EU states in clearing houses authorisation push

Foreign clearing houses wanting to operate in the European Union would be authorised by EU member states’ national regulators and not by the regions’ powerful new markets regulator, according to a joint UK-German amendment to draft European Commission proposals for derivatives market reforms.

The UK-German intervention on the European Market Infrastructure Regulation (Emir) is one of the most significant since the document was first published in mid-December.

It highlights concern in the two EU member states with the largest clearing houses that the power to authorise the operations of clearers remains with national regulators and not move to the European Securities and Markets Authority (ESMA), the new Paris-based watchdog.

London is home to five “recognised clearing houses” – LCH.Clearnet, ICE Clear Europe, CME Clearing Europe, Euroclear UK & Ireland and European Central Counterparty – as well as seven “recognised overseas clearing houses”, including Cassa di Compensazione e Garanzia, the Borsa Italiana clearer, SIX x-clear and The Chicago Mercantile Exchange.

The amendment comes under a chapter of Emir dealing with “Relations with third countries”. It was inserted by the British and German governments.

It says: “A CCP [central counterparty] established in a third country may provide clearing services to clearing members and their clients established in the Union only where that CCP is recognised by the competent authority of a Member State in which a CCP intends to provide clearing services or activities”.

The move is an apparent attempt to ensure that London and Frankfurt retain the power to authorise which clearing houses are based there, and will stir intense political debate between member states.

It comes as a flurry of changes are being made to Emir and to an accompanying document working its way in parallel through the European Parliament’s Economic Committee, or “Econ Committee”, chaired by British MEP Sharon Bowles.

Another change included in the latest draft of the Econ Committee’s document for the first time addresses the issue of indices, or benchmarks, which include the Euro Stoxx and FTSE 100 indices. Emir, by contrast, does not address indices.

That is becoming a controversial issue as the London Stock Exchange and LCH.Clearnet have been frustrated in their attempts to licence the Euro Stoxx index, owned by a company controlled by Deutsche Börse.

A new “Article 48a” has been inserted into the document, and says: “A CCP shall have the right to non-discriminatory access to the data feed of any particular trading venue and access to any relevant settlement system that it needs for the performance of its duties”.

Both Emir and the Econ Committee document were supposed to be finalised by the summer, although the number of amendments and complexities thrown up means they are unlikely to be finalised until after the summer when Poland takes the EU presidency, Brussels lobbyists say.