Trade associations urge policymakers to delete active account proposal under EMIR 3.0

In a joint statement, the negative impacts the proposal would have on EU capital markets including introducing fragmentation, loss of netting benefits and reducing the EU’s resiliency to market stresses, are highlighted by the associations.

European trade associations have published a joint statement urging EU policymakers to delete the proposed active account requirement under the European Market Infrastructure Regulation (EMIR 3.0).

Announced in December, the proposal by the European Commission would require all market participants to hold active accounts at EU central counterparties (CCPs) for clearing a portion of certain systemic derivatives contracts.

Read more: Post-Brexit derivatives clearing tussle continues as European Commission clamps down on non-EU CCPs

The new clearing threshold calculation has been designed to increase the attractiveness of EU CPPs, according to the European Commission, with the EMIR 3.0 proposals currently being debated by co-legislators in the European Parliament and Council.

In the joint statement, European trade associations including AIMA, EFAMA, BFPI Ireland, EACB, FIA EPTA, Federation of the Dutch Pension Funds, Finance Denmark, Nordic Securities Association, ICI Global, FIA and ISDA, have urged EU policymakers to delete the proposal and instead focus on streamlining the supervisory framework for EU CCPs across member states.

The trade associations noted that incentivising measures would offer sustainable growth of EU CCPs while maintaining competitive and open markets.

Read more: European clamp down on non-EU CCPs using mandated active accounts could counter competition, EFAMA finds

The negative impacts the proposed active account requirement would have on EU capital markets were highlighted in the statement, including introducing fragmentation, loss of netting benefits and reducing the resiliency of the EU to market stresses with no benefit to EU financial stability. The associations emphasised that the proposal will ultimately harm European pension savers and investors.

Elsewhere, the associations highlighted that the new requirement would create a competitive disadvantage for EU firms when compared to third-country firms, which would still be able to transact in global markets without restrictions.

To comply with an active account threshold, EU clients required to clear at an EU CCP would be forced to accept an uncompetitive price in instances where the price available at an EU CCP is higher than that available at a Tier 2 CCP.

“When making important decisions, such as imposing an active account requirement, policymakers should act prudently and be guided by comprehensive and robust cost-benefit assessments that include a review of the risks and impacts on financial stability and on the competitiveness of EU market participants,” the trade associations said in a statement.

“To date, such a comprehensive and robust cost-benefit assessment has not been produced.”