Back in March this year, we shared our thoughts on Europe’s desire to reduce their exposure of non-EU CCPs (Central counterparty clearing houses) in the clearing of Euro-denominated and Polish Zloty-denominated OTC derivatives; and to increase the attractiveness of EU-based CCPs for market participants.
To give some idea of how much of this volume is cleared outside of the EU, at the end of 2020, over 90% of Euro-denominated OTC Derivatives were carried out in the UK (source).
The backdrop to this European central-clearing strategy is a deeper integration of capital markets across all EU member states, i.e. the single Capital Markets Union, or the “CMU”.
Recently on 7 December, the European Commission proposed a list of legislative revisions to its clearing rules in EMIR. We have reviewed its communication and have summarised the proposed amendments within the overall EU-clearing strategy:
Building a competitive clearing service domestically within the EU
1. Encouraging innovation at EU CCPs:
2. Providing clearing benefits to more market participants:
Building a safer and more resilient clearing ecosystem across the EU
3. Establishing a more joined-up EU-centric supervisory framework for clearing:
4. Raising specific requirements on those who clear commodity derivatives:
Reducing exposure to systematic third-country CCPs to clear euro-denominated derivatives
5. Clearing participants will be required to maintain active accounts at EU CCPs to clear a portion of the products. ESMA will define details.
6. Concentration risk on supervised entities (credit institutions and investment firms) held at third-country CCPs will be subject to enhanced monitoring. Measures will include incentives and punitive measures if these risks outside the EU cannot be reduced.
7. Equivalence assessment on third-country CCPs will be proportionate to the risks involved.
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Why not call us now to make sure you’re ready?
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