HM Treasury published a draft statutory instrument (SI) under the European Market Infrastructure Regulation (EMIR) relating to non-UK central counterparties (CCPs) after the United Kingdom’s withdrawal from the European Union (exit day). It has also published a supporting explanatory memorandum.
The explanatory memorandum explains that the purpose of the SI is to use powers in the European Union (Withdrawal Act) 2018 in order to address failures of retained EU law to operate effectively by addressing four points.
Firstly, the SI addresses the deficiencies in EMIR by transferring functions of the European Securities and Markets Authority (ESMA) relating to the recognition of third-country CCPs to the Bank of England and amends the Financial Services and Markets Act 2000, where necessary, to ensure a coherent UK regulatory framework.
Secondly, the SI provides the Bank of England with powers to receive applications from and make decisions on the recognition of non-UK CCPs before exit day to ensure a seamless continuation of services provided by non-UK CCPs currently providing clearing services in the United Kingdom. From exit day, a non-UK CCP will only be able to provide clearing services in the United Kingdom if it has been recognized by the Bank of England under the provision of Article 25 of EMIR.
Thirdly, the SI puts in place a “Temporary Recognition” regime, to enable third-country CCPs to continue their activities in the United Kingdom for a limited period after exit day, if they are currently able to carry out those activities in the European Union under EMIR, and have notified the Bank of England prior to exit day that they intend to continue doing so in the United Kingdom.
Finally, the SI enables the Bank of England to charge fees from non-UK CCPs that are providing services to the United Kingdom, in order to enable the Bank of England to carry out work in relation to their transitional functions.
The draft SI is available here.
The explanatory memorandum is available here