The main focus of the commentary so far has been on the references to security (in the Article 50 notice) and the references to Gibraltar (in the EU response).

What though does this mean for the Financial Services Industry in the UK and the EU? Whether by accident or design, within two days of the Article 50 notice we saw the draft guidelines from the EU. Both they, and the Government's response, reflect a major step forward compared to where we feared we would be a few months ago.

When we concluded in the IRSG report here in January that the Third Country Regime was not appropriate for the future UK/EU relationship and that a bespoke mutual access arrangement was required, that felt like an audacious ask. But two months on and The European Council "welcomes and shares the United Kingdom's desire to establish a close partnership" and "stands ready to initiate work" towards an "ambitious free trade agreement". Such agreement should be balanced, ambitious and wide ranging.

Of course, there are issues. The first is scope. The message is clear and far from unexpected, that " a non-member cannot have the same rights and enjoy the same benefits as a member". Compromise will be necessary.

Secondly, discussions on a deal are said to have to wait until the "second phase" of the negotiations and can only be concluded once the UK has become a third country. This matters more in the absence of Transitional Arrangements – which the industry continues to seek. On this, transitional arrangements may be sought to "provide for bridges towards the foreseeable framework for the future relationship". It is made clear that such arrangements would need to be subject to existing "regulatory, budgetary, supervisory and enforcement instruments and structures to apply." Although this doesn't expressly mention the four freedoms, there are noises from the Government this morning that free movement of people may continue during an "Implementation Period".

So, full steam ahead on producing content and concepts for a free trade agreement to provide future mutual access models. This hasn't been done before for financial services (read here our article on CETA and its deficiencies for financial services) but the prize is worth having – for the UK and the EU (read the "Exit Negotiations" report from German Capital Markets Institute, Deutsches Aktieninstitut) and watch out for the next piece of work from The CityUK/IRSG on this.