ESMA includes recognition of UK CCPs in no-deal Brexit scenario among 2019 priorities

Maria Nikolova

ESMA’s assessment of the 19 pending applications for recognition as third-country central counterparties is also among the supervision priorities for this year.

The European Securities and Markets Authority (ESMA) has published its annual report and work program to highlight its supervisory priorities for 2019. “Brexit” is a key theme in the report with monitoring and recognition of third country central counterparties (TC-CCPs) being among the priorities.

For TC-CCPs, ESMA has identified the following priorities for 2019:

  • Recognition of UK CCPs in a no-deal Brexit scenario;
  • Assessment of the 19 pending applications for recognition as TC-CCPs;
  • Monitoring of the potential risks TC-CCPs might introduce in the EU;
  • Monitoring of the impact of Brexit on the third country CCP regime; and
  • Preparation for the potential changes in the scope of ESMA supervision of TC- CCPs following the current review of the applicable regulations.

This year, ESMA will pursue recognition process with two categories of CCPs. The first category includes the UK CCPs which will become third country CCPs on Brexit day, with a special focus on ensuring continued access for EU Clearing Members and Clients in a no-deal scenario. The second category includes the remaining TC-CCP applicants for which an equivalence decision is adopted, as well as with recognised TC-CCPs extending their activity, together with the assessment of the related clearing obligation for the relevant OTC derivatives. ESMA plans to negotiate and sign the corresponding MoUs with the relevant home country supervisors.

In addition, ESMA will monitor that recognised TC-CCPs comply with the EMIR criteria and equivalence conditions, if applicable, on an ongoing basis.

The announcement about ESMA’s 2019 supervision priorities is published just a day after the pan-EU watchdog announced that in the event of a no-deal Brexit, three UK central counterparties (CCPs) – LCH Limited, ICE Clear Europe Limited and LME Clear Limited – will be recognised to provide their services in the EU. ESMA explained that has made these recognition decisions in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU.

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