Clearing of Euro OTC Derivatives Post Brexit - An Analysis of the Present Cost Estimates

18 Pages Posted: 12 Jan 2018

See all articles by Volker Brühl

Volker Brühl

Center for Financial Studies (CFS)

Date Written: November 29, 2017

Abstract

In the context of the upcoming Brexit, a relocation of the clearing of euro-OTC derivatives for EU-based firms is the subject of controversial discussion. The opponents of a relocation argue that a relocation would cause additional costs for market participants of up to USD 100 bn over a period of 5 years. This paper shows that this cost estimate is fairly unrealistic and that relocation costs would amount to approximately USD 0.6 bn p.a., which translates to cumulative costs of around USD 3.2 bn for a transition period of 5 years. In light of the strategic importance of systemically relevant CCPs for the financial stability of the eurozone, the potential relocation costs should not be a decision criterion.

JEL Classification: G20, G21

Suggested Citation

Brühl, Volker, Clearing of Euro OTC Derivatives Post Brexit - An Analysis of the Present Cost Estimates (November 29, 2017). CFS Working Paper, No. 588. Available at SSRN: https://ssrn.com/abstract=3098932 or http://dx.doi.org/10.2139/ssrn.3098932

Volker Brühl (Contact Author)

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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