Euroclear UK to continue Irish securities settlement in ‘no-deal’ Brexit

Euroclear’s London-based CSD  to settle Irish securities in a ‘no-deal’ Brexit scenario after agreement with ESMA and the Bank of England.

Euroclear’s London-based central securities depository (CSD) will continue to settle Irish securities in a ‘no-deal’ Brexit scenario following an agreement with Europe’s financial watchdog and the Bank of England (BoE).

The European Securities and Markets Authority (ESMA) agreed with the BoE to recognise UK clearing houses and the UK CSD, Euroclear UK & Ireland, if the UK leaves the European Union without a withdrawal deal.

ESMA stated the agreement will “allow the UK CSD [Euroclear] to continue to serve Irish securities, and to limit the risk of disruption to the Irish securities market.”

“ESMA aims to complete the next steps for the recognition of the UK CCPs and the UK CSD and to adopt the recognition decisions well ahead of Brexit date. The recognition decisions would take effect on the date following Brexit date, under a no-deal Brexit scenario.”

Euroclear UK & Ireland operates the CREST settlement system for securities traded on the London Stock Exchange and the Irish Securities Exchange, now run by Euronext.

The agreement eases concerns of significant disruption to the Irish securities market, as the EU demands trades to be settled by EU-authorised CSDs.

Euroclear had previously explored the idea of setting up an Irish-based CSD as a potential solution, however this proposal was pulled in April last year.

In November, the European Commission said it will adopt temporary equivalence to ensure there will be no disruption to central clearing of derivatives and settlement of securities in Europe, stressing the contingency measure will be temporary in nature and should, in principle, not go beyond the end of 2019.