CEO of London Stock Exchange says 100,000 jobs could be lost if clearing leaves London

Chief Executive of London Stock Exchange Xavier Rolet said 100,000 jobs would be at risk if clearing leaves the UK in an interview with Bloomberg.

“We estimate, conservatively, that at a very minimum 100,000 jobs, in risk management, compliance, middle office, back-office support functions -- by the way not just in London, up and down the country -- are implicated in supporting this business and clearly could be at risk,” said Rolet.

However, he pointed out that there are very few financial centers around the world that could accommodate such a global business.

London Stock Exchange is the majority owner of London Clearing House (LCH) which is the world’s largest clearinghouse for derivatives linked to interest rates. Around 700 people are directly employed in London’s clearinghouses, the majority of which, at over 500, are at LCH.

Last year, LCH cleared over €320trn of euro-denominated securities. It deals in 17 of the main world currencies in its central default fund.

Global investment banks in London said they expect France and Germany will fight over the clearing of $570bn of euro derivatives a day.

European politicians like French president Francois Hollande have singled out clearing as a business that won’t be allowed to remain in the UK post Brexit.

Clearing houses hold collateral and monitor risks in order to keep defaults under control. Regulators believe they are the best way to prevent another financial crisis.

If the clearing house in London were to move, Rolet says it would most likely be to New York rather than one of Europe’s financial centres.

“The London Stock Exchange Group via the London Clearing House operates a very successful clearing business and is currently licensed to operate in for example, in what I believe could be frankly the only logical alternative to London, if that came to pass, and that is the New York market” said Rolet.

Rolet however feels a move is unlikely. “The physical possibility of moving, as well as the economic consequences, are rather complex,” Rolet said.

“The notion of separating, for example, the clearing of euro-denominated interest-rate swaps from U.S. dollar-denominated interest-rate swaps, just doesn’t make any economic sense and probably cannot be achieved, even from a regulatory or legal standpoint.”