Technical Paper on Active Accounts

In the paper Targeted consultation on the review of the central clearing framework in the EU from February 2022, one of the measures proposed for consideration by the European Commission (EC) was the requirement for an “active account” (ie the requirement to “maintain[…] an active account with an EU central counterparty (CCP) for the products that are available inside and outside the EU”). We understand that such a measure would require all, or a subset of, EU clearing participants to have an account at an EU CCP or a tier-1 CCP in addition to, or as an alternative to, an account at a tier-two third-country CCP.

We accept that having viable options is always good risk management, but note however that this is a tool that could, depending on how it is designed, add costs and risks for EU clearing participants (be they clearing members or clients).

As we understand that this proposal is under serious consideration by the EC, we provide analysis as to the potential consequences of different design choices.

We look at three policy options:

  • Policy Option 1: No active accounts
  • Policy Option 2: Active accounts without a target minimum level of activity
  • Policy Option 3: Active accounts with qualitative and quantitative usage requirements – minimum activity levels

For each policy option we analyze the impact on market participants and how the policy option could be operationalized and supervised.

We also would like to refer to our paper A Roadmap to Make European Clearing More Attractive for proposals on how to make clearing in the EU more attractive without disadvantaging EU firms.

Recognition of Cross-product Netting is Critical

US regulators are in the process of making important changes to the regulatory capital framework by proposing modifications to the enhanced supplementary leverage ratio, which should help stop it from acting as a non-risk-sensitive constraint on bank capacity – a...

ISDA, GFXD Response to FCA on SI Regime

On September 10, ISDA and the Global Foreign Exchange Division (GFXD) of the Global Financial Markets Association responded to the Financial Conduct Authority's (FCA) consultation paper CP25/20 on the systematic internalizer (SI) regime for derivatives and bonds. ISDA and the...

ISDA Response on Clearing Costs

On September 8, ISDA responded to consultation by the European Securities and Markets Authority (ESMA) on a draft regulatory technical standard on clearing fees and associated costs (article 7c(4) of the European Market Infrastructure Regulation (EMIR)). In the response, ISDA...