A number of trade associations have urged EU policymakers to delete the proposed Active Account Requirement, under the European Market Infrastructure Regulation (EMIR 3.0).
The European Commission’s active account proposal 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 EMIR 3.0. proposals are currently being debated by the co-legislators in the European Parliament and Council.
The letter, signed by EFAMA, BFPI Ireland, EACB, FIA EPTA, Federation of the Dutch Pension Funds, Finance Denmark, Nordic Securities Association, AIMA, ICI Global, FIA and ISDA, which collectively represent major European end users of derivatives along with providers of clearing services, reads: “Further efforts should focus on streamlining the supervisory framework for EU CCPs across member states while making the EU CCPs’ offering for clearing in the EU more attractive and innovative.
“We believe that incentivising measures would provide a path to sustainable growth of EU CCPs while maintaining competitive and open markets.”
The associations believe the proposed Active Account Requirement would have a negative effect on EU capital markets by introducing fragmentation, loss of netting benefits, and making the EU less resilient to market stresses with no benefit to EU financial stability, ultimately harming European pensions savers and investors.
European Market Infrastructure Regulation (EMIR) has made derivatives markets safer, the associations suggest. “It is important to build on the progress made and not introduce policies that would disrupt and fragment the global clearing ecosystem,” the letter adds.
A location requirement for market participants would make the EU one of the only advanced capital markets with such a policy. The associations highlight the fact that in the US, despite clearing participants being significantly exposed to Tier 2 CCPs, has not sought to impose a location policy, which suggests that most jurisdictions believe that central clearing markets are “global by nature” and that financial stability risks are best managed through a solid shared oversight framework between supervisors.
“Finally, the proposed AAR severely challenges the principle of best execution toward the end client.” The statement asserts that the Active Account Requirement will create a competitive disadvantage for EU firms compared to third-country firms, who will remain able to transact in global markets without restrictions. EU clients that are 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.
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