The EU’s financial markets watchdog is working to ensure the bloc’s regulators have agreements in place with the UK’s Financial Conduct Authority (FCA) in the event of the UK leaving the EU without a withdrawal deal.

Speaking at a conference in Athens yesterday, Steven Maijoor, chair of the European Securities and Markets Authority (ESMA), said that, in case of a ‘no deal’ Brexit, national securities markets regulators and ESMA itself should have with their UK counterparts the same type of agreements – memoranda of understanding (MOU) – as they had with a large number of regulators in non-EU countries.

“These MOUs are essential to meet our regulatory objectives and allow information exchange for effective supervision and enforcement, for example for market abuse cases,” said Maijoor.

He added that the watchdog had already coordinated preparations for MOUs with regulators in the EU27 – the 27 member states that will comprise the EU upon the UK’s departure.

ESMA was planning negotiations with the FCA with the aim of having the agreements in place “sufficiently on time” before the end of March 2019, he said.

Earlier in his speech Maijoor had emphasised the particular nature of the data that was exchanged on a daily basis between the UK and the rest of the EU under MiFID II. It was “extensive and granular” and “goes far beyond the data exchange we typically have with third countries”. 

UK clearing access must continue

Maijoor also emphasised the importance of EU-based financial market participants continuing to be able to trade derivatives in the UK in the event of a no-deal Brexit.

Central clearing of derivatives was generally considered to be the securities markets area entailing the highest stability risks in the event of ‘no deal’, he said, and EU clearing members and trading venues needed to continue to have access to central clearing houses (CCPs) in the UK.

Maijoor said continued access was in line with proposed amendments to the current regulatory regime, for which he urged a “swift conclusion”.

This, however, should be “complemented by a transitional provision allowing for the continued access to UK-based CCPs, subject to conditions ensuring that UK CCPs continue to comply with EMIR requirements and [regulators] continue to monitor this compliance”.

The FCA has previously said as much as £26trn (€29trn) worth of derivatives contracts could be negatively affected by Brexit.