Associations representing issuers, investors and brokers and market intermediaries expressed their concerns over clearing access in a joint letter to Commissioner Michel Barnier from the European Commission (EC).
The group of seven signatories to the letter, including the European Association of Corporate Treasurers (EACT) and Association for Financial Markets in Europe (AFME), point out that forthcoming EMIR legislation may not take “proper account of the likely concentration of clearing provision”.
European trading and clearing infrastructures are changing dramatically over a slew of impending legislations aside from EMIR, such as MiFID II and the capital requirements directive (CRDIV) under Basel III, while market participants are drawing attention to unintended consequences. Chiefly, that choice and efficiency in clearing services in the EU may diminish.
EMIR mandates central clearing for OTC derivatives and over time, says the group, and expects that cleared derivatives will be the dominant model, with no more than a fringe of bilateral trades remaining.
As a result, the group are calling for explicit and detailed open access requirements for clearing of all financial instruments in EMIR and MiFID II.
“Such open access requirements should ensure that a clearing house must accept instruments for clearing regardless of the venue on which they are traded, and that a venue must provide data feeds and other assistance to any clearing house that wants to clear the instrument in question,” wrote the group.
The push for ensuring such access comes at a time of consolidations in the trading and clearing landscape in Europe - NYSE Euronext and Deutsche Boerse and BATS and Chi-X Europe mergers are moving forward under regulatory scrutiny and the London Stock Exchange has recently announced talks with LCH.Clearnet for a majority stake in the clearing house.
Other signatories to the letter included the Association of Corporate Treasurers (ACT), European Fund and Asset Management Association (EFAMA), Investment Management Association (IMA), International Swaps and Derivatives Association (ISDA) and the British Bankers’ Association (BBA).
