On August 11, the European Securities and Markets Authority (ESMA) published an updated list of central counterparties (CCPs) outside the European Economic Area (EEA) that have applied for recognition under Article 25 of the European Market Infrastructure Directive (EMIR). Absent such recognition, non-EEA CCPs are not permitted to provide clearing services to clearing members or trading venues established in the European Union. In addition, the EU Capital Requirements Regulation provides that only recognized non-EEA CCPs are “qualifying CCPs” for purposes of calculating certain exposures. Therefore, an EU credit institution risks significantly adverse capital treatment to the extent that it, or any of its affiliates for which it calculates capital on a consolidated group basis, is a clearing member at a non-EEA CCP that has not been recognized under Article 25 of EMIR. In order for a non-EEA CCP to obtain recognition, a number of preconditions must be met, including that the European Commission (EC) has determined that the legal and supervisory regime in such non-EEA CCP’s jurisdiction is equivalent to the applicable requirements under EMIR. The EC has requested guidance from ESMA in making these determinations, and to date ESMA has issued guidance in respect of the following jurisdictions: Australia, Canada, Hong Kong, Japan, India, Singapore, South Korea, Switzerland and the United States. Notably, ESMA’s updated list of non-EEA CCPs applying for recognition include CCPs from jurisdictions where ESMA has not yet issued any guidance, including Brazil, Dubai, Israel, Malaysia, Mexico, New Zealand and South Africa. ESMA has not indicated when, or if, it intends to prepare guidance in respect of these latter seven jurisdictions.
Despite the guidance that ESMA has provided to date, the EC has not yet made any formal equivalence determination in respect of any non-EEA jurisdiction. On June 27, Michel Barnier, the EU Financial Services Commissioner, indicated his intention to recommend recognition for CCPs from Australia, Hong Kong, India, Japan and Singapore, but not for CCPs from the United States.
ESMA’s updated list of non-EEA CCPs that have applied for recognition under EMIR can be found here. ESMA’s technical guidance that has been published to date can be found here. The June 27 statement from Commissioner Barnier can be found here.