European Union:
Industry Groups Lobby The European Commission On UK Derivatives Trading Venues Equivalence Ahead Of Brexit
13 March 2019
Kramer Levin Naftalis & Frankel LLP
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A number of industry associations, including the International
Swaps and Derivatives Association ("ISDA") and the
Association for Financial Markets in Europe ("AFME"),
addressed a letter to the European Commission ("EC") on
28 February 2019 highlighting concerns about the impact of Brexit
with respect to derivatives markets, specifically in regard to
trading venues. If UK trading venues do not receive the benefit of
an equivalence decision in time for exit day, UK exchange-traded
derivatives risk being reclassified as over-the-counter
("OTC") derivatives. Such a reclassification could cause
certain types of counterparties to exceed the clearing threshold
under EMIR, thereby becoming subject to margin, clearing and other
requirements. In addition, under MiFIR those counterparty types
that exceed the clearing threshold must conclude transactions in
OTC derivatives on either an EU trading venue or third-country
venue recognized as equivalent by the EC, and if UK trading venues
are not granted equivalence, counterparties may lose access to
important liquidity sources for those OTC derivatives. Noting that
UK trading venues will meet the criteria for equivalence under EMIR
and MiFIR, the industry groups urge the EC to adopt an equivalence
decision either in time for exit day or as rapidly as possible
thereafter.
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