- Derivatives — Central counterparty (CCP) — Financial regulation — European Securities and Markets Authority (ESMA)
This chapter illustrates the new legal framework for the regulation of non-European Union (EU) central counterparties (CCPs) operating in the EU, which came into force in 2020. The new legal framework divides recognized non-EU CCPs into categories according to systemic importance. Additionally, it is possible for the European Securities and Markets Authority (ESMA) to recommend relocation of systemically important CCPs to the EU. Brexit has also created a mirror-image framework of systemic classification by the UK authorities in respect of non-UK CCPs. The chapter attempts to trace a pathway through the new legal and regulatory environment. Along the way, various strategic landmarks stand out: the extent to which geography is relevant to the regulation of clearing of financial products which have no obvious geographical roots, the meaning of ‘systemic importance’ as applied to CCPs, the impact of Brexit on the industry’s most important CCPs for clearing of over-the-counter (OTC) derivatives, and the policy of the EU and the European Central Bank (ECB) with regard to the location of CCPs.
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