ESMA Report Says ICE Clear Europe Should Keep EU Recognition Status

The European Securities Markets Authority (ESMA) has recommended specific clearing services provided by LSEG’s LCH and ICE Clear Europe continue to be recognised as of systematic importance in the European Union post-Brexit. In a report assessing the role of UK-established central counterparties (CCPs) in Europe, the regulator found that LCH’s SwapClear interest rate derivatives clearing service and the credit default swaps (CDS) and short-term interest rate derivatives services provided by ICE Clear Europe should maintain a recognised status in Europe. The services were identified as systematically important due to their ability to pose potential financial stability risk to the EU or member states because of their dominant market share in certain EU currency denominated products that had created a level of dependency on their services. The regulator has proposed measures including considering incentives to reduce the size of EU exposures to said Tier 2 CCPs, revising its compliance framework, expanding its crisis management toolbox or enhancing its cooperation with UK authorities on CCP recovery and resolution. ESMA added that the findings of its report would also provide “important input” in the European Commission’s deliberations over a potential extension of its temporary equivalence for UK-based Tier 2 CCPs early next year.