The chair of Europe’s securities watchdog has voiced his support for stricter supervision of clearers of euro-denominated derivatives based outside of the EU.
The EU confirmed last week it will publish proposals to enhance controls over clearing houses in the UK, such as LCH and ICE Clear Europe, which dominate the euro-swaps clearing market.
If approved, it will be up to the European Securities and Markets Authority (ESMA) to carry out the proposals.
“We need a mechanism to supervise third country entities. I am happy with the EU communication that will table a legal proposal looking at enhancing the supervision of third country CCPs,” said Steven Maijoor, chair of ESMA, at the ISDA Annual General Meeting.
However, Maijoor also stated that the securities watchdog is understaffed, and giving it further responsibility to supervise third country CCPs will be difficult with its current resources.
Last week the French securities regulator, Autorite des Marches Financiers (AMF), published its position paper on the issue, calling for the EU’s equivalence regime to exclude CCPs and trade repositories dealing in euro-denominated products “since these infrastructures absolutely should be located in Europe for their activities in euros.”
Deustche Boerse, which owns Frankfurt-based Eurex Clearing, is looking to capitalise on the animosity between London and Brussels and capture market share.
“We have a very function-ready model out there that’s based on very solid and state-of-the-art technology and risk management systems and now, obviously, with the uncertainty delivered by the exit of the UK, there is a lot of demand that we are getting for continental European clearing solutions,” said Eric Muller, CEO, Eurex Clearing, on Deutsche Boerse’s quarterly earnings call.
Meanwhile ICE, which operates clearing houses both in London and in the EU, is bullish that a deal can be made.
“I believe that the UK has every ability to adopt policies to retain the business that it has earned and that the UK and the EU will find ways to work together constructively,” said Jeff Sprecher, chairman and CEO, ICE on its quarterly earnings call.