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UK clearing house equivalence - request from nine trade associations

Capital Markets | EMIR
16 September 2021 | Policy Position
Capital Markets
derivatives clearing

Nine associations (AFME, AIMA, EAPB, EBF, EFAMA, FIA, ICI, ISDA, SIFMA AMG) welcome the Commission's decision to grant a time-limited equivalence decision in respect of UK CCPs. However, when this time-limited equivalence decision expires on 30 June 2022, there remains a significant risk of disruption to clearing for EU firms and to their access to global markets.

• Because of this potential for major disruption due to an inability to clear on UK CCPs, and in consideration of the enhanced powers available to ESMA and EU CBIs and the protections granted to EU clearing members and their clients under EMIR 2.2, and the UK's continued adherence to EMIR provisions, the Joint Associations (representing the broadest group of market participants) ask the Commission to extend the equivalence decision for UK CCPs.

• We recognise that the Commission and in particular ESMA need to consider carefully the potential financial stability impact of substantial, systemically important clearing services being provided in the EU by non-EU CCPs, and we remain convinced thatEMIR 2.2, with its new enhanced recognition framework, gives ESMA appropriate powers to deal with any such financial stability related concerns that may be identified.

• The industry recognises the European Commission's objective of growth of EU financial market infrastructures and supports the growth of derivatives transaction clearing in EU CCPs. Indeed, the services provided by EU CCPs enhance choice and competition in derivatives clearing, to the benefit of market participants. The build-up of liquidity on EU CCPs should be voluntary and market driven and needs to be given sufficient time to develop. There is already clear evidence of liquidity flowing towards EU CCPs, and our expectation is that this will continue.

• We are concerned that if the Commission allows the time-limited equivalence decision to expire, EU clearing members would not only lose access to UK CCPs that have been determined to be of such substantial systemic importance that they can no longer be recognised, but they would also lose access to UK CCPs that are not systemically important and that would otherwise be able to benefit from recognition under EMIR 2.2.

• We would welcome the opportunity to discuss with the Commission the risks to the EU that the Commission perceives, should UK CCPs continue to be able to offer clearing services to EU market participants after 30 June 2022. The ongoing uncertainty confronting EU clearing members and their clients is already negatively impacting their clearing business. If the Commission is considering allowing the time-limited equivalence decision to expire, we would also welcome the opportunity to discuss the solutions that the Commission is considering to mitigate any potential market disruption that may result, and the time that may be needed to develop and implement those solutions.

• In the meantime, the Joint Associations will continue to work with the Commission and other EU authorities to achieve the least disruptive outcomes for EU capital markets.

clearing house equivalence

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