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#1 12-11-2020 14:20:08

johnedward
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From: Paris - France
Registered: 21-12-2009
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ESMA will restric stock market transaction in the EU after Brexit

ESMA will restric stock market transaction in the EU after Brexit is completed


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The ESMA (European Security and Market Authority) has issued guidelines, ordering brokers and asset managers to execute their equity trades within the European Union after Brexit has been completed.

According to ESMA's revised equity trading obligation, stock traders will have to trade EU-listed shares within the bloc if the Brexit agreement restricts access to the EU market to London-based companies.

However, the guidelines will allow EU-listed shares to be traded on platforms in London if they are traded in British pounds. It should be noted that less than 50 such EU shares, or less than 1% of total shares, are traded in GBP in London.

"This revised guidance aims to address the specific situation of the small number of EU issuers whose shares are primarily traded on London trading platforms that are denominated in British pounds", said ESMA.

In particular, a few London-based pan-European exchanges, Cboe, London Stock Exchange's Turquoise, and Aquis Exchange, trade shares on EU exchanges. All of them have opened European platforms to offer euro-denominated shares to avoid any disruption to trading services.

Meanwhile, UK regulators have yet to draw up rules for trading EU-listed shares and hope Brussels will offer full access to the EU's markets.

"ESMA has worked closely with the European Commission to minimise disruption and avoid overlap in the revised requirements for trading in equities and their potentially negative effects on traders," says an ESMA representative.

Brexit uncertainties

The divorce between the EU and the UK has already been finalised and both are now in a transition period, which will end at the end of this year. Although negotiations between the two are ongoing, financial regulators are developing guidelines to facilitate the functioning of the market after next year begins.

With these recent guidelines, ESMA aims to strengthen European capital markets and believes that trading in non-European currencies will also increase forex risks for EU traders.

ESMA recognises three UK central counterparties (CCPs) which can provide services after Brexit is completed: ICE Clear Europe Limited, LCH Limited and LME Clear Limited.

CCPs are financial institutions that assume credit risk between the parties involved in transactions, providing clearing and settlement services for transactions in forex, securities, options and derivative contracts. Their services are therefore essential in the financial markets.

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