Trade associations call on EU to extend UK CCPs equivalence
13 December 2024 EU
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European financial associations have called on the European Commission to extend the equivalence status of UK central counterparties (CCPs) as the EU prepares to implement its latest revision of the European Market Infrastructure Regulation (EMIR).
In a joint letter addressed to Commissioner Maria Luis Albuquerque, a group of 12 trade associations emphasised the importance of a non-time-limited equivalence decision for UK CCPs.
The current equivalence arrangement, which ensures that UK CCPs meet EU regulatory standards, is set to expire on 30 June 2025.
This follows the recent publication of Regulation 2024/2987, known as EMIR 3.0, in the Official Journal of the EU, which officially enters in to force on 24 December.
Announced in February, EMIR 3.0 refers to the latest set of revisions to the regulatory framework concerning over-the-counter (OTC) derivatives, CCPs, and trade repositories in the EU.
By updating EMIR, the EU aims to strengthen financial stability while promoting innovation and competitiveness in its markets.
One of the key changes is the introduction of “active account obligation”, which incentivises EU counterparties to clear a certain number of derivatives at EU-authorised CCPs, with the aim of reducing the reliance on third-country CCPs.
The Alternative Investment Management Association (AIMA) welcomes the intention of EMIR 3.0 to enhance the attractiveness of the EU clearing landscape, but it disagrees with the rationale of forcing market participants to relocate their clearing activity from the UK into the EU.
“The impact of the new rules will be less choice and higher costs for market participants in the clearing of derivative contracts,” says AIMA, which opposed the active account requirement in its review of the new regulation.
The association believes that extending the equivalence decision for UK-based CCPs will allow industry participants to continue using “tried and tested” clearing services.
If the commission does intend to grant a further time-limited equivalence decision, the joint letter asks for at least five years to “limit uncertainty for EU counterparties”.
The associations also warn that a failure to extend equivalence could result in market fragmentation, increased clearing costs, and disruptions for EU participants.
In a joint letter addressed to Commissioner Maria Luis Albuquerque, a group of 12 trade associations emphasised the importance of a non-time-limited equivalence decision for UK CCPs.
The current equivalence arrangement, which ensures that UK CCPs meet EU regulatory standards, is set to expire on 30 June 2025.
This follows the recent publication of Regulation 2024/2987, known as EMIR 3.0, in the Official Journal of the EU, which officially enters in to force on 24 December.
Announced in February, EMIR 3.0 refers to the latest set of revisions to the regulatory framework concerning over-the-counter (OTC) derivatives, CCPs, and trade repositories in the EU.
By updating EMIR, the EU aims to strengthen financial stability while promoting innovation and competitiveness in its markets.
One of the key changes is the introduction of “active account obligation”, which incentivises EU counterparties to clear a certain number of derivatives at EU-authorised CCPs, with the aim of reducing the reliance on third-country CCPs.
The Alternative Investment Management Association (AIMA) welcomes the intention of EMIR 3.0 to enhance the attractiveness of the EU clearing landscape, but it disagrees with the rationale of forcing market participants to relocate their clearing activity from the UK into the EU.
“The impact of the new rules will be less choice and higher costs for market participants in the clearing of derivative contracts,” says AIMA, which opposed the active account requirement in its review of the new regulation.
The association believes that extending the equivalence decision for UK-based CCPs will allow industry participants to continue using “tried and tested” clearing services.
If the commission does intend to grant a further time-limited equivalence decision, the joint letter asks for at least five years to “limit uncertainty for EU counterparties”.
The associations also warn that a failure to extend equivalence could result in market fragmentation, increased clearing costs, and disruptions for EU participants.
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