ESMA confirms recognition of three UK CCPs post Brexit
30 September 2020 London
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The European Securities and Markets Authority (ESMA) has confirmed LCH, ICE Clear Europe, and LME Clear will be recognised as third country central counterparties (CCPs) from January 2021.
The three UK CCPs will be eligible to provide services in the EU after the end of the transition period following the withdrawal of the UK from the EU on 31 December 2020.
On 21 September,
the European Commission adopted a time-limited decision to allow financial market players until 30 June 2022 to reduce their exposure to UK CCPs.
Additionally, ESMA has adopted decisions to recognise the three UK CCPs as third country CCPs under the European Market Infrastructure Regulation (EMIR).
In line with the equivalence decision, the recognition decisions will only take effect on the day following the end of the transition period and continue to apply while the equivalence decision remains in force.
ESMA explained the 18-month period will provide the opportunity to conduct a comprehensive review of the systemic importance of UK CCPs and their clearing services or activities to the EU and take any appropriate measures to address financial stability risks.
The review will include a fully reasoned assessment to examine whether a third country CCP or some of its clearing services are of such substantial systemic importance that this CCP should not be recognised to provide certain clearing services or activities.
ESMA said it undertakes to conduct such a comprehensive review in due time.
The decision was also welcomed by the Association for Financial Markets in Europe (AFME), who recently published a paper calling for both UK and EU market participants to develop equivalence determinations and address regulatory challenges.
Oliver Moullin, managing director at AFME, commented: “We welcome today’s confirmation that the Commission has adopted a time-limited equivalence decision for UK CCPs.”
“This is a vital step to address an important financial stability risk and ensure continued access for EEA firms to clearing services at the end of the Brexit transition period. We hope that progress will be made in the negotiations and completing equivalence assessments in other areas.”
“We continue to encourage the EU, the UK and national member states to take action to address remaining risks at the end of the transition period such as the implications of the trading obligations for shares and derivatives, and continued servicing of existing contracts,” Moullin concluded.
The three UK CCPs will be eligible to provide services in the EU after the end of the transition period following the withdrawal of the UK from the EU on 31 December 2020.
On 21 September,
the European Commission adopted a time-limited decision to allow financial market players until 30 June 2022 to reduce their exposure to UK CCPs.
Additionally, ESMA has adopted decisions to recognise the three UK CCPs as third country CCPs under the European Market Infrastructure Regulation (EMIR).
In line with the equivalence decision, the recognition decisions will only take effect on the day following the end of the transition period and continue to apply while the equivalence decision remains in force.
ESMA explained the 18-month period will provide the opportunity to conduct a comprehensive review of the systemic importance of UK CCPs and their clearing services or activities to the EU and take any appropriate measures to address financial stability risks.
The review will include a fully reasoned assessment to examine whether a third country CCP or some of its clearing services are of such substantial systemic importance that this CCP should not be recognised to provide certain clearing services or activities.
ESMA said it undertakes to conduct such a comprehensive review in due time.
The decision was also welcomed by the Association for Financial Markets in Europe (AFME), who recently published a paper calling for both UK and EU market participants to develop equivalence determinations and address regulatory challenges.
Oliver Moullin, managing director at AFME, commented: “We welcome today’s confirmation that the Commission has adopted a time-limited equivalence decision for UK CCPs.”
“This is a vital step to address an important financial stability risk and ensure continued access for EEA firms to clearing services at the end of the Brexit transition period. We hope that progress will be made in the negotiations and completing equivalence assessments in other areas.”
“We continue to encourage the EU, the UK and national member states to take action to address remaining risks at the end of the transition period such as the implications of the trading obligations for shares and derivatives, and continued servicing of existing contracts,” Moullin concluded.
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