On 7 February 2024, the European Parliament and the Council reached a provisional political agreement on the clearing package, which includes amendments to the European Market Infrastructure Regulation (EMIR) and other pieces of EU law. The new rules will contribute to making EU clearing services more attractive and robust, preserving financial stability, and supporting a well-functioning Capital Markets Union, because only well-developed and dynamic central counterparties (CCPs) can support trading in capital markets effectively. The package also draws lessons from the recent stress events in energy markets and aims at mitigating some of the risks of excessive reliance on CCPs located in non-EU countries.

Three objectives

Shaping a competitive and modern clearing system in the EU: The provisional agreement introduces streamlined supervisory processes, including for the extension of a CCP’s existing authorisation to new services and products, and for the validation of changes to a CCP’s risk models. This is a significant improvement compared to the current situation, where it can take up to 2 years for an EU CCP to get the supervisory approvals necessary to start offering a new clearing service. This will, in turn, allow EU CCPs to remain competitive internationally and to keep up with the increasing demand for clearing.

A safer EU clearing ecosystem through strengthened supervision: The provisional agreement strengthens cooperation, coordination and information sharing among supervisors and the European Securities and Markets Authority (ESMA) and ensures an appropriate division of tasks between national authorities and ESMA. The agreement also strengthens the role of ESMA, providing it with a coordination role in emergency situations, while leaving the ultimate decision-making powers to national competent authorities. ESMA will also take on the role of co-chair of supervisory colleges, working together with the relevant national competent authorities. Finally, ESMA will be informed about, and may request to be invited to, on-site inspections and provide opinions in an extended range of areas.

Contributing to the EU’s open strategic autonomy: The provisional agreement requires market participants that are under the clearing obligation to clear a pre-determined number of their derivatives transactions through active accounts at EU CCPs. The derivatives targeted are those belonging to the clearing services of non-EU CCPs that ESMA considers pose significant risks to the financial stability of the EU or of one or more of its Member States – namely over-the-counter (OTC) interest rate derivatives denominated in euro and Polish zloty, and Short Term Interest Rate futures. This is accompanied by operational requirements aimed at ensuring that the account is used effectively and is able, even at short notice, to receive large volumes of derivative contracts at all times from those non-EU CCPs. Furthermore, a Joint Monitoring Mechanism is created to keep track of this new requirement.

Crucial first step

While the level of ambition of the provisional agreement on the active account is disappointing compared to the Commission’s proposal, the agreement is nevertheless a crucial first step towards boosting clearing in the EU and allowing work on the Capital Markets Union to progress.

The review clause and the extensive reporting requirements that come with it will allow the Commission and co-legislators to resume the debate in the near future if the measures agreed upon do not lead to a significant reduction of exposure to systemically important non-EU CCPs.

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