FIA today released survey results that provide a high level snapshot into clearing brokers’ progress with their Brexit contingency plans, the issues they face when structuring and executing such plans, and the policy proposals that would help address these issues. A primary concern expressed by a number of EU27 clearing firms is that they may be forced to close some or all of their client clearing business if UK CCPs are not recognised under EMIR and/or fail to retain their QCCP status under the EU’s Capital Requirements Regulation.
“This snapshot survey reveals that significant uncertainty remains among clearing firms regarding the UK and EU regulatory environment post-Brexit,” said FIA President and CEO Walt Lukken. “In order to avoid fragmentation and loss of market access, the report makes six recommendations on how authorities in both the UK and EU could provide clarity to enable cross-border business to continue to be conducted post-Brexit.”
Following the publication in December 2017 of FIA’s white paper “The Impact of a No-Deal Brexit on the Cleared Derivatives Industry,” FIA has interviewed over 15 institutions representing a cross-section of the industry’s clearing firms by jurisdiction, market segment and size to discuss their Brexit implementation plans with respect to their client clearing business. Collectively, they represent the vast majority by volume of client clearing activity on UK and EU27 CCPs, for both cleared OTC derivatives and listed derivatives such as futures and exchange-traded options.
Based on the results of the survey, it is clear that although clearing brokers are endeavouring to adapt to Brexit, significant concerns and uncertainties remain. FIA urges UK and EU policymakers to consider the following steps:
- The European Commission confirms whether, and from when, UK firms may be permitted to benefit from the third country passport under Articles 46/47 or MiFIR;
- The European Commission confirms whether, and from when, UK CCPs will be capable of recognition under EMIR;
- The European Commission confirms that UK CCPs will retain their “QCCP” status under the EU’s Capital Requirements Regulation;
- The European Commission confirms whether EU27 CCPs will be able to continue to service UK clearing members and clients;
- The UK and EU27 each confirm whether the UK will continue to participate in the EU Emissions Trading Scheme during the Brexit transition period and whether the UK will adopt a domestic version of the scheme thereafter; and
- The UK confirms whether and when it will implement a domestic version of the EU’s REMIT regulation.