The UK looks set to take the European Central Bank to court over its proposals to only allow clearing houses that operate within the Euro-zone geographical area to trade in some of the securities denominated in the single currency.

This would then force some institutions to leave the UK’s City of London for locations in Paris or Frankfurt.

Clearing houses are the bodies that stand between the buyer and seller and also guarantee the trade making them extremely important. The exchanges also work better if the clearing house is close and in-house.

The London Stock Exchange is currently in talks with the intention of buying LCH.Clearnet, Europe’s last independent clearing house.

The problem is that under EU rules, which the UK Treasury says applies here, there is the presumption of free trade. But the ECB would presumably like to bring clearing into the 17 member Euro-zone for better control.

The UK Government will fight this proposal as it goes against the requirements of the larger EU of freedom of movement of services and capital as laid out in various treaties.

The UK did see the French off recently over another related proposal to allow clearing houses to have access to ECB liquidity, which would also have forced clearing houses into the Euro-zone cities.

This latest move could be interpreted as the Euro-zone just trying to get its house better in order or perhaps France and Germany manoeuvring to enhance their own financial services sectors. But it could also be construed as yet another move to marginalise the UK or even move it that bit closer to joining the Euro-zone.

The EU treaties have already been effectively torn up over the bailing out of countries such as Greece, as the treaties do say that bail-outs are not possible. So more breaches that are in the interests of the Euro are almost a certainty and are likely to be supported by the EU courts, whatever the UK says.

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