Capital markets union: European Council adopts new clearing house rules (including Brexit)

Capital markets union: The European Council adopted yesterday (15 October) revised rules for clearing houses in the single market.

The new framework sets out how EU and third country clearing houses should be supervised in the future, taking particular account of the effects of Brexit on the European financial system. It will be implemented through a revision of the European market infrastructure regulation (EMIR).

Clearing houses or central counterparties (CCPs) facilitate securities and derivatives transactions by centralising and standardising all the steps leading up to the payment. They also take on counterparty risk by stepping in between the seller and the buyer, thereby providing guarantees that the transaction can be completed.

16 CCPs

There are currently 16 CCPs established and authorised in the EU. An additional 33 third-country CCPs have been recognised under EMIR’s equivalence provisions, allowing them to offer their services in the EU. Following Brexit, the three CCPs based in the UK will de facto become third-country CCPs.

The aim of the reform is to strengthen the supervision of CCPs in order to take into account the growing size, complexity and cross-border dimension of clearing in Europe. It introduces a unique mechanism within the European Securities and Markets Authority to bring together expertise in the field of CCP supervision and ensure closer cooperation between supervisory authorities and central banks responsible for EU currencies.

Next steps

Following the signature of the text in Strasbourg in the week of 21 October, the regulation is scheduled to be published in the Official Journal on 24 October and will enter into force 20 days later.