The European Fund and Asset Management Association (EFAMA) and 10 other trade associations* representing major European end-users of derivatives and providers of clearing services have called on the European Commission (EC) to delete the proposed active account requirement (AAR) contained in the European Market Infrastructure Regulation (EMIR 3.0).

The controversial proposal, currently being debated along with other EMIR 3.0 proposals in the European Parliament and Council, requires all market participants to hold active accounts at EU central counterparties (CCPs) for clearing at least a portion of certain systemic derivatives contracts.

One aim of EMIR 3.0 is to improve the competitiveness of EU CCPs by streamlining current rules which the EC itself says are “overly complex”, including supervisory approval procedures which are “unnecessarily long and burdensome”.

As a result, EU institutions have continued to rely substantially on UK CCPs for clearing services.

But the EC said this raises concerns about financial stability, and wants to move more clearing business into the EU.

In a statement issued yesterday, the associations said while they supported many of the measures introduced by EMIR 3.0, they strongly recommended the deletion of AAR.

They argued that EMIR 2.2 already provides European authorities with effective tools to supervise and oversee systemically important third-country CCPs (Tier 2 CCPs).

“However, the proposed AAR would negatively impact EU capital markets by introducing fragmentation and loss of netting benefits, and make the EU less resilient to market stresses, with no benefit to EU financial stability,” the statement said.

It added that the AAR would create a competitive disadvantage for EU firms compared with third-country firms, who would remain able to transact in global markets without restriction.

“The introduction of quantitative thresholds in the AAR is especially damaging, and could lead to a large, volatile, and unpredictable price difference between CCPs, which would significantly increase the cost and risk of hedging for EU clients,” it warned. “Ultimately, it would harm European pension savers and investors.”

And it contrasted the so-called “location requirement” with other advanced capital markets, such as the US.

“The fact that US authorities have not sought to impose a location policy 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,” it observed.

The statement said 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.

* The associations issuing the statement are:

  • Federation of Dutch Pension Funds (Pensioenfederatie)
  • Finance Denmark
  • Nordic Securities Association
  • Banking & Payments Federation Ireland (BPFI Ireland)
  • European Fund and Asset Management Association (EFAMA)
  • Alternative Investment Management Association (AIMA)
  • Futures Industry Association (FIA)
  • FIA European Principal Traders Association (FIA EPTA)
  • International Swaps and Derivatives Association (ISDA)
  • European Association of Co-operative Banks (EACB)
  • ICI (Investment Company Institute) Global

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