Mark Hemsley, president of the European arm of U.S. exchange CBOE, said EU regulators were trying to map out future working relations with their UK counterparts after Britain leaves the bloc next March.

Brussels has proposed joint supervision of foreign clearing houses that want access to EU customers - or else clearing in euro-denominated contracts, currently dominated by LCH in London, must relocate to the bloc.

This has raised concerns among regulators in the United States, where clearing houses handle dollar-denominated transactions for EU customers.

Hemsley, president of CBOE Europe, the region's biggest pan-European share trading platform and based in London, said the bloc must tread carefully.

Britain may take some elements of information sharing and cross supervision with EU regulators to win the "prize" of continued access to Europe, and European firms having access to the Britain, he said.

"But they have got to do that in a way that doesn't mean that the European regulators are going to try and regulate the DTCC, or CBOE US or CME because U.S. firms and regulators will say 'go jump, it's not going to happen'," he told the annual FIA IDX derivatives conference.

The EU grants financial market access if it deems a foreign or "third country" firm is complying with rules that are strict at those enforced in the bloc.

Brexit has prompted the bloc to review its equivalence regime as it was not intended for a foreign global financial centre on its doorstep, as London will become after next March.

"That's the framework they are trying to work out. How do you manage a big third country without trying to reach into things which will never happen like regulating Japan, regulating the US," Hemsley said.

"Then you've got Switzerland, which is going to be probably a receiver in whatever happens in the UK environment."

The EU's euro clearing draft law builds on its equivalence system by including on-going supervision.

France is also calling for much tougher equivalence conditions for foreign investment banks and trading platforms that want to trade securities on behalf of EU customers.

(Editing by Matthew Mpoke Bigg)

By Huw Jones