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CFTC chair on ‘financial stability risk’ from a possible no-deal Brexit

Scott Gamm

The clock is ticking for the UK to reach a deal with the European Union to avoid a no-deal scenario.

Heath Tarbert, chairman of the Commodities Futures Trading Commission (CFTC), a key Wall Street regulator that oversees derivatives, is watching Brexit closely, as London is a major hub for derivative clearing houses.

“I think we have an interest in ensuring there is no financial stability risk that arises in the event of a no-deal Brexit,” Tarbert said at Yahoo Finance’s All Markets Summit in New York City. “The good news is we've been working very closely with our European counterparts and our UK counterparts on this point.”

At issue is how the London clearinghouses would be recognized by the European Union in the event of a no-deal Brexit. A clearinghouse acts as an intermediary between derivatives trades to ensure transactions are facilitated smoothly.

“As an agency, we've done a year's worth of work, essentially replicating any and all agreements that we have with the Europeans that would apply to the UK - we've replicated those to ensure that if it breaks away, the UK still has all the same regulatory protections that companies did when they were under the EU,” Tarbert said.

NEW YORK, NEW YORK - OCTOBER 10: Moderator Scott Gamm (L) and Under Secretary of the Treasury for International Affairs Heath Tarbert attend the Yahoo Finance All Markets Summit at Union West Events on October 10, 2019 in New York City. (Photo by Jim Spellman/Getty Images)

Brexit and systemic risk

Should chaos ensue in the derivatives market in the event of a no-deal Brexit, Tarbert remains confident of the safeguards that exist to limit such market risk.

“There could, of course, be some volatility,” he said. “Prices could move.”

UK and EU negotiators have until October 31 to reach a deal in order to avoid a no-deal or hard Brexit.

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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