European and US central counterparties (CCPs) will soon be able to operate in both markets with full regulatory compliance after a common approach was agreed.
The agreement will allow US CCPs to continue to provide services in the EU while complying with Commodity Futures Trading Commission (CFTC) requirements. EU CCPs will be able to provide services to US clearing members and clients while complying with certain corresponding EU requirements.
European commissioner for financial stability, the financial services and capital markets union, Jonathan Hill, said: “This is an important step forward for global regulatory convergence. It means that European CCPs will be able to do business in the US more easily and that US CCPs can continue to provide services to EU companies.
“It has taken a long time, but it is good news that after more than three years of discussion, we are now able to provide certainty for the marketplace. I am grateful to chairman Timothy Massad and his team for all their work in helping us get to this point.”
Massad added: “Our agreement is critical to ensuring that our global derivatives markets remain robust, while keeping our financial system as stable and resilient as possible.”
“It is a significant milestone in harmonising regulation of these markets. I thank commissioner Hill for working in a constructive and collaborative manner to resolve this issue.”
In addition, the European Commission is set to adopt equivalence rules under the European Market Infrastructure Regulation (EMIR) to ensure US trading venues are equivalent to regulated EU markets
The move aims to provide a level playing field between EU and US trading venues for the purposes of the Markets in Financial Instruments Directive I framework.
EU member state authorities must vote before an equivalence decision is adopted.
On the US side, the CFTC will provide a basis for both EU CCPs already registered with the CFTC as derivatives clearing organisations and those seeking registration to meet certain CFTC requirements by complying with the corresponding EMIR requirements.
Both sides also showed further willingness to expand the range of the agreement in the future.
In particular, the Committee on Payment and Market Infrastructures and the International Organization of Securities Commissions work on CCP resilience was cited as an area of interest where the standards contained in Principles for Financial Market Infrastructures for initial margin methodologies could be made more granular and robust.
