CCPS - Equivalence decisions

Under article 25 of Regulation (EU) No 648/2012 of the European Parliament and of the Council of July 4th 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR") a central counterparty ("CCP") established outside the European Union is entitled to provide clearing services under EU law to EU clearing members and trading venues where it has been recognised by ESMA.

In order to be recognised the non- EU CCP shall meet the following conditions:

  • it must be able to perform the clearing obligations of EU counterparties and will also obtain qualifying CCP (QCCP) status across the European Union under Regulation (EU) No 575/2013 (CRR).
  • the European Commission must have adopted a positive equivalence decision with regard to the regulatory framework applicable to such CCPs in the third country. ESMA considers regimes equivalent where the legal provisions and the level of supervision and enforcement is similar to that of EMIR.
  • at the moment of the request the central counterparty must be authorised and supervised by a regulatory framework considered as equivalent.
  • the third country where the CCP is established or authorised must be considered as having equivalent systems for anti-money-laundering and combating the financing of terrorism to those of the EU in accordance with the criteria set out in the common understanding between Member States on third-country equivalence under Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing.
  • cooperation arrangements must exist between ESMA and the relevant third country supervisory authorities covering supervisory arrangements and the sharing/notification of information.

"Four "equivalence" decisions for the regulatory regimes for CCPs in Australia, Hong Kong, Japan and Singapore adopted."

Within this frame the European Commission started its equivalence assessment in relation to such non-EU CCPs which have applied to receive recognition from ESMA and on October 30th 2014, it adopted four "equivalence" decisions (implementing acts) for the regulatory regimes for CCPs in Australia, Hong Kong, Japan and Singapore.

Following publication of the implementing acts in the Official Journal, CCPs in each of the four jurisdictions will be able to obtain recognition in the EU and be used by market participants to clear standardised OTC derivatives as required by EU legislation, but will nonetheless remaining subject to the sole supervision of their home jurisdiction.