The European Commission has adopted its first equivalence decisions for the regulatory regimes of central counterparties (CCPs) in Australia, Hong Kong, Japan and Singapore.
The CCPs in these third country jurisdictions will be able to obtain recognition in the EU, and can therefore be used by market participants to clear standardised over-the-counter derivatives as required by EU legislation, whilst remaining subject solely to the regulation and supervision of their home jurisdiction.
Although rules may differ in the detail, international regulators are pursuing the same objectives to promote financial stability by promoting the use of CCPs that are subject to robust prudential requirements.
Vice-president Michel Barnier, who is responsible for internal market and services, said: “Globally agreed reforms of derivatives markets, like all financial services reforms, will only work in international markets if regulators and supervisors rely on each other.”
“[The] decisions show that the EU is willing to defer to the regulatory frameworks of third countries, if they meet the same objectives as EU rules. We have been working in parallel on assessing 12 additional jurisdictions and finalising those assessments is a top priority.”
The European Commission begins its assessment for equivalence if a CCP from a third country seeks recognition from the European Securities and Markets Authorities (ESMA).
Equivalence assessments are undertaken using an outcome-based approach. This requires that the relevant rules operating in the third country satisfy the same objectives as in the EU, ie, a robust CCP framework promoting financial stability through a reduction in systemic risk.
It does not mean that identical rules are required to be in place in the third country.
This assessment is undertaken in cooperation with the regulators in the third country.
If a determination of equivalence is made, it will be given effect through a legally binding implementing act in accordance with Article 25(6) of the European Market Infrastructure Regulation (Regulation (EU) No 648/2012).
