The International Swaps and Derivatives Association (ISDA), Futures Industry Association (FIA), Association for Financial Markets in Europe (AFME) and International Capital Markets Association (ICMA) welcome the statement regarding temporary equivalence for the purpose of recognition for UK central counterparties (CCPs) in the European Commission’s (EC) communication regarding Brexit Contingency Planning published on November 13, and the statement by the European Securities and Markets Authority on November 23.
Our members have identified that certain areas of uncertainty nonetheless remain.
In the absence of the further comfort, clarity and legal certainty that is sought in this letter, we remain concerned that UK CCPs may deem it necessary to issue termination notices to their EEA members later this month, to ensure that those UK CCPs will not be in breach of EMIR Article 25 (which prohibits CCPs that are neither authorized nor recognized from having EEA clearing members) on March 30, 2019 in the event of the UK leaving the EU without agreement on a transition period. Where UK-based brokers have established EU domiciled affiliates, these affiliates are in the process of applying for clearing memberships of UK CCPs. If already approved, these memberships will be subject to any termination notices, and future applications would be rejected, preventing EEA-based clients that currently clear via such a broker from continuing to do so.
EEA members of the signatory associations also need clarity and certainty regarding the same issues, in order to prudently execute their contingency plans. Abrupt cessation of access to UK CCPs has the potential to introduce widespread disruption for EEA markets.
We therefore respectfully but urgently request that the EC provide the desired legal certainty by publishing its proposed temporary equivalence determination for the UK (together with any conditions) and, in turn, procure that ESMA confirms that the three UK CCPs are each recognized under EMIR, on the condition that the UK leaves the European Union at the end of March 29, 2019 (CET) without a transition period coming into effect at the point of leaving and that the proposed temporary regime is implemented.
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