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V Cross-Border Issues, 16 Brexit: Equivalence; Location Policy »

Dermot Turing
From: Clearing OTC Derivatives in Europe
Edited By: Bas Zebregs, Victor de Seriere, Rezah Stegeman, Patrick Pearson
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.

Part III Post-Trading Infrastructures, 15 Central Securities Depositories and Participant Default in the EU »

Dermot Turing
From: Financial Market Infrastructures: Law and Regulation
Edited By: Jens-Hinrich Binder, Paolo Saguato
This chapter explores the legal and regulatory framework of the Central Securities Depositories Regulation (CSDR) and investigates the delicate dynamics of the CSDs' default arrangements to manage a CSD participant's default. CSDs are recognized to be a core component in the smooth functioning of the financial system. CSDR was made law in 2014 and created a new uniform legal and regulatory framework for CSDs in the European Union. One feature of the regulation of CSDs, as with other types of financial market infrastructure, was the requirement for rules and procedure for an orderly management of the default of a CSD participant. The chapter identifies that, while policymakers and CSDs share the same objective of ensuring the safety of securities settlement systems, CSDs' rulebooks and default rules and CSDR itself might have lagged behind the development of new resolution procedures for a participating financial institution which get into difficulties. It critically assesses some of the practices included in CSDs' rulebook on a participant's default management and how they would practically apply vis-à-vis the resolution of a participating firm.