EU opens door wider for US derivatives clearers and exchanges

Mairead McGuinness.

The European Union has widened access for US exchanges and clearing houses in the eurozone.

The  European Commission said a number of exchanges in the US which trade derivatives and are supervised by the Securities and Exchange Commission (SEC) can now be used by investors from the EU.

 “Today’s decisions are essential, facilitating EU market participants’ access to SEC-supervised US CCPs,” said Commissioner Mairead McGuinness, responsible for Financial Stability, Financial Services and the Capital Markets Union.

She added, “These decisions are in the interest of the EU – we want our capital markets to be better integrated with other international markets.  We look forward to continued, good cooperation between the EU institutions and agencies and the US Securities and Exchange Commission.”

The European Market Infrastructure Regulation (EMIR) provides a framework for the recognition of non-EU central counterparties.

It ensures that these CCPs comply with requirements that are equivalent to those set out for eurozone firms under EMIR.

This door opening is in contrast to the EU’s intention to shut off clearing houses in London in 2025.

Even before Brexit, clearing was a battleground between Britain and the EU with the latter seeking to wrest activity away from London and build what it called “strategic autonomy” in capital markets. The situation has only intensified since the UKs left the bloc two years ago.

The London Stock Exchange’s LCH unit clears about 90% of euro interest rate derivatives, a contract widely used by companies in the EU to insure themselves against unexpected moves in borrowing costs.

Earlier in the year, the European Commission extended the UK’s temporary right to clear trades, known as equivalence, for the next three years.

Both UK and European banks, investment managers and hedge funds have called on the Commission to extend their access, warning of significant market disruption.

However, McGuinness, has made it clear that 2025 is the final deadline and that the EU strategy is to reduce “our excessive dependence” on major clearers based outside the bloc and to improve the attractiveness of EU-based clearers while enhancing their supervision as volumes increase.”

©Markets Media Europe 2022

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