The European Securities and Markets Authority (ESMA) has welcomed a recent communication from the European Commission which outlines plans for central clearing in the case of a no-deal Brexit scenario.
Earlier this month, the European Commission said that it will adopt a temporary and conditional equivalence decision in order to ensure that there will be no disruption to central clearing in Europe. The Commission stressed that the contingency measures will be temporary in nature and should, in principle, not go beyond the end of 2019.
ESMA added that it is now working with the European Commission to plan preparatory actions for the recognition of UK central counterparties clearinghouses (CCPs) in the case where there is a no-deal ahead of the UK’s departure from the European Union on 30 March next year.
“The aim is to ensure continued access to UK CCPs for EU clearing members and trading venues as of 30 March 2019, should all the conditions in EMIR, including any conditions set out in the equivalence decision, be fulfilled,” ESMA stated.
ESMA also published a report earlier this month with draft regulatory technical standards (RTS) on the clearing obligation under EMIR. It said that in the event of a no-deal Brexit a limited exemption would be implemented to facilitate the innovation of certain non-centrally cleared OTC derivatives contracts to EU counterparties during a specific time-window.
Chair of ESMA, Steve Maijoor, said that the proposed changes supports counterparts’ Brexit preparations and maintains and level playing field between EU counterparties, while addressing potential risks to orderly markets and financial stability.