On 23 June 2016, the British population voted that the country should leave the European Union, with a small majority. On 29 March 2017, the British Prime Minister, Theresa May, notified in a letter to the European Council the United Kingdom’s intention to leave the European Union. This notification starts the official withdrawal process under Article 50 of the Treaty with a two-year period during which the EU and the UK will negotiate the terms of Brexit. Even though we very much regret this decision, we are determined to make the best of this outcome for the financial centres concerned and for Europe.
The European Union and UK financial markets are strongly interlinked. The UK financial market currently acts as a wholesale hub for other EU financial centres and accounts for almost 80 % of EU activity in financial market segments1).
It is expected that the negotiations between UK and EU will be challenging. EU law will continue to apply in the UK during the negotiation period, but uncertainty for market participants will continue until the terms of the UK’s withdrawal (including any transitional arrangements) are agreed.
UK-based financial firms will likely lose their existing EU passporting rights to conduct business with EU 27-based clients, if no transitional provisions or treaties are agreed between the UK and the EU that would maintain these rights.
Third-country rules, incorporated in EU financial regulations (e.g. MiFID II / MiFIR, EMIR, CSDR), are designed to provide access for non-EU firms to EU financial markets. However, third-country rules are not an exact substitute to the EU passport.
It is important that Europe remains competitive internationally while upholding financial stability. Therefore, deregulation (“race to the bottom”) and regulatory arbitrage (“cherry picking”) must be avoided.
With less than one year before Brexit becoming effective, EEX Group as part of the Deutsche Börse Group is closely monitoring Brexit processes, engaging with regulators and governments and will strive to take all necessary measures to mitigate the impact on existing business relations.
To support our trading and clearing members in their efforts, we have established a Brexit Working Group to support your Key Account Managers to guide and assist you through any required preparations, whether in terms of relocation to the EU27 or organisational restructuring to fit the new realities. With a view to maintaining access to our trading and clearing services for UK and EU27 customers in commodities trading, EPEX SPOT, EEX, Powernext and ECC are in contact with relevant regulators to discuss authorisations requirements post Brexit and to prepare accordingly.
We encourage our customers to plan with all scenarios in mind, cognisant that the future relationship between the UK and EU, in particular the legal framework for cross-border services, are yet to be agreed. Lacking a ratified withdrawal agreement between the UK and EU, all EU law will cease to apply to the UK from 30 March 2019 and the UK will then become a 'third country' with legal repercussions as set out in notices of the EU Commission published on 8 February 2018. EEX group regulated in the European Union with an EMIR licensed CCP is best positioned to cover customer needs post-Brexit in an existing and known regulatory framework.
Please engage proactively with your Key Account Manager for further information.