Although the U.K. is outside the euro zone, London is by far the leading player in euro-denominated financial markets. More than twice as many euros are traded in Britain than in all the euro-zone countries combined. Over half of all derivatives traded in the U.K. are euro-denominated, more than sterling- and dollar-denominated business put together.
All of this helps London maintain its pre-eminence as a global financial center, and brings with it considerable benefits to the U.K. Yet it is looked on with envy by many in the euro zone who believe that euro-denominated markets should be located in the euro-zone countries—and are busy looking for ways to reduce Britain's market share.
To take one topical example, London could lose the key euro-denominated business of post-trade clearing. This refers to all activities from the time a commitment is made for a particular trade until the trade is settled. Clearing is a vital part of efficient and honest markets, since people need to know that commitments made as a result of particular trades will be honoured.
This article originally appeared in the Wall Street Journal. Continue reading here.