(Adds more detail)
By Huw Jones
LONDON, Jan 9 (Reuters) - Assessing if UK-based derivatives clearing houses can get access to European Union investors after Brexit can be done by June, but a final decision will hinge on broader EU-UK trade negotiations, the EU's markets regulator said on Thursday.
The London Stock Exchange's LCH unit clears the bulk of euro-denominated swaps contracts, which are widely used by companies and banks across the EU to hedge against adverse moves in interest rates.
The comments from the European Securities and Markets Authority (ESMA) provide a clear sign that UK financial services will not automatically have access to the EU after Brexit, even if Britain maintains most EU rules.
ESMA will play a key role in deciding if LCH can continue serving EU investors after Britain has left the bloc on January 31, and a "standstill" transition period that lasts until December has ended.
For LCH to have access, the EU must decide if UK clearers comply with rules that are "equivalent" to its regulation in terms of protecting investors and financial stability.
Britain and the EU have agreed they would seek to complete assessments for equivalence by the end of June to avoid a "cliff edge" after December.
"We think indeed that from a technical standpoint that that is possible," ESMA Chair Steven Maijoor told reporters. "But obviously this is much more around the political negotiations."
Maijoor said an ESMA priority for the next three years was to help build a deeper EU capital market.
Asset managers, banks and insurers based in Britain have opened over 300 new hubs in the EU to avoid disruption from Brexit, taking some jobs and trading activity from London and helping EU efforts to deepen its capital market.
This could have a bearing on how much equivalence-based access the EU will grant UK financial firms. Banks, insurers and asset managers in Britain now have unfettered access to the rest of the EU.
"It's important to realise that equivalence will be a different environment than the environment where the UK is part of the EU," Maijoor said.
"We all know that technically, the assessments will be relatively straightforward because they apply EU law at this stage. Progressing on equivalence decisions is really now in the hands of the negotiations," Maijoor added.
British Prime Minister Boris Johnson said on Wednesday he would not seek a trade deal with the EU based on close alignment with EU rules, raising questions about the ability of maintaining equivalence-based access over the longer term. (Reporting by Huw Jones; editing by Sinead Cruise, Larry King)