EMIR amendments damaging to EU capital markets, associations say

EMIR, EUA group of European financial associations have hit out against proposed amendments to the European Market Infrastructure Regulation (Emir), stating the changes would be harmful to EU capital markets.

In a joint statement, the International Swaps and Derivatives Association (Isda), the Alternative Investment Management Association (Aima), the European Fund and Asset Management Association (Efama) and the Futures Industry Association (Fia) said changes to Emir proposals would leave EU firms less competitive as they would be less able to clear through central counterparties (CCP) based outside the EU.

The collection of bodies noted the European Commission’s proposal for firms to be subject to the EU clearing obligation and to have an active account at an EU central counterparty (CCP) but argued that this would reinforce the ability of the European Securities and Markets Authority to define the portion of certain euro- and Polish zloty-denominated contracts.

“Changes to capital rules would reinforce this, making it less commercially viable for EU market participants to clear through CCPs based outside the EU,” the statement read.

The proposals would “make EU firms less competitive and would have a negative impact on the derivatives market, EU clearing members and their clients, EU investors and savers, and the Capital Markets Union,” it continued.

For EU firms, the changes would not only hinder their ability to provide best execution to clients but would also be costly to implement, the statement highlighted.

“We believe the EC should substantiate the risk of clearing through tier-two CCPs based outside the EU and provide a robust cost-benefit analysis of the proposed active account requirements,” the statement read.

The associations noted that the EC has taken “some important steps towards strengthening the competitive position of Europe’s growing derivatives markets in the Emir 3.0 proposal” and the latest round of amendments “address the efficiency and resilience of financial market infrastructure in the EU.”

These include proposals to streamline supervisory practices for new EU central counterparty product approvals, efforts to facilitate the availability of cross-border intragroup transaction exemptions, and amendments to the Ucits Directive and Money Market Funds Regulation to incentivise clearing of over-the-counter derivatives.

“Such measures would further reinforce the positive trends already observed in the clearing of euro-denominated contracts at EU CCPs. A strategy based on organic growth and market-driven solutions would best support the competitiveness of EU CCPs in a global clearing marketplace,” the statement read.

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