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Clearing Houses: European Presidency and Parliament Reach Agreement on CCP Recovery and Resolution Plans

The European Council and the European Parliament approved a deal outlining a regulatory framework relating to the recovery and resolution plans of central counterparties ("CCPs").

In a press release, the General Secretariat of the European Council stated that the proposed rules provide national authorities with tools to manage crises and to handle the failures of key financial market infrastructures. The main objectives of the reform are to reduce the probability of CCP failure by introducing incentives for proper risk management; and in case of financial difficulty, to preserve CCPs' critical functions, to maintain financial stability, and to prevent taxpayers from bearing the costs associated with the restructuring or resolution of CCPs.

According to the release, the recovery and resolution plans will be based on a three-step approach: (i) prevention and preparation, (ii) recovery measures and (iii) resolution tools. With certain limited exceptions, the new framework will start applying 18 months after the date of entry into force of the regulation to allow time to adopt all implementing measures and for market participants to take the necessary steps to comply with the new rules.

Further, due to COVID-19, the co-legislators agreed that it was appropriate to give one additional year for trading venues and CCPs offering trading and clearing of exchange-traded derivatives to start applying open access rules in Markets in Financial Instruments (or "MiFIR"). As a result, the open access regime will start as of July 4, 2021.

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Tags

Sub-Activity: 
Resolution Plans
Regulated Entities: 
Sub-Entity: 
Exchanges / Contract Markets
Body of Law: 
Jurisdiction: 
Organization: 
Sub-Author: 
European Parliament