On 12 November 2019, the Association for Financial Markets in Europe (AFME) published a joint letter, in collaboration with 13 other trade associations, to the European Commission (Commission) on temporary equivalence and recognition in relation to UK central counterparties (CCPs).
The decision to allow the European Securities and Market Authority (ESMA) to temporarily recognise UK CCPs to allow them to continue to provide clearing services in the EU expires on 30 March 2020 under Commission Implementing Decision (EU) 2018/2031 (Implementing Decision).
The letter requests the Commission to extend this temporary recognition until ESMA has completed its scheduled review of recognition decisions in existence at entry into force of EMIR 2.2 (including the temporary recognition decisions in relation to UK CCPs), and the UK CCPs have had the opportunity to terminate the clearing memberships of EU clearing members.
Therefore, taking into account that EMIR 2.2 will be published in the Official Journal of the EU on 12 December 2019, the trade associations estimate that the deadline for ESMA to complete its review of existing recognition decisions would be 1 July 2020, i.e. 18 months after the entry into force of the relevant Commission delegated acts under EMIR 2.2.
In light of this, the trade associations invite the Commission to amend the Implementing Decision to extend the temporary equivalence of UK CCPs until the date of 18 months after entry into force of the relevant Commission delegated acts under EMIR 2.2, plus an additional three month period to allow UK CCPs to serve termination notices to EU clearing members, in the event that recognition is withdrawn following ESMA’s review.
The trade associations ask the Commission to confirm its intention to make the amendments as soon as possible before the end of 2019, otherwise UK CCPs will need to start serving termination notices in December 2019 so that EU clearing members’ membership is terminated by 30 March 2020.