A foray into High Finance … covid-free

Have I got ‘Daily Betrayal News’ for you  today! They’re good and bad at the same time. One is that today’s column is going to be a ‘covid-free zone’, for once. Bad or good – you decide! In contrast to the print editions of our esteemed MSM, this is also a ‘Markle-free zone’. No apologies for that. The other news is that I’m daring to put my toes into the cold waters of finance and banking this morning.

Frankly, I haven’t got a clue about ‘high finance’, but I and, I’m sure, many of you have several clues about the EU and Brussels underhand dealings! We also understand that the MSM generally are still firmly in the Remain corner, especially their Brussels editors. The sudden proliferation of articles on Amsterdam ‘beating’ London in the “Euro Derivative Trading” stakes comes thus as no surprise. Certainly it came as no surprise to me to see that the broadsheet Brussels correspondents resurrected a certain M Barnier who was again uttering threats.

So what is this all about? It’s about EU intransigence which certainly cannot be so very unexpected, given the various reports we’ve had since January 1st 2021, from confiscating truckers’ ham-and-cheese sandwiches to the ongoing spat about selling fish and shellfish and what is ‘permitted’ to be sent to NI. For the latter, i.e. forbidding the ‘import’ of British seed potatoes or anything else ‘with British soil attached’ into NI we can blame British customs officials. I wish they’d heard that MEP who said in regard to the shellfish spat that the waters around the UK haven’t suddenly become dirty between December 31st 2020 and January 1st 2021. 

This sadly customary EU intransigence applies to the financial markets. It’s interesting that the more ‘general’ MSM authors seem to stand on ‘Remain grounds’, with headlines moaning about “Amsterdam overtaking London” and depicting gloom and doom for the City (paywalled link). Financial editors however generally seem to be less Remain-centred and don’t look on the noises coming from Brussels and Barnier as gospel. For example, the financial editors in RemainCentral are not exactly doom-laden when they write:

“The City’s future may be secure but the EU will chip away at its edges, using rules to divert business to the Continent. Nearly nine tenths of the derivatives trading market is denominated in non-euro currencies, which means that the bulk of it is going nowhere. But the EU can cancel UK equivalence on clearing when the temporary regime ends in 18 months’ time, and take a small bite into those derivatives. Similar actions, some already taken, will mean London’s capital pools get a little shallower.” (link, paywalled)

That’s not so much ‘the sky is falling’, is it, but rather a cool observation of reality. There’s more:

“The City’s business is being shared out between Amsterdam, Paris, Frankfurt and Dublin. This fracturing, however, doesn’t work for the banks and fund managers. Three quarters of UK financial services have nothing to do with the EU and only some EU business will migrate. Brussels can hardly prevent euro trading on non-EU foreign exchange markets if it wants the euro to be a global reserve currency.” (link, paywalled)

Now compare and contrast this with the articles penned by our dear Brussels correspondents who prefer to give Barnier – yes, him! – a platform. The DT’s Brussels mouthpiece, Mr Crisp, was first out of the blocks yesterday afternoon, quoting M Barnier:

“As far as financial services are concerned, we know there are attempts to circumvent the new rules through what we call letterbox structures,” Mr Barnier said. “Needless to say national authorities of the EU in each and every country and the EU authorities themselves will be very, very vigilant. In the next few weeks and months, I recommend everyone to be careful.” (paywalled link)

Ah – good old Michel! And just as we’ve seen in regard to fisheries and shellfish trading, the ‘EU finance inspectors’ are going to be ‘very vigilant’. It’s the same old Brussels attitude of ‘the Brits can’t be trusted to do anything right according to our EU standards’, combined with the attitude of ‘punish the Brexit UK wherever, whenever, with whatever’. So yes, the ‘regulators’ are out to check that there’s no cherry-picking, that these ‘letterbox companies’ have actual people working there:

“EU regulators expect British companies to post people to subsidiaries, in spite of the current pandemic travel restrictions, if most of their European business is still handled in London. Some regulators are regularly inspecting whether entities set up on mainland Europe and on EU territory are operational and adequately staffed. Last month, the European Securities and Markets Authority warned that some banks and fund managers, both British and European, were using “questionable practices” to bypass post-Brexit restrictions on trade.” (link, paywalled)

So it’s ‘never mind covid, never mind lockdowns, never mind travel restrictions’: Brussels rulz are Brussels rulz. Clearly, becoming a Brussels ‘Regulator’, checking any alleged ‘rule breaking’, is a job with a future.

One reason for this City item suddenly coming to the fore, on the back of the sudden outcry about ‘Amsterdam is better than London’ is the speech of the Governor of the Bank of England on Wednesday evening. He dared to point out Brussels’ lack of co-operation, so the Remainers had to find something to create scare ‘news’, thus being able to relegate that speech to the back pages, using the “Amsterdam” story which then lead to business comment writers pondering the wherefores and whys at length.

They did not really go into the lack of equivalence rights mentioned by Mr Bailey in his speech. However, our friends at facts4eu have published that speech (link). One of the important points he made is that the UK has granted equivalence rights to the EU – but that the EU hasn’t reciprocated:

“It would be reasonable to think that a common framework of global standards combined with the common basis of the rules – since the UK transposed EU rules from the outset – would be enough to base equivalence on global standards. Less than this was enough when Canada, the US, Australia, Hong Kong and Brazil were all deemed equivalent. Continuing with the example of central clearing, the EU has recently made the US SEC equivalent for CCPs, subject to certain conditions. These conditions are already met by UK CCPs as they are a legal requirement in the onshored legislation, but equivalence beyond the temporary extension remains uncertain” (link)

Do read the whole thing! If, like me, you don’t know either what ‘CCP’ stands for, it means “Central Counterparty Clearing House (CCP)”. It’s an instrument that helps facilitate trading in various European derivatives and equities markets, typically operated by the major banks in each country. File this under ‘learn something new every day’.

Even lay persons can understand Mr Bailey’s observations – but it’s not hard to see that our Remainers again seem to be comfortable with the EU’s obstinacy. That’s just Remain business as usual. The remarks by cher Michel are being taken, again as usual, at face value, as if even the Governor of the Bank of England must be expected to bend his knee and accept that “we” simply have to do as told, else it’s ‘nothing doing’:

“Barnier, a former EU financial services commissioner, ruled out any quick Brussels decision to grant “equivalence” allowing eased access to European financial markets. “Equivalence decisions are, and will remain, unilateral of each party and aren’t subject to negotiation,” he said. “We will take no risk about financial stability.” The EU is demanding that the UK guarantee that it will remain aligned to European regulations before a decision.” (link, paywalled)

There’s an interesting comment piece in the Daily Mail on this whole mess where the author, Alex Brummer, first explains why the ‘shock-horror’ news about Amsterdam were misleading, because:

“[…] in the absence of an ‘equivalence’ deal, whereby Brussels recognises UK financial regulation, euro-denominated stocks would have to be traded elsewhere. It is no accident that it is Amsterdam rather than Frankfurt or Paris which has come out on top. It is where the London Stock Exchange (LSE) chose to establish a parallel Turquoise platform for the convenience of the big American and European investment banks based in the City. Stronger Amsterdam volumes are largely London-based trades conducted on the canals.” (link)

Since I didn’t know what “Turquoise platform” actually means – surely not something to do with jewellery? – I looked it up and found that it is a ‘multilateral trading facility’ operated by the London Stock Exchange (link). That’s a second ‘learn something new every day’ ticked off for today!

Instead of giving space to the Remainers’ clinging to cher Michel’s threatening pronouncements, instead of giving space to RemainCentral’s editorial blaming BJ for this whole thing, even quoting a wail by the Chamber of Commerce (they’ve been staunch Remainers all along) that ‘the Square Mile was handed a ‘No Deal for services’ (link, paywalled), I’ll finish today’s foray into High Finance with this quote from Mr Brummer:

“Fortunately, the City is not standing still. Swiss shares, barred under the previous regime, are back on the LSE platform. Chief executive David Schwimmer is using the Refinitiv platform to expand into global trading of currencies and fixed interest, with outposts across the globe. It would be better if a decent relationship could be reached with the EU. The harder Brussels and Frankfurt make it, the more incentive there will be for Britain to look outwards and away from Europe. That would be an act of self-harm for our Continental pals.” (link)

Precisely! Furthermore, let’s not mention the dire state of the €uro, the debt crisis faced by EU member states, and let’s forget that the £ seems to be falling upwards in relation to the €uro.

However, let’s never forget that we do not have ‘friends’ in Brussels and the EU, as BJ is so fond of saying. Let’s not forget that even now Remain would rather we clung to the sinking EU economy than spread our wings. Let’s remember that the Remain MSM are still fond of using their Brexit Fear scenarios as long as they can get some quotes from cher Michel to cheer them up.

KBO!

Photo by jam_90s