On February 28, ISDA submitted its response to the HM Treasury’s consultation on the Future Regulatory Framework Review: Central Counterparties (CCPs) and Central Securities Depositories (CSDs). ISDA’s main comments were:

• It will be important to define clearly the territorial scope of the Bank’s rule-making powers with respect to the regulation and supervision of CCPs and CSDs. We understand that the intention is to retain the current recognition framework for non-UK CCPs and CSDs, and the scope of the Bank’s rule-making power should be consistent with this framework, allowing for deference to the home state regulator.
• With respect to the proposed statutory objectives and regulatory principles for the Bank, we agree that:
  • the Bank should ensure that it does not discriminate on the basis of nationality or location in advancing its primary objective;
  • the Bank should take into account the financial stability impact of UK CCPs and CSDs on other jurisdictions;
  • the majority of the regulatory principles that currently apply to the PRA and FCA would be appropriate for the Bank’s regulation of UK CCPs and CSDs;
  • the Bank should be required to have regard to the public policy priorities underpinning retained EU law when remaking those requirements as rules.
• As mentioned in our response to the general consultation on the Future Regulatory Framework, we continue to have concerns regarding the potential power for HM Treasury to direct the Bank. In particular, it is unclear whether this power would in fact impinge on the Bank’s independence or not, and if it would, what safeguards would apply around exercise of the power.
• We consider it crucial that the Bank should consider the possible impact of its rules on relevant deference arrangements afforded to the UK by overseas jurisdictions.
• It would be useful to understand how HM Treasury may seek to exercise their proposed power to direct the Bank. In particular, we recommend that there be prior consultation and adequate transparency around exercise of this power.
• While we agree that the Bank already engages effectively with the UK CCPs and CSDs that it regulates, we consider that the Bank should increase its engagement with the members and users of those CCPs and CSDs.