Fri. Sep 22nd, 2023

Regulation HK

Financial Regulator

Trade Bodies Call on Policymakers to Scrap EU Clearing Proposal

2 min read

A proposed requirement for market participants to hold active accounts at EU CCPs will be detrimental to EU capital markets, the trade bodies say.

A group of trade associations has published a joint statement urging European policymakers to scrap a proposal to require market participants to hold active accounts at EU CCPs.

The so-called “Active Account Requirement” was proposed in December last year as part of plans to further develop the EU’s Capital Markets Union (CMU) through the introduction of an “EMIR 3.0”.

The proposal would require all market participants to hold active accounts at EU CCPs for clearing at least a portion of certain systemic derivatives contracts. It was designed to incentivise EU clearing and reduce excessive exposures to third country CCPs, particularly LCH, which clears the bulk of OTC interest rate derivatives denominated in euro.

The associations say the Active Account Requirement would be detrimental to EU capital markets because it will introduce fragmentation, eliminate netting benefits, and make the EU less resilient to market stresses – with “no benefit to EU financial stability”.

In addition, the requirement will create a competitive disadvantage for EU firms compared to third-country firms, who will remain able to transact in global markets at potentially more competitive prices.

The statement urges EU policymakers to delete the proposed Active Account Requirement, and instead focus on streamlining the supervisory framework for EU CCPs across member states and enhancing the attractiveness of CCP offerings.

“We believe that incentivising measures would provide a path to sustainable growth of EU CCPs while maintaining competitive and open markets,” the statement says.

The statement was published by EFAMA, BFPI Ireland, EACB, FIA EPTA, Federation of the Dutch Pension Funds, Finance Denmark, Nordic Securities Association, AIMA, ICI Global, FIA and ISDA.

The EMIR 3.0 proposals are currently being debated by co-legislators in the European Parliament and Council.

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