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MarketScreener Homepage  >  Equities  >  Hong Kong Stock Exchange  >  Hong Kong Exchanges and Clearing Limited    388   HK0388045442

HONG KONG EXCHANGES AND CLEARING LIMITED

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EU to throw London lifeline with extension to coveted clearing

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09/15/2020 | 12:52pm EDT
Outbreak of the coronavirus disease (COVID-19) in London

The European Union is set to throw the City of London an 18-month lifeline to continue clearing euro derivatives after Britain's unfettered access to the bloc ends in January, an EU draft document showed.

Britain left the EU in January and continued access under transition arrangements ends on Dec. 31, meaning EU banks would not be allowed to use clearing houses such as the London Stock Exchange's LCH and ICE Clear Europe in 2021.

The European Commission declined to comment on Tuesday.

Although a low margin business, clearing is a critical foundation for global financial markets, ensuring trillions of dollars in swap trades complete safely.

London's clearing houses help cement the capital's status as the world's biggest centre for trading derivatives, adding to its historic attractiveness as a base for global banks.

Brexit has already prompted some to shift hundreds of jobs to EU hubs, and lobby groups have warned that more could leave if euro clearing shifts to the euro zone.

LCH clears the bulk of euro-denominated interest rate swaps that are used by companies across the EU to insure themselves against adverse moves in borrowing costs.

But euro derivatives clearing in London has long been a point of tension between Britain and the EU, where policymakers want euro zone activity under European Central Bank scrutiny.

'TIME LIMITED'

The EU has acknowledged that a sudden cut-off in access could undermine financial stability as users sought to shift large derivatives positions at short notice, giving it little choice but to grant what it has dubbed "time limited" access.

The EU document, which was seen by Reuters and is out for consultation among EU states since Monday, said access would start on Jan. 1, 2021 and expire on June 30, 2022.

Industry officials expect a formal decision next week.

"This is going to be good news," one industry source said after concerns that a shorter period was on the cards.

A European Commission official had told derivatives industry officials last week that a decision to grant access would be delayed from this week to later in the month due to Brussels' concern over British moves to partly breach its Brexit treaty.

Granting temporary access is aimed at giving time for euro zone-based clearers to "further develop their capacity to clear relevant trades", the document said.

Signed by European Commission president Ursula von der Leyen, the document said the derivatives industry is also expected to develop a "clear process" to reduce exposures to systemically important clearing houses in Britain.

Access will also depend on the Bank of England cooperating "closely" with EU authorities, and on the bloc's markets watchdog ESMA having "immediate access in all situations" to all information on risks from British-based clearers.

The Bank of England has warned the EU about "multiple hands on the steering wheel" in a market crisis.

By Huw Jones


Stocks mentioned in the article
ChangeLast1st jan.
DEUTSCHE BÖRSE AG 0.03% 146.65 Delayed Quote.4.60%
HONG KONG EXCHANGES AND CLEARING LIMITED 1.66% 367.2 End-of-day quote.45.14%
LONDON STOCK EXCHANGE PLC -0.32% 8808 Delayed Quote.14.01%
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Financials
Sales 2020 18 548 M 2 393 M 2 393 M
Net income 2020 11 023 M 1 422 M 1 422 M
Net cash 2020 74 112 M 9 563 M 9 563 M
P/E ratio 2020 41,9x
Yield 2020 2,13%
Capitalization 464 B 59 917 M 59 919 M
EV / Sales 2020 21,0x
EV / Sales 2021 16,8x
Nbr of Employees 2 182
Free-Float 94,1%
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Technical analysis trends HONG KONG EXCHANGES AND CLEARING LIMITED
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TrendsNeutralBullishBullish
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 24
Average target price 397,91 HKD
Last Close Price 367,20 HKD
Spread / Highest target 25,8%
Spread / Average Target 8,36%
Spread / Lowest Target -30,8%
EPS Revisions
Managers
NameTitle
Xiaojia Li CEO & Executive Director
Romnesh Lamba Co-President
Chi Kin Tai Co-President & Chief Operating Officer
May Lung Cha Non-Executive Chairman
Vanessa Lau Group Chief Financial Officer
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1st jan.Capitalization (M$)
HONG KONG EXCHANGES AND CLEARING LIMITED45.14%58 937
INTERCONTINENTAL EXCHANGE, INC.9.45%56 854
LONDON STOCK EXCHANGE PLC14.01%40 050
DEUTSCHE BÖRSE AG4.60%31 503
NASDAQ20.33%21 168
MARKETAXESS HOLDINGS INC.41.93%20 431