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IOSCO Warns Regulators on EMIR CCP Recognition Processes

In early June, the Asia-Pacific Regional Committee of the International Organization of Securities Commissions (IOSCO) wrote a letter to European Commissioner Michel Barnier expressing concern about the recognition process for Asia-Pacific Central Counterparties (CCPs) under the European Markets Infrastructure Regulation (EMIR).  The concerns are:

• the need for greater transparency in the assessment methodologies and parameters in determining EU equivalence;

• the use of a “one size fits all” approach towards equivalence assessment under EMIR for third country CCPs rather than international standards such as the IOSCO Principles for Financial Market Infrastructures (PFMI);

• the CCP’s own rules and regulations and regulatory guidance should be taken into account when assessing equivalence within the legal framework.

The letter which has only recently been made public, notes that EU institutions would no longer be able to benefit from the services provided to them should Asia-Pacific CCPs not seek recognition or fail to receive it.  EU institutions would also “incur a special capital charge under CRD IV if it clears trades with non-EU CCPs not recognised by ESMA, irrespective of whether the EU institution is a CCP member via its branch or subsidiary.”

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