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Battle for the City of London Tips in Favor of the Queen; Poland to the Rescue

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Reposted with permission from EconomicPolicyJournal.com

A short time ago, the financial relevance of the UK seemed in jeopardy, but two events announced only yesterday suggest the Square Mile will remain a major player in international trading, at least for the time being. First, the board of LCH.Clearnet, the country's largest counterparty clearinghouse, announced it had approved a buyout offer from the London Stock Exchange, edging out a materially lower offer from Markit, with a shareholder vote to determine the final outcome. Jeremy Grant explained a salient point earlier in the month in the Financial Times (emphasis ours):

But what about SwapClear, the over-the-counter (OTC) interest rate swaps clearing service under LCH.Clearnet?
 
While LCH.Clearnet books OTC derivatives revenues on its accounts from the SwapClear service, this does not tell the full story on where SwapClear profits go.Some [profits] go to the OTC derivatives dealer-banks that form a curious governance mechanism for SwapClear, known as OTCDerivNet.The amount of profit that goes to these banks is dictated by a sliding scale of thresholds set out in an arrangement between LCH.Clearnet and the banks, revised last year.
 
It is a glass bead game that few even in the industry understand, but the bottom line is that any LSE deal with LCH.Clearnet would probably have to allow SwapClear to be ring-fenced somehow to allow the banks to carry on. I can’t see the SwapClear banks represented on the LCH.Clearnet board being enthusiastic, either, about exchange control of LCH.Clearnet(which is what you’d get if the LSE wants 51 per cent).
 
This is one hurdle that Markit, the LSE’s rival bidder, does not face. Perhaps that is why the LSE has offered a knock-out €21 a share price for LCH.Clearnet, above Markit’s €15 offered for 100 per cent of LCH.Clearnet.
So, the big London banks on the LCH board capitulated. But why? Perhaps they read the proverbial handwriting on the wall, as power centers on the Continent were jostling for a carrot-and-stick-induced LCH crossing of the channel. If London were to lose LCH, the Deutsche Borse/NYSE Euronext faction might shift the occidental financial axis firmly along a New York/Frankfurt line.
 
The carrot was that the EU is currently considering giving clearing houses access to central bank liquidity in a crisis (i.e., ECB bailout funds), similar to the arrangement between the Federal Reserve and the DTCC and CLS Bank. The stick was that the ECB would require clearing activities to be conducted within the EU (sic Germany) as a precondition to access, which would require a re-domicile of LCH on the Continent. On September 15, the UK threatened to sue the ECB over the issue, but only yesterday, the tide turned, as Poland intervened (emphasis ours):
Derivatives clearinghouses such as LCH.Clearnet Group Ltd. may face less pressure to move parts of their business from the U.K. to the euro area as European Union negotiators seek to resolve a clash between Britain and the European Central Bank.
 
Poland, which holds the EU’s rotating presidency, proposed changing a draft law on over-the-counter derivatives so that “no member state or a group of member states should be discriminated, directly or indirectly, as a venue for clearing services,” according to the document posted on an EU website. The U.K. said “there are a number of issues” requiring discussion before Britain can sign off on the law.
 
The new wording was added to negotiating texts after the U.K. said on Sept. 15 that it would sue the ECB over its plans to prevent some euro-denominated securities from being cleared outside the 17 countries that share the currency. The text was added to ease U.K concerns that the ECB may push for clearinghouses to relocate, according to an EU official familiar with the talks who couldn’t be identified because negotiations on the measures are private.
Bloomberg continues:
‘Highly Unclear’
 
“It is highly unclear whether the ECB has the power to make policy like it did in the July paper,” Damian Carolan, a lawyer at Allen & Overy LLP, said in a phone interview from London. “People were quite surprised how far it felt its jurisdiction to extend.”
 
The Polish proposal would put the U.K. “in a far stronger position in saying that the ECB has gone outside its remit,” Carolan said. “I don’t think it brings you legal certainty but it brings this policy decision clearly into the legal framework.”
 
The U.K. lawsuit hasn’t been officially registered with the EU Court of Justice in Luxembourg.
Clearinghouses such as LCH.Clearnet and Deutsche Boerse AG’s Eurex Clearing operate as central counterparties for every buy and sell order executed by their members, who post collateral, reducing the threat from a trader’s default.
 
The derivatives rules are scheduled to be discussed at a meeting of EU diplomats on Sept. 29, according to the EU official. Draft EU laws need approval from the European Parliament and national governments before they can take effect.
The seemingly unlikely bridge between the UK and Poland is made by Poland's finance minister,Jacek Rostowski, a "British-born economist and academic...[who]...will now chair meetings of EU finance ministers and hopes to take part in critical talks among euro-zone finance ministers." A hardliner for EU solidarity (though Poland has itself yet to join the euro), he has pushed strongly for the Greecian bailout and an IMF-style approach that, at least initially, favors growth over austerity. What concessions or favors he might have wrung from the UK are unknown, but we would not be surprised to see a British role in the EFSF cum pan-European bond, once the twin Hungarian calls for a crisis come to fruition.
 
Regardless, the LSE's vert just improved by a few inches. Not enough for a slam dunk, but enough to maneuver in the paint.

 

 

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Wed, 09/28/2011 - 15:56 | 1719488 Ripped Chunk
Ripped Chunk's picture

The bankers sold the UK out decades ago. Just let it die.

Wed, 09/28/2011 - 14:38 | 1719196 ded_moroz
ded_moroz's picture

In the recent years Poland has become the most important financial centre for the region. Just look how many Ukrainian, Lithuanian, Czech etc. companies are lister here in Warsaw. The government is almost totally loyal to Brussels, but even they feel incomfortable with it. BJ? Maybe, but without swallowing!

Wed, 09/28/2011 - 18:27 | 1720044 koperniuk666
koperniuk666's picture

GDP all of Poland?  600bn

GDP all of London? 600bn

nuff said

Wed, 09/28/2011 - 16:11 | 1719525 PolishErick
PolishErick's picture

Financial centre- sounds way too positive... more like the event horizon for a comming implosion.

700 thousand or so mortgages in the swiss frank (leasing and consumer loans in yens... by the millions), govenment subsidized housing (the "rodzina na swoim" program- sounds Fanie-miliar?), total realestate bubble- upheld by the post-commie mafia in the banks and development firms...

The gubbernment swelling like cancer with legions of coffee slurping beaurau clercs... Spending money like drunken sailors in a whorehouse...

Local municipalities taking every penny the EU gives for bridges to nowhere and other bullshit projects, to then load up on debt (because the EU only provides a percentage- ussualy around 40%)

I wont even touch upon the social healthcare that runs out of money for treatmen around march, almoast every year, and the bulshit education system...

And besides all of the above, the head of this fish, for the last 60 years has been the most rotten, degenerate, back stabbing, group of con artists to walk this world. They ought to be drowned in molten led but this fucking idiot nation will always vote for the biggest scumbags... Their (the local cleptocracys) hobby is cooking the books and pulling the dumbfuck populace into scam after scam. It is ceirtain they have skelletons in the closet, and shitpiles under the rug... Mark my words- something will come out of nowhere and blow this country to pieces.

 

"The biggest harm you can inflict upon the poles is to let them govern themselves"

- Otto von Bismarck

Thu, 09/29/2011 - 12:30 | 1722267 Freddie
Freddie's picture

England should let the Poles come in and solve their Islamo problem in England.  The Poles are quite good at that - see The Battle of Vienna.

Wed, 09/28/2011 - 14:36 | 1719193 fyrebird
fyrebird's picture

The British are the best at English. Just thought I'd mention that. Coming from an American. Oh and I love their metaphors. Or similies. Or something. My own ignorance is like an anchor and my entire country is like a child.

Wed, 09/28/2011 - 13:15 | 1718874 lsd
lsd's picture

najglupsza.

fixed it for you.

Wed, 09/28/2011 - 12:54 | 1718815 GoldbugVariation
GoldbugVariation's picture

This looks very significant:

"What concessions or favors he might have wrung from the UK are unknown, but we would not be surprised to see a British role in the EFSF cum pan-European bond"

The UK was already happy to bail out Ireland unilaterally.

Wed, 09/28/2011 - 14:44 | 1719237 Grimbert
Grimbert's picture

UK Exports £bn (2008)

from http://www.guardian.co.uk/news/datablog/2010/feb/24/uk-trade-exports-imports#data

1 UNITED STATES 35.0 

2 GERMANY  28.5

3  NETHERLANDS  19.4

4 FRANCE 18.7

5 IRISH REPUBLIC 18.6

 

That's why the UK bailed them out. The UK sells half as much stuff to the RoI (pop. 4.5 million) as to the USA (pop. 307 million)

Thu, 09/29/2011 - 12:31 | 1722273 Freddie
Freddie's picture

What does Ireland export besides Guinness and crappy U2 records.

Wed, 09/28/2011 - 18:43 | 1720108 koperniuk666
koperniuk666's picture

useful to note it shows CLEARLY that UKs most important trading partner is USA not Europe

 

Let the fuckers rot.

 

Wed, 09/28/2011 - 14:18 | 1719120 Lord Welligton
Lord Welligton's picture

They had to.

Their banks were on the hook for about €10bn.

Wed, 09/28/2011 - 13:07 | 1718852 gojam
gojam's picture

Doesn't mean that a Conservative led coalition would play any significant role in a "Pan European Bond".

It ain't gonna happen.

Ireland is a different matter. More chance of Ireland adopting a Sterling backed Pound than the UK adopting pan European bonds.

Wed, 09/28/2011 - 12:52 | 1718811 DoChenRollingBearing
DoChenRollingBearing's picture

Polska jest najlepsza!

Wed, 09/28/2011 - 12:51 | 1718809 shazbotz
shazbotz's picture
Ring of Power: Empire of the City - Full Length Documentary

http://www.youtube.com/watch?v=4w-A54h_GQ8

 

From the mystery religions of ancient Egypt to the Zionist role in 9/11, "Ring of Power -- Empire of the City -- 4,000 Years of Suppressed History" puzzles together the missing pieces of our human story. Find out how an Illuminati network of international bankers and European royalty have turned the world's nations and citizens into their debt slaves.

Part 1: 9/11 The Untold Story
Half the world believes Muslims were responsible for 9/11. The other half believes it was Israeli Zionists. Who is right?

Part 2: Hidden Empire
The world's most powerful empire is not the USA. It is an empire that insiders call "Empire Of The City"

Part 3: Trail Of The Pharaohs
Did the Biblical Abraham really live to be 175? Did Moses really turn staffs into snakes and rivers into blood?

Part 4: God And The Queen
Genealogy charts show that British and French royalty are descendants of Mary Magdalene and Jesus. Is it true?

Part 5: All The Queen's Men
How rich and powerful is Queen Elizabeth II?

Part6: The Godfathers
They scammed control of the Bank of England and the US Federal Reserve, then they found God-Gold, Oil and Drugs.

Part 7: Cheating At Monopoly
How many people would play a game of monopoly if the banker was cheating and fixing the rules? Over 6 billion.

Part 8: Asses Of Evil
The New World Order MAFIA are invisible rulers who make puppets out of politicians and heroes out of villains.

Part 9: King Of Hearts
The ultimate goal of "insiders" is to disarm the world and create one world empire under one world ruler. Who is he?

Part 10: Solutions
Protesting and writing letters to deaf politicians doesn't work. What does work?

Wed, 09/28/2011 - 14:23 | 1718935 strannick
strannick's picture

"Genealogy charts show that British and French royalty are descendants of Mary Magdalene and Jesus. Is it true?"

Just when we were having a coherent, interesting conversation.

In metals news, Tulving stopped posting spot.

Wed, 09/28/2011 - 15:21 | 1719362 NotApplicable
NotApplicable's picture

Here's Tulving's explanation. "Call for Prices As Most Services Prices Are Not Updating Correctly, Currently."

So, is somebody monkeying with the PM quote mechanisms, or are they breaking, or is Tulving giving up on the paper spot price and setting his own (which I fully expect to happen eventually as the paper game dies)?

Wed, 09/28/2011 - 14:39 | 1719205 ded_moroz
ded_moroz's picture

Jesus and Mary Magdalene were Polish.

Wed, 09/28/2011 - 12:50 | 1718801 MrBinkeyWhat
MrBinkeyWhat's picture

OT: Here from the "Fringe" of "fringe blog sites" I would point out that currently there is a geo-magnetic storm thanks to a recent coronal mass ejection (sun event) that is messing with my computers, my network(s) and the internet.

So if your equipment is getting squirelly, don't blame the IT folks. It is "cosmic man".

Wed, 09/28/2011 - 14:50 | 1719259 Enceladus
Enceladus's picture

Check out sunspot activity on 1302. Its given off two x class flares and CME's in the last week.

http://www.spaceweather.com/

Wed, 09/28/2011 - 20:05 | 1720307 tip e. canoe
tip e. canoe's picture

wow, look at those auroras, fantastico!

Wed, 09/28/2011 - 15:14 | 1719339 NotApplicable
NotApplicable's picture

Wow, that's a huge spot. Hope it stays quiet as it crosses past us.

Wed, 09/28/2011 - 12:42 | 1718783 SoNH80
SoNH80's picture

The seemingly unlikely bridge between the UK and Poland

Uh hello?  September 3, 1939?

Wed, 09/28/2011 - 15:03 | 1719295 monkeyfaction
monkeyfaction's picture

And the fact that, according to some estimates, somewhere in the region of a million Poles have moved to the UK since EU enlargement in 2004.

Wed, 09/28/2011 - 18:46 | 1720117 koperniuk666
koperniuk666's picture

better than a million nigerians

Wed, 09/28/2011 - 16:08 | 1719524 CompassionateFascist
CompassionateFascist's picture

Yes, those stupid effin Poles expected the Brit Navy to sail on dry land. "On to Berlin!" Not this again, please....

Wed, 09/28/2011 - 16:25 | 1719565 PolishErick
PolishErick's picture

Those Poles back then wern't all that stupid, maybe a bit too naive and hopefull for brits acting upon treaties they signed... how silly... But the fact is- any offensive action by the allies on the western border of Germany in '39 would end in a parade in Berlin two months after the first shots would have been fired. Hitler wasn't ready for war on two fronts... But the french where too busy making white flags, and the british still had a mouth full of Hitlers cum after sucking his dick for years...

Today... Now thats what I would say are stupid fucking poles... With the euro crumbling the party line is still jumping into it head first... every scam thrown at the sheople lands the criminal class milions... and they are still going to elect the same con artists that have been fucking them for the last 20 years.

Wed, 09/28/2011 - 20:08 | 1720316 tip e. canoe
tip e. canoe's picture

Erick, any news on the plane crash or has that been completely swept under the rug?

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