Active Accounts at EU-based CCPs
Note: This article was originally published on the Clarus Blog by Chris Barnes.
Active Accounts at EU-based CCPs will be required for EU counterparties subject to the clearing obligation.
The European Parliament recently announced that:
- At least one active account will be necessary at a CCP established in the EU.
- The requirement covers both financial and non-financial counterparties subject to the clearing obligation.
- The active account must regularly clear five trades in each of the derivatives subcategories.
- The account is “active” if it posts initial and daily variation margin (and can be scaled up).
- If necessary, further measures can be enacted in several years (the quoted politician states two years).
The European Commission then provided the following details:
- ESMA should identify up to three derivative classes (interest rate derivatives in EUR and PLN, STIRs in EUR so far).
- ESMA will then identify up to five subcategories per derivative class, based on size and maturity.
- Five trades per annum should be cleared.
- There will be a scaled-down representativeness requirement for some counterparties (for example, EU pension funds) to clear only one trade per annum (within each derivative class).
- ESMA will have to report the effects of these new rules two years after the active account requirement goes live.
For those of us who thrive on the details, this looks almost exactly the same as I wrote back in December:
My understanding from reading the texts is that the calibration period will be annual (irrespective of size). However, the FT suggests it could be monthly, resulting in 900 trades a year for the largest derivatives users.
Either way, the commentary is aligned that this is a “scaled-back” plan compared to earlier proposals.
If you are interested in the politics…
I tend to focus on the details rather than the politics, but our readers may also be interested in some of the back stories circulating. Politico states that as recently as September 2023, ECB staff were lobbying for 30–40% of trades to be moved to the EU for European banks. Apparently, French banks pushed back hard against this, and the French government sided with their banks and against Germany – it is interesting reading, at least!
Path forward
As per the FT (with the aid of data from Clarus CCPView), London dominates euro derivatives clearing:
The latest announcements will likely move Clearing to where it belongs – away from the front pages, away from political intrigue, and back into the depths of financial market plumbing. If you read another article about Clearing in the mainstream press, it is likely only because something has gone wrong!
European market share
This story will now move away from politics and back toward the data. I will continue to monitor market shares across OTC EUR Swaps, Euribor futures contracts traded at ICE and Eurex, and ESTR liquidity across CME, Eurex, and ICE. I updated the data three weeks ago, so readers will have to wait until the end of the quarter to see an updated STIR dashboard on the blog. Our data clients can, of course, monitor the data daily.
This article was originally published on the Clarus Blog.
