07 November 2014

Financial Times: EU set to recognise more overseas clearing regimes

The disclosure comes only two weeks after Brussels recognised four countries in Asia as having clearing house rules that were deemed “equivalent” to those for clearing houses in the EU. They were Singapore, Japan, Australia and Hong Kong.

Speaking at an annual Asia capital markets conference hosted by the Asia Securities Industry & Financial Markets Association (ASIFMA), Patrick Pearson, head of the financial market infrastructure unit at the European Commission, said the EC was preparing to recognise a second wave of jurisdictions as part of its so-called “equivalence assessments”.

Michael Voisin, derivatives partner at Linklaters, said the further recognition of more clearing houses was “encouraging” but added: “The continued omission of the US is, however, the main concern for everyone. The ideal outcome would be for regulators on both sides of the Atlantic to use the recent softening of tone from the CFTC as a springboard to work together to address problems caused by the extra territorial reach of both regulatory systems.”

Mr Pearson said that it was essential for key regulators to at least come to agreement soon on rules covering the potential failure of clearing houses, or central counterparties (CCPs). There were five main systemically important CCPs globally, he said, with common clearing members which created interlinkages in the financial system. “We have the luxury [of time] now to sort out these issues. If one of the globally important CCPs runs into trouble and we need to decide what to do, it will be too late,” Mr Pearson said. “There is a sense of urgency to use the luxury we have now to sort out the international basis for regulatory co-operation.”

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