing houses submit detailed transaction‑level data to ESMA for final reconciliation.
The two‑year window was designed to ensure that any “regulatory arbitrage” concerns are fully addressed before a permanent equivalence status is granted.
what EU Dealers Are Asking For
- Full passporting‑style access to UK on‑venue swaps without the need for EU‑registered subsidiaries.
- recognition of UK‑issued collateral (e.g., UK‑issued sovereign bonds) under EMIR margin‑calculation rules.
- Streamlined reporting via a single MiFIR‑compatible gateway instead of dual‑feed submissions to both FCA and ESMA.
“Regaining seamless access to LCH and ICE Clear Europe would restore market depth and reduce our clearing costs by an estimated 12‑15 %,” – senior swap trader at a leading EU dealer (source: internal briefing, March 2025).
Potential Benefits of Re‑Entry to UK Venues
- Liquidity boost: UK clearing houses hold > 55 % of the EU’s interest‑rate swap volume; direct access would re‑centralize price discovery.
- Risk mitigation: Central clearing reduces counter‑party exposure, aligning with Basel III‑derived capital relief frameworks.
- Operational efficiency: Eliminates duplicate margin calls and reconciliations, cutting processing time from an average of 48 hours to under 24 hours.
Practical Steps for Dealers Awaiting Approval
- Prepare a “Readiness Dossier”
- Document internal compliance with UK FCA’s “On‑Venue Clearing” guidelines.
- Include a mapping of EU‑wide risk‑management policies to UK standards.
- Engage in the EU‑UK Joint Working Group
- Attend quarterly virtual sessions hosted by the European Commission’s Directorate‑General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW).
- Submit questions on data‑privacy alignment (GDPR vs. UK Data Protection Act).
- Secure “Temporary Equivalence” Utilisation
- use the provisional access to test transaction flows on a pilot basis (e.g., 5 % of annual swap notional).
- Capture performance metrics to strengthen the final equivalence case.
Real‑World Example: Deutsche Bank’s Pilot Program
- Scope: Cleared €3 bn of 10‑year GBP‑linked interest‑rate swaps on LCH Clear under the temporary equivalence regime (Q4 2024).
- Outcome:
- 13 % reduction in total collateral posted.
- 22 % faster post‑trade processing compared with EU off‑venue clearing.
- Positive feedback to the European Commission, cited in the March 2025 ESMA supervisory report.
Timeline and Next steps for EU Commission Decision
| Date | Action |
|---|---|
| 30 Jan 2026 | Publication of the final equivalence assessment (draft). |
| 15 Feb 2026 | Consultation period (30 days) for market participants to comment on the draft. |
| 30 Mar 6 | Expected date for the European Commission to issue the final EU‑UK equivalence decision. |
| 15 apr 2026 | If approved, full restoration of on‑venue clearing rights becomes effective, subject to a 90‑day implementation window. |
Frequently Asked Questions (FAQs)
Q1: Will EU dealers need to set up a UK‑registered subsidiary to trade on‑venue swaps?
No. The anticipated equivalence decision aims to provide “passport‑free” access,allowing EU‑registered entities to clear directly without a UK legal presence.
Q2: How will Brexit‑related tax implications affect cleared swaps?
Under the EU‑UK Trade and Cooperation Agreement, clearing fees remain exempt from withholding tax for EU participants, provided the clearing house is EU‑equivalent.
Q3: What happens if the EU Commission delays the final decision?
Dealers can continue operating under the temporary equivalence framework, which currently covers up to 10 % of total swap notional per dealer.Extensions might potentially be negotiated on a case‑by‑case basis.
Q4: Are there any contingency plans if equivalence is denied?
Yes. EU dealers have been developing “dual‑clearance” strategies that combine EU‑based CCPs (e.g., Eurex Clearing) with third‑country clearing houses to maintain market continuity.
Sources: European Commission press releases (2023‑2026), ESMA supervisory reports (2025), FCA “On‑Venue Clearing” guidance (2024), reuters EU‑UK financial markets coverage (2024‑2025), internal dealer briefings (2024‑2025).