The European Securities and Markets Authority (ESMA) has announced that it will recognise the three central counterparties (CCPs) established in the UK as third country CCPs (TC-CCPs) from 1 January 2021. The decision means that beyond the end of the Brexit transition period the TC-CCPs will be able to continue to operate in the EU and continue to provide clearing services to their EU members.
ESMA has adopted the following tiering decisions:
- LME Clear Limited has been assessed as a Tier 1 CCP;
- ICE Clear Limited as a Tier 2 CCP; and
- LCH Limited as a Tier 2 CCP.
The BoE says it welcomes ESMA’s decision and, as part of the recognition process, has agreed an updated Memoranda of Understanding (MoU) with ESMA regarding cooperation and information-sharing arrangements in relation to CCPs. The MoU will take effect from 1 January 2021.
Separately, Sir Bill Cash MP, chair of the European Scrutiny Committee (the Committee) has written to HM Treasury regarding the EU’s supervision of UK CCPs under the amended European Markets Infrastructure Regulation (EMIR 2.2). In the letter, the Committee raised several questions on the impact of EMIR 2.2., in particular in relation to:
- Supervisory cooperation between BoE and ESMA;
- Comparable compliance for “tier 2” non-EU CCPs; and
- The EU’s Recovery & Resolution Regulation for CCPs.
The Committee has invited HMT to respond by 16 October 2020.