European futures exchanges have been given a one-year delay to implement rules aimed at boosting competition under MiFID II, just two weeks before the regime was set to come into force.
The European Parliament confirmed the delay for exchanges and clearing houses to implement open access, after regulators warned the coronavirus pandemic has impacted on firms’ ability to prepare. The delay was agreed by the European Parliament and EU national governments, and inserted into a draft EU financial services law.
The open access regime, due to take effect on 4 July, aims to increase competition in the futures market by removing the vertical silo model of trading and clearing at the same location. It requires trading venues and clearing houses to allow non-discriminatory access to their services, meaning traders can trade a future on one exchange and clear it at a central counterparty (CCP) owned by a completely separate group.
London-based futures exchanges and clearing houses such as CurveGlobal and LCH have backed the regime, but Germany’s Eurex and Intercontinental Exchange (ICE) opposed the plans, arguing that futures are not mutually interchangeable that can be bought on one exchange and cleared somewhere else. Deutsche Börse and ICE are also wary the rules would challenge their integrated structure where they offer trading, clearing and data services under one group.
Earlier this month, the European Securities and Markets Authority (ESMA) stated the current market environment, with a high degree of uncertainty and volatility driven by the COVID-19 pandemic, will negatively impact clearing houses and trading venue’s operations and increase their operational risk.
The UK’s Financial Conduct Authority (FCA) backed ESMA’s statement, adding that firms must prioritise the maintenance of markets and ensure continuity of their services, even if that results in delays to an open access request.