#planb accessing the european market
TRANSCRIPT
#PlanB – Accessing the European marketBrexit from an infrastructure provider perspective
London
12 June 2018
1
The EU and the UK are strongly interlinked
Deutsche Börse Group
British-
European
relations in
numbers
EU AND UK FINANCIAL
MARKETS ARE STRONGLY
INTERLINKED
► The UK financial market
acts as a wholesale hub for
other EU financial centres
and accounts for up to 80 %
of EU activity in financial
market segments.6
DEMOGRAPHY
► In 2015, 3.2 million people living in the UK were
citizens of another EU country.1
► Around 1.2 million British live in the EU27 in 2015.1THE EU IS THE UK´S MAJOR
TRADE PARTNER
► In 2016, the UK covered
approximately 51 % of the
imports from the EU.2
► 48 % of British exports
(goods and services) went in
2016 to the EU. 3
► From the EU view, trade with
the UK in 2015 turns off just
16 % of the EU-good exports.
Vice versa the EU imported
240 milliard pounds in UK
goods in 2016.4
► The UK gained 16 % of the
complete EU GDP in 2016.5
1 http://www.europarl.europa.eu/news/de/headlines/eu-affairs/20170505STO73508/brexit-schutz-der-rechte-von-eu-burgern-im-vereinigten-konigreich2 http://ec.europa.eu/eurostat/tgm/refreshTableAction.do?tab=table&plugin=1&pcode=tet00036&language=de3 https://www.dai.de/files/dai_usercontent/dokumente/studien/2017-02-28%20Positionspapier%20Brexit%20Deutsches%20Aktieninstitut.pdf4 https://www.dai.de/files/dai_usercontent/dokumente/studien/2017-02-28%20Positionspapier%20Brexit%20Deutsches%20Aktieninstitut.pdf5 https://www.destatis.de/Europa/DE/Thema/RegionalesThemenuebergreifendes/Brexit_Bremain.html6 According to the FESE European Equity Market Report 2016 around 54 % of the European equity trading was executed in UK. The UK handles 77 % of euro-denominated derivatives transactions, according to the Bank
for International Settlements data on over-the-counter trades. Around 78 % of European FX trading, 74 % of European interest rate derivatives trading and 50 % of European fund management activities (by assets) take
place in the UK.
2
Agenda
Deutsche Börse Group
► Current status of the Brexit process
Potential impact on financial markets2
1
Deutsche Börse Group in the Brexit landscape3
Brexit information4
Outlook5
3
Countdown to Brexit
Jan
2018
Jan
2019
Apr July Oct 29 Mar
2019
2017
Last feasible date for a
draft Brexit deal
October 2018
Vote on Brexit deal at:
- European Parliament
- UK Parliament
- EU27 Parliaments
end 2018 – early 2019
TODAY
12 June 2018
Negotiations
19 June 2017 –
October 2018
Ratification
October 2018 –
29 March 2019
Time remaining = less than 1 year
3
Unconfirmed
transitional period
29 March 2019 –
31 December 2020
?
31 Dec
2020
4
Even with an agreement on the withdrawal issues, the outcome
of the negotiations is still uncertain
Deutsche Börse Group
6 WTO: World Trade Organization7 EEA: European Economic Area
“There should be very little
difference between the
standards and regulations in
the U.K. and the EU
immediately after Brexit.”4
[26 January 2018]
“Nothing is agreed until everything is
agreed.”2
[10 April 2018]
Theresa May,
Prime Minister of the
United Kingdom
David Davis,
Secretary of State for
Exiting the EU
“[…] I believe Brexit is one of the
saddest moments in 21st-century
European history. In fact, sometimes I
am even furious about it.”5
[10 April 2018]
“We have the chance, now, to
create a new dynamic in the
talks to work together to
explore workable solutions - in
Northern Ireland, in our future
security cooperation and in
order to ensure the future
prosperity of all our people.”1
[22 March 2018]
1 https://www.reuters.com/article/us-britain-eu-may/seize-on-new-dynamic-to-agree-brexit-deal-may-tells-eu-idUSKBN1GZ05H 2 http://delano.lu/d/detail/news/nothing-agreed-until-everything-agreed/1731933 https://mobile.reuters.com/article/amp/idUSKCN1J42044 https://www.politico.eu/article/david-davis-middlesbrough-speech-uk-wants-to-stay-in-eu-trade-deals-during-transition/5 http s://www.reuters.com/article/us-britain-eu-tusk/furious-about-brexit-tusk-calls-for-eu-unity-from-dublin-idUSKBN1HH2WJ
Softer
Brexit
Hard
Brexit
Cliff-edge Brexit
Keeping close ties with the EU One model
of a soft Brexit could be the so-called Norway
option – being a member of the EEA7 and
staying in the single market.
Leaving the EU single market
Trading with the EU would be based
on WTO6 rules and third-country
regimes.
Michel Barnier,
European Chief Negotiator
for the United Kingdom
Exiting the European Union
Donald Tusk,
President of the
European Commission
“"Companies are well advised to
prepare for the worst-case scenario as
well (…) there is no guarantee that this
overall agreement will be reached,
though we are working hard on it".”3
[11 June 2018]
Olaf Scholz, German
Finance Minister
5
Agenda
Deutsche Börse Group
Current status of the Brexit process
► Potential impact on financial markets2
1
Deutsche Börse Group in the Brexit landscape3
Brexit information4
Outlook5
6
Third-country rules are no substitute to the EU passport and will have
a great impact financial markets
Deutsche Börse Group
Leaving the EU single market means that the UK would be considered as a third country and UK-based
financial firms would lose their EU passporting rights1.
Third-country rules (TCRs) for financial services are incomplete and can be withdrawn by the EU.
They do not provide appropriate substitute long-term solutions for UK-based financial firms.
UK-based firms are considering to establish a subsidiary in EU27 in order to make use of the passporting rights.
Even though UK’s regulatory regime is currently “exactly” the same as EU’s, there still is uncertainty as the decision
to give third-country recognition is ongoing, forward-looking and will take into account the risk of larger
financial activities passing out of the European supervisors’ direct control.
Market InfrastructuresTCRs for cross-border services
Banking and related servicesTCRs for cross-border services
Trading Venues Investment services
Systematic Internalisers Banking services (e.g. deposit taking, lending,
payment)
CCPs Fund management & marketing activities of
AIFMs
Trade repositories UCITS fund management
CSD services Provision of benchmarks
Data reporting services
Prospectuses
?
1 Passporting rights make it possible to conduct financial services on a cross-border basis throughout the entire EU.
7
Agenda
Deutsche Börse Group
Current status of the Brexit process
Potential impact on financial markets2
1
► Deutsche Börse Group in the Brexit landscape3
Brexit information4
Outlook5
8
Listed
FX spot and
derivatives
Cash securities,
bonds and ETFs
Listed
derivatives OTC derivatives Commodities
Clearing
Settlement
and
custody
Collateral
management
Trading
Pre-IPO
Regulatory Reporting Hub
Market Data + Services
Transaction cost analysis
Funding and
financing
Repo &
Securities
Lending
Repo & GC
Pooling CCP
SecLending CCP
GFF
N/A
Un-cleared Cleared
OTC
Deutsche Börse GroupEntire value chain is affected by Brexit
(Futures only) N/A
Other listed
derivatives
Outsourcing platform, IT services
Group
via partner
for OTC
uncleared
N/A
Externally
provided
Cleared Un-cleared
Index Services Regulatory Services
Others
Data Services
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How Deutsche Börse Group is preparing for Brexit?
Deutsche Börse Group
Deutsche Börse Group has set up a dedicated Brexit Transition Team to help its customers deal
with the changes and uncertainty surrounding Brexit.
The Transition Team analyses all aspects of Brexit, potential implications for Deutsche Börse
Group´s customers as well as how this will affect Deutsche Börse Group´s own set up vis-à-vis
its clients.
Brexit Transition Team
The Brexit Readiness Project was set up to ensure continued segments readiness from group
level perspective for all relevant group markets and products as well as continued client access.
The project’s purpose is to maintain continued access to our customers currently located in the
UK in a post-Brexit world.
Brexit Readiness Project
Last year, Eurex Clearing introduced a partnership program to develop a EU27 based alternative
for OTC Interest Rates Derivatives clearing.
Eurex Clearing partnership program
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Agenda
Deutsche Börse Group
Current status of the Brexit process
Potential impact on financial markets2
1
Deutsche Börse Group in the Brexit landscape3
► Brexit information4
Outlook5
11
Where to find Brexit information on our website
Deutsche Börse Group
On the Group’s dedicated Brexit website all relevant updates are published.
In the menu, you will be able to find a Brexit member readiness sub-section.
http://deutsche-boerse.com/dbg-en/regulation/regulatorytopics/reg-topics-brexit
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Where to find Brexit information on our website
Deutsche Börse Group
13
Where to find Brexit information on our website
Deutsche Börse Group
14
Where to find Brexit information on our website
Brexit questionnaire
Deutsche Börse Group
A first tab provides
guidelines on how
to use it and fill it
out.
In the second tab,
you will find the
questionnaire:
Part I
Part II (optional)
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Agenda
Deutsche Börse Group
Current status of the Brexit process
Potential impact on financial markets2
1
Deutsche Börse Group in the Brexit landscape3
Brexit information4
► Outlook5
16
Brexit makes finding a sustainable vision for EU financial
markets key… … to ensure stability, efficiency and a level playing field
Deutsche Börse Group
How to ensure
stable EU financial
markets?
EMIR Review and
CCP Recovery and
Resolution
No Financial Transation Tax
(FTT)
True EU-27 Capital Market
required
MiFID Review / Recalibration
How to increase
competitiveness of
EU capital
markets?
and
European Supervisory
Authorities (ESAs) Review
Favourable environment
Implementation of
G20 Agenda
Capital Markets Union
(CMU)
Economic and Monetary
Union (EMU)
CRD IV/CRR
…
How to ensure supervision of
systemic important infrastructures?
How will definition of liquid markets
work with third country venues?
How to ensure efficient allocation
of resources across EU?
How to ensure fair, stable and
open market access for EU27
market participants?
How to make EU attractive for
non-EU investors and issuers?
How to ensure that EU does not
end with letter box banks?
Thank you for your attention!
Italo di Lorenzo
Government Relations
E-Mail: [email protected]
Phone: +352 243 3 26 06