EU Grants Temporary Recognition to UK CCPs For End of Brexit Transition Period

Shearman & Sterling LLP

Shearman & Sterling LLPThe European Securities and Markets Authority has announced that it has granted temporary third-country recognition to three U.K. CCPs from January 1, 2021 under the European Market Infrastructure Regulation. ESMA's announcement follows the time-limited equivalence decision for the U.K.'s legal and regulatory supervision regime of U.K. CCPs, which was published on September 21, 2020. The third-country recognition for ICE Clear Europe Limited, LCH Limited and LME Clear Limited means that EU clearing members of these three CCPs will be able to continue to access the services and that the CCPs will be able to continue to provide their services in the EU at the end of the transition period on December 31, 2020, following the U.K.'s withdrawal from the EU.

As part of the recognition process, ESMA conducted the new tiering assessment according to the Delegated Regulation on tiering. EMIR 2.2 introduced a new tiering system for third-country CCPs, making non-systemically important (Tier 1) third-country CCPs subject to less stringent requirements than systemically important (Tier 2) third-country CCPs. ESMA determined that ICE Clear Europe and LCH are Tier 2 CCPs and that LME Clear is a Tier 1 CCP.

ESMA and the Bank of England have agreed an updated Memorandum of Cooperation on information sharing regarding these CCPs, which also takes effect on January 1, 2021. The BoE published a statement welcoming the recognition of the U.K. CCPs as third-country CCPs from January 1, 2021.

View ESMA's announcement.

View details of the U.K. CCP equivalence decision.

View details of the Delegated Regulation on tiering.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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