BoE and CFTC continue CCP supervision agreement
20 April 2023 UK/US
Image: Alex Yeung
The Bank of England (BoE) and Commodity Futures Trading Commission (CFTC) have released a joint statement on the supervision of cross-border central counterparties (CCPs), continuing the longstanding cooperation on the subject.
Following a 2020 Memorandum of Understanding (MoU) covering some US and UK CCPs, those under the MoU’s scope are subject to mutual practices by both organisations. Practices are already in play to maintain these agreements, including information sharing, notifications of material events and supervisory engagement.
Post-Brexit, the BoE has responsibility for the recognition and supervision of non-UK CCPs intending to provide clearing services to UK-based clearing members or trading venues. As such, the bank will tier these CCPs in accordance with the systemic risk they pose to the UK financial system.
Those whose home authority meets the regulatory and supervisory requirements of the BoE, measured by the Informed Reliance Assessment, will be categorised as Tier 1, with their home authority defered to. The CFTC has been established as a Tier 1 authority, with the BoE placing reliance on its supervision and oversight of incoming US-based CCPs.
Through this system, the CFTC and the BoE restate the primacy of UK and US home authorities in their respective jurisdictions, acknowledging the importance of deference and maintaining an information-sharing and cooperation framework.
Commenting on the announcement, Stanislav Ermilov, founder and CEO of data aggregation platform Tallarium, says: "The US and UK are two most important hubs for commodity clearing by far, and where most cleared volumes are concentrated. We should see improved collaboration across regulators on the back of this, as well as more harmonisation of the clearing practices and their consistency across both sides of the Atlantic.
“More transparency and information sharing is always positive. For clearing house members, this a constructive development that should lead to faster propagation of best practices and policies as regulators align more closely.”
Following a 2020 Memorandum of Understanding (MoU) covering some US and UK CCPs, those under the MoU’s scope are subject to mutual practices by both organisations. Practices are already in play to maintain these agreements, including information sharing, notifications of material events and supervisory engagement.
Post-Brexit, the BoE has responsibility for the recognition and supervision of non-UK CCPs intending to provide clearing services to UK-based clearing members or trading venues. As such, the bank will tier these CCPs in accordance with the systemic risk they pose to the UK financial system.
Those whose home authority meets the regulatory and supervisory requirements of the BoE, measured by the Informed Reliance Assessment, will be categorised as Tier 1, with their home authority defered to. The CFTC has been established as a Tier 1 authority, with the BoE placing reliance on its supervision and oversight of incoming US-based CCPs.
Through this system, the CFTC and the BoE restate the primacy of UK and US home authorities in their respective jurisdictions, acknowledging the importance of deference and maintaining an information-sharing and cooperation framework.
Commenting on the announcement, Stanislav Ermilov, founder and CEO of data aggregation platform Tallarium, says: "The US and UK are two most important hubs for commodity clearing by far, and where most cleared volumes are concentrated. We should see improved collaboration across regulators on the back of this, as well as more harmonisation of the clearing practices and their consistency across both sides of the Atlantic.
“More transparency and information sharing is always positive. For clearing house members, this a constructive development that should lead to faster propagation of best practices and policies as regulators align more closely.”
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