On October 30, the European Commission (EC) adopted its first equivalence decision for the regulatory regimes of central counterparties (CCPs) located in four jurisdictions: Australia, Hong Kong, Japan and Singapore.
Under the European Market Infrastructure Regulation (EMIR), any CCP clearing for an EU clearing member or trading venue, must either be authorized or recognized by the European Securities and Markets Authority (ESMA). Only CCPs located in the EU can become authorized by ESMA. Before a non-EU CCP can become recognized by ESMA, the EC must have made a determination that the regulatory framework of the CCP’s home jurisdiction is equivalent to those of EU CCPs under EMIR. The non-EU CCP, however, remains subject to regulation and supervision only in its home jurisdiction.
Once a non-EU CCP is recognized by ESMA, it will also be able to obtain status as a qualifying CCP under the EU Capital Requirements Regulation, which will allow non-US clearing members that are part of an EU corporate group to benefit from favorable capital treatment. Additionally, any over-the-counter derivatives subject to a mandatory clearing determination under EMIR can be cleared on an ESMA-recognized non-EU CCP.
The EC is continuing to consider whether to make equivalency determinations for additional jurisdictions, including the United States.