The European Securities and Markets Authority (ESMA) has today announced that in the event of a no-deal Brexit, three central counterparties (CCPs) established in the United Kingdom (UK) – LCH Limited, ICE Clear Europe Limited and LME Clear Limited – will be recognised to provide their services in the European Union (EU). ESMA has adopted these recognition decisions in order to limit the risk of disruption in central clearing and to avoid any negative impact on the financial stability of the EU.

?ESMA to recognise three UK CCPs in the event of a no-deal #Brexit

? https://t.co/CnK7N823ng

ℹ️In the event of a #nodeal Brexit, three CCPs established in UK – LCH Limited, ICE Clear Europe Limited & LME Clear Limited – will be recognised to provide their services in the EU pic.twitter.com/NHenVnfMEa

— ESMA (@ESMAComms) February 18, 2019

ESMA has previously communicated, in its statements of 23 November, 19 December 2018 and 4 February 2019, that its Board of Supervisors supports continued access to UK CCPs. Having assessed the applications and the information submitted by the three CCPs, and consulted the relevant authorities in accordance with EMIR, ESMA considers that the conditions for recognition under Article 25 of EMIR are met by the three CCPs in case of a no-deal Brexit. Therefore, it has adopted decisions to recognise the three CCPs as third country CCPs under EMIR.

The recognition decisions would take effect on the date following Brexit date, under a no-deal Brexit scenario.

UK Central Securities Depository (CSD)

ESMA has previously communicated that its Board of Supervisors also supports continued access to the UK CSD. That recognition process is still on-going, the results of which will be published as soon as the process is finalised.

From ICE:

Intercontinental Exchange, a leading operator of global exchanges and clearing houses and provider of data and listings services, announced today that, in the event of a no-deal Brexit scenario, ICE Clear Europe has been recognized as a third-country central counterparty (CCP) in accordance with the European Market Infrastructure Regulation (EMIR).

“We are pleased to receive this recognition, which means that ICE Clear Europe can continue to service all its clearing members and customers, including those based in the EU, in the event of the UK leaving the European Union without a withdrawal agreement,” said Finbarr Hutcheson, President of ICE Clear Europe. “We thank the European Commission, Bank of England, and European Securities and Markets Authority (ESMA) for its work securing this recognition and, in doing so, removing any uncertainty around the ability of EU-based market participants to access ICE Clear Europe.”

The recognition as a third-country CCP is described in Article 25 of EMIR, the Regulation (EU) No 648/2012 of the European Parliament and of the Council of 04 July 2012 on OTC derivatives, central counterparties and trade repositories. In the absence of a withdrawal agreement being entered into between the UK and the EU in accordance with Article 50(2) of the Treaty on European Union, or a decision being taken to extend the two year period referred to in Article 50(3) of the Treaty on European Union, ICE Clear Europe’s recognition shall apply from March 30, 2019.

With approximately 4 million contracts cleared every day across multiple asset classes, ICE Clear Europe is one of the world’s most diverse and leading clearing houses. ICE Clear Europe provides central counterparty clearing and risk management services for interest rate, equity index, agricultural and energy derivatives, as well as European credit default swaps.

As part of its strategy to provide clearing services in the regulatory jurisdictions and time zones where its customers conduct business, ICE Clear Europe offers secure, capital-efficient clearing, risk management and physical delivery services. To help mitigate systemic risk and protect the interests of its clearing members and customers, ICE Clear Europe holds over $4.5 billion in its guaranty fund and is regulated by the Bank of England in the U.K. and by the SEC and CFTC in the U.S.Additionally, ICE Clear Europe was recently recognized as a foreign central counterparty by the Swiss Financial Market Supervisory Authority.

Source: ICE

Catherine McGuinsess, policy chair at City of London Corporation, said:

This is good news for the short term, as it provides certainty in case of a no deal. We now need further progress on remaining cliff-edge issues, most notably cross-border data flows – an issue the IRSG recently wrote to the European Commission about – and contract continuity. https://t.co/x9loWgg61K

— Catherine McGuinness (@City_McGuinness) February 18, 2019

The International Commodities and Derivatives Association said:

ESMA recognises three UK-based CCPs in case of no-deal #Brexit – very welcome to our members: see https://t.co/zIZ01KaxMb

— ICDA (@incodaorg) February 18, 2019