The European Commission has extended the deadline to recognise international clearing houses by six months, providing a respite for the Options Clearing Corporation (OCC) as equivalency discussion continue.
The Commission and the US Securities and Exchange Commission (SEC) have not been able to come to an agreement over international rules for equity derivatives. If no agreement is made, European banks will face high capital charges to clear at the OCC.
“This announcement provides some important breathing room for the listed options industry. We look forward to continuing to work with the EC, the European Securities and Markets Authority, and the SEC as they work to come to an agreement on a common approach for the regulation of cross-border QCCPs,” said Craig Donohue, executive chairman of the OCC.
The OCC have lobbied the SEC to come to a similar agreement between Europe and the US Commodity Futures Trading Commission (CFTC).
However in May, the OCC was placed on CreditWatch with ‘negative implications’ by rating agency S&P.
It noted: ““OCC lacks the pool of liquidity resources that would enable it to settle, at a 99 per cent confidence level, the securities transactions of the largest two Clearing Members (should they default at the same time). This is in contrast to the ‘Cover 2’ minimum standard that European peers must meet.”
The OCC has stated if it is not granted qualified CCP (QCCP) status, it would cost European banks over $5 billion in additional capital to do business with the clearing house.