European Commission gives green light to US CCPs

US CCPs will now be allowed to apply to ESMA for clearing status.

The European Commission has officially deemed US rules on clearing houses as equivalent to its own, spelling an end to the long-running international dispute.

The announcement comes one month after the head of the US derivatives watchdog and European Commissioner Jonathan Hill came to an agreement on the regulatory framework for transatlantic central counterparties (CCPs).

US CCPs will now be allowed to apply to the European Securities and Markets Authority (ESMA) for clearing status.

The agreement between the European Commission and US Commodity Futures Trading Commission (CFTC) put to rest fears of a fragmented derivatives market.

“It [equivalence] means that US CCPs, once recognised by ESMA, can continue to provide services to EU companies. We look forward to the CFTC’s forthcoming decision on substituted compliance which will allow European CCPs to do business in the United States more easily,” said Commissioner Hill.

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