The European Securities and Markets Authority, or ESMA, had made an announcement. This announcement, made on Monday, is regarding its recognition of three central counterparties (CCPs) established within the United Kingdom. ESMA recognizes these CCPs as third-country CCPs, in order to provide services to the 28-nation bloc after the Brexit transaction had reached its deadline

Slowly Coming To A Head

As for the CCPs themselves, they are: LCH Limited, ICE Clear Europe Limited, and LME Clear Limited.

It’s been years since the UK made a referendum to exit from the EU. After much tribulation, a diverse between these two groups had been established earlier this year. The final separation will occur on the 31st of December, 2020, after an 11-month period of transition.

Gearing Towards Functioning Post-Brexit

Both regulators and lawmakers of both sides are hard at work trying to streamline this separation. This is due to many, be it companies or individuals, will be affected in this massive shift.

On the 21st of September, 2020, the Delegated Acts had an update published to it. This update stipulated a new supervisory and regulatory regime for third-country CCPs. Alongside this, the European Commission has opted to adopt an equivalence decision in order to determine a limited time period where the supervisory and regulatory framework applicable to CCPs can be established within the UK.

The announcement explained that the recognition decisions would take effect only after the end of the transition period. This makes it run in line with the equivalence decision, as well. Furthermore, the announcement took note that this will continue to apply as long as the equivalence decision remains in force. As for the duration this will be, the equivalence decision will be in effect for 18 months, until the 30th of June, 2022.

FCA Doing The Same

CCPs stand as financial institutions that take on the counterparty credit risks between the parties involved within a transaction. This allows for settlement and clearing services to be provided for trades regarding securities, forex, derivatives, and options contracts. Through serving this purpose, the CCP serves a critical role when it comes to the financial market and its international trade.

On the other side of the Brexit decision, the UK financial regulator, the FCA, is seeking consultations. These consultations are in regard to the authorization of EEA-licensed companies, so they can continue to operate within the country post-Brexit.