The FIA has called for market forces to determine the location of the euro clearing from its current London location.

The Futures Industry Association, (FIA) an industry body, underlined the fact that forcing banks to shift the clearing of euro denominated derivatives from London to the European Union is likely to double the amount of cash that must banks must set aside in case of defaults.

FIA’s statement comes as a precursor to the European Commission scheduled meet later month wherein it will debate where and how euro denominated derivatives will be cleared once Britain leaves the European Union in 2019.

The bulk of clearing is currently done in London.

The industry body has stated that forcing a change in location would fragment markets and hike up costs.

Walt Lukken, FIA’s chief executive told a conference in London that the cash, banks must hold in case a derivatives trade defaults, could nearly double from $83 billion to $160 billion.

“It’s important that we allow market forces to determine the appropriate location for euro clearing,” said Lukken.

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Tags: analysis, Brexit, cash reserves, derivative defaults, EU, euro clearing, European Union, fallout, FIA, fragment market, Futures Industry Association, impact, London