EFAMA, BFPI Ireland, EACB, FIA EPTA, Federation of the Dutch Pension Funds, Finance Denmark, Nordic Securities Association, AIMA, ICI Global, FIA and ISDA, which collectively represent major European end users of derivatives along with providers of clearing services, have published a joint statement on the European Commission’s (EC) proposed active account requirement under the European Market Infrastructure Regulation (EMIR 3.0).
The EC’s active account proposal would require all market participants to hold active accounts at EU central counterparties (CCPs) for clearing at least a portion of certain systemic derivatives contracts. The EMIR 3.0 proposals are currently being debated by co-legislators in the European Parliament and the Council of the European Union.
The associations urge EU policymakers to delete the proposed active account requirement and instead focus efforts on streamlining the supervisory framework for EU CCPs across member states while making EU CCPs’ offering for clearing in the EU more attractive and innovative. Incentivizing measures would provide a path to sustainable growth of EU CCPs while maintaining competitive and open markets.
The statement highlights the detrimental implications the proposed active account requirement would have on EU capital markets by introducing fragmentation, loss of netting benefits and making the EU less resilient to market stresses with no benefit to EU financial stability. This will ultimately harm European pensions savers and investors, the associations point out.
The statement also asserts that this requirement will create a competitive disadvantage for EU firms compared to third-country firms, which will remain able to transact in global markets without restrictions. EU clients that are required to clear at an EU CCP to comply with an active account threshold could be forced to accept an uncompetitive price wherever the price available at an EU CCP is higher than what is available at a Tier 2 CCP.
When making important decisions, such as imposing an active account requirement, policymakers should act prudently and be guided by comprehensive and robust cost-benefit assessments that include a review of the risks and impacts on financial stability and on the competitiveness of EU market participants. To date, such a comprehensive and robust cost-benefit assessment has not been produced.