Another week, another round of baffling Brexit political farce. But if you want a different perspective on these dramas, ponder a topic that (almost) no British politician ever bothers to discuss: the state of London’s gigantic derivatives market after leaving the EU.
For while this topic is arcane, it matters deeply — not just because derivatives have financial stability implications, but also because the issue is sparking some extraordinary behind-the-scenes battles, now with transatlantic consequences.
The issue at stake revolves around the clearing of derivatives trades. In recent years, the London Clearing House has dominated the swaps and futures sector, regularly clearing more than $3tn of trades each day, of which a quarter are euro-denominated and almost half in dollars.