EMIR 3.0 – an unfortunate case of the national interest outshining the European interest
The EU’s ambition is to encourage clearing at EU CCPs and with EU clearing members. This is to reduce reliance on systemic non-EU CCPs, and to build a more attractive and robust EU clearing market. To achieve this, EMIR 3.0 requires EU clearing members and clients subject to the clearing obligation to hold active accounts at EU CCPs. The minimum number of derivative contracts to be cleared is set to at least five trades per annum for the relevant subcategories of trades and derivatives classes.
Although it is very unlikely that this will fulfil the EU’s ambition, more importantly it risks diminishing the competitive position of EU firms, leading to EU clients who do not fall under the clearing obligations to use non-EU clearing members, and concentrating non-EU clients’ euro-denominated interest rate swaps trading activity with non-EU dealers.
Instead, what is missing from EMIR’s final text published on 14 February, is a centralised supervisory framework. Just enhancing the current supervision mechanism is not enough. A European centralised supervisor will not only strengthen risk monitoring and (eventually) minimise systemic risks but will also reduce supervision costs, the number of procedures, divergent interpretations of EMIR rules, and the exchange of data.
Apostolos Thomadakis, Ph.D., is Head of Research at ECMI and Research Fellow at CEPS.