EU Grants Equivalence to More US CCPs
01/28/2021An EU equivalence decision for U.S. CCPs regulated by the U.S. Securities Exchange Commission that are "covered clearing agencies" under the SEC rules has been published in the Official Journal of the European Union. The decision paves the way for these U.S. CCPs to be recognized by the European Securities and Markets Authority upon which they will be able to provide clearing services to EU trading venues and businesses. Relevant U.S. CCPs that potentially would be covered by this designation but which were not previously granted equivalence include the Fixed Income Clearing Corporation, National Securities Clearing Corporation, The Depository Trust Company and The Options Clearing Corporation. ICE Clear Credit LLC also registered with the SEC, however, this CCP already benefits from EU equivalence as it falls within the previous EU equivalence decision for U.S. CCPs regulated by the Commodity Futures Trading Commission. ICE Clear Europe, which was an EU CCP until Brexit, is also recognized under the EU's temporary equivalence for U.K. CCPs. LCH SA is also registered with the SEC, but is an EU CCP and so the equivalence regime is not applicable to it.
As with the 2016 EU equivalence decision for U.S. CCPs regulated by the CFTC, the equivalence is conditional and only applies where the CCPs internal rules and procedures include risk management measures to ensure that initial margins are calculated and collected: (a) in the case of derivative contracts executed on regulated markets, a liquidation period of two days calculated on a net basis; (b) in the case of OTC derivative contracts, a liquidation period of five days calculated on a net basis; and (c) in the case of all derivative contracts, measures designed to limit procyclicality equivalent to at least one of the following: (i) measures applying a margin buffer at least equal to 25 percent of the calculated margins which the CCP allows to be temporarily exhausted in periods where calculated margin requirements are rising significantly; (ii) measures assigning at least 25 percent weight to stressed observations in the look-back period; or (iii) measures ensuring that margin requirements are not lower than those that would be calculated using volatility estimated over a 10 year historical look-back period.
Although the decision is not time-limited, as is the temporary equivalence granted recently to U.K. CCPs, the Commission will review the decision every three years.
The U.K. has granted equivalence to EEA CCPs, and has temporarily recognized most third-country CCPs currently recognized under the EU regime, but is yet to grant a definitive equivalence for any other jurisdictions. The SEC issued a statement in November 2020 setting out the requirements for EU CCPs seeking to register with the SEC.
View the Commission's adopted decision.
View the SEC's November 2020 statement for EU CCPs wanting to register with the SEC.
View details of the EU's equivalence decision for U.S. CCPs supervised by the CFTC.
View details of the temporary equivalence decision for U.K. CCPs.
View details of the U.K. equivalence decision for EEA CCPs.
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