European trade associations have urged EU policymakers to scrap the active account requirement proposal under the European Market Infrastructure Regulation (EMIR 3.0) in a joint statement.
The EMIR 3.0. mandate, aimed at enhancing the appeal of the EU’s clearing system while reducing the exposure of EU entities to third-country CCPs, would require all market participants to hold active accounts at EU central counterparties (EU CCPs) for clearing at least a portion of certain systemic derivatives contracts. The trade bodies argued this would put EU companies at a “competitive disadvantage” compared to third-country firms.
The trade associations include the European Fund and Asset Management Association (EFAMA), Banking & Payments Federation Ireland (BPFI), European Association of Co-operative Banks (EACB), FIA European Principal Traders Association (FIA EPTA), Alternative Investment Management Association (AIMA), Investment Company Institute ( ICI global), International Swaps and Derivatives Association (ISDA), Futures Industry Association (FIA), Federation of the Dutch Pension Funds, Finance Denmark and Nordic Securities Association.
According to the bodies, the mandate would harm the EU’s financial stability by introducing of fragmentation, diminishing netting benefits and making it less resilient to market stresses, ultimately harming European pension savers and investors.
They urged the European Commission to focus efforts on streamlining the regulatory structure for EU CCPs across member states while making its offering for clearing in the EU “more attractive and innovative”. They stated: “Incentivising measures would provide a path to sustainable growth of EU CCPs while maintaining competitive and open markets.”
“EU clients required to clear at an EU CCP to comply with an active account threshold could be forced to accept an uncompetitive price wherever the price available at an EU CCP is higher than what is available at a Tier 2 CCP,” they added.
They recommended that policymakers be guided by “comprehensive and robust” cost-benefit assessments that include a review of the risks and impacts on financial stability and the competitiveness of EU market participants.
The EMIR 3.0 proposals, aimed at enhancing the appeal of the EU’s clearing system while reducing the exposure of EU entities to third-country CCPs, are currently being debated by co-legislators in the European Parliament and Council.
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