CME first US CCP to win ESMA approval

The approval comes one week after US and EU regulators announced a cooperation agreement to regulate cross-border CCPs.

CME has become the first US clearing house to be approved for clearing derivatives in Europe, a measure that will ease cross-border activity for banks.

The authorisation by the European Securities and Markets Authority (ESMA) comes one week after it announced with the US Commodity Futures Trading Commission (CFTC) that it will establish co-operation agreements regarding regulation of cross-border clearing houses.

CME joins other “third country” central counterparties (CCPs) authorised to carry out derivatives clearing in Europe including the Japan Securities Clearing Corporation (JSCC), ASX Clear (Futures),  SIX x-Clear, and ICE Clear Singapore.

“Today’s action by ESMA will ensure that CME Clearing will be able to continue to provide the clearing services that our global customers depend upon to manage risk.  It also will ensure that US markets are not put at a disadvantage in our highly competitive global marketplace,” said Terry Duffy, executive chairman and president of CME Group.

In March the European Commission deemed US rules on clearing house as equivalent to its own, spelling an end to a long-running international dispute on cross-border derivatives regulation.

If no agreement was made, the cost of doing business between European banks and US CCP’s, such as CME, would triple, most likely fracturing the trillion dollar derivatives market

Timothy Massad, chairman of the CFTC, has previously said he expects the Commission to grant substituted compliance to European clearing houses before the first wave of mandatory clearing in June.