London Stock Exchange welcomes thaw in EU relations, sees no 'cliff' for clearing

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain

By Huw Jones

LONDON (Reuters) - London Stock Exchange Group said on Thursday it welcomed a thaw in relations between Britain and the European Union, and does not expect the company's clearing arm to be cut off from customers in the bloc from June 2025.

Existing permission from Brussels for London-based clearing institutions to continue serving customers in the bloc is due to end in June 2025.

The EU's executive European Commission has set out a draft law to put pressure on banks and asset managers in the bloc to move clearing in three types of derivatives from LSEG and ICE in London, to the EU.

There is, however, no indication that all UK-based clearing must move, easing fears among market participants of a "cliff edge" in June 2025.

"We are fairly confident, given the messages that have come out of the EU and the European Commission, there is not going to be a cliff edge in 2025," LSEG Chief Executive David Schwimmer told analysts.

LSEG customers in the EU have also made it "increasingly clear" they want continued access to clearing in London, Schwimmer said.

"We are optimistic and hopeful that will continue to play out well, and if anything the improvement in tone is making us that much more optimistic."

Earlier this week, Britain and the EU agreed a deal on disputes over Northern Ireland, which had been a stumbling block to the EU's endorsement of a memorandum of understanding to create a forum for EU and UK financial regulators to talk on a regular basis.

This is seen by the financial industry as key to warmer relations that could eventually reverse a near exclusion of UK financial services from the bloc since Brexit.

An improvement in relations between the EU and Britain is a "good thing" for markets, Schwimmer said.

"Fragmentation is not helpful for markets."

Britain's financial services minister Andrew Griffith was in Berlin on Thursday as part of a tour of EU capitals over coming months to "reset" financial services relations with the bloc, and encourage the EU to activate the new discussion forum.

(Reporting by Huw Jones; Editing by Jason Neely and Tomasz Janowski)