Latest thinking

 

Latest thinking

Brexit: What will this mean for derivatives transactions?

6 September 2016

Industries: Financial Institutions
Jurisdictions: United Kingdom
Services: Capital Markets

Following the result of the vote in the UK referendum on 23 June 2016, there is some uncertainty about how the UK’s exit from the European Union (EU) will impact derivatives transactions.

The UK will not leave the EU immediately and will continue to be part of the EU and remain a member for some time. Until then all EU legislation (including new EU laws) will continue to apply within the UK so there will be little that will fundamentally change in the short term. Indeed, following the vote, the Financial Conduct Authority (the FCA) confirmed in a statement on the EU Referendum result that firms must continue to abide by their obligations under UK law, including those derived from EU law, and continue with implementation plans for legislation that is still to come into effect.

The first step towards the UK leaving the EU is for the UK Government to notify the European Council of its intention to withdraw by invoking Article 50 of the Treaty on the European Union. This will then trigger a two year time period during which the UK will negotiate its exit from the EU. The longer term impact of Brexit on derivatives regulation will very much depend on the new relationship that the UK has with the EU in the future, and there is much uncertainty surrounding this. Below we have set out the potential forms that this new relationship could take. Nevertheless, market participants may want to start planning for Brexit to identify the potential risks and opportunities and to mitigate the potential impact.

Find out more here.