MNI BRUSSELS WATCH: Bumpy Path For Draft CCP Relocation Text

--Some EU States Want Stronger Powers On Third Country CCPs

--Other Says Proposal Not Needed, Warn Of Negative Consequences

By Jean Comte

     BRUSSELS (MNI) - European Union member states are divided as they start

difficult negotiations Monday on a draft text enhancing supervision of third

party clearing houses dealing with large volume euro denominated operations,

Market News understands.

     The text, initially unveiled in June, creates a new mechanism at the

European Securities and Markets Authority to watch over these entities, and

could possibly force them to relocate into the EU. The clear target is

post-Brexit London, where 75% of euro-denominated operations are currently

cleared.

     EU member states are deeply divided on the way forward, according to a set

of written comments obtained by MNI.

     Some are extremely critical and doubt whether such a text is needed.

     Croatia, for example, bluntly 'disagrees' with the proposed procedure, and

is unsure about the need for any text dedicated to CCPs. Sweden argues that

there are no 'sufficient motives for the proposed changes'.

     Ireland, which depends heavily on UK-based CCPs, is worried about any

negative impact if ESMA seeks relocation of a major British clearing entity.

     'Such a decision would mean EU market participants would have to find

alternative clearing arrangements within a very short space of time. (...)

Consideration should be given to a transitional period to allow market

participants to put in place new arrangements in order to minimise market

disruption', wrote the Irish delegation.

     Other states seem concerned about the new role for ESMA, with Spain writing

that 'burdens should only be imposed when clearly needed'.

     Then there are the member states who think that the proposal is not harsh

enough, and are pushing for more powers for EU entities regarding British CCPs.

     France, which 'strongly supports' the draft text, wants to give veto right

to the EU Commission on 'decisions taken by third country authorities, if such

decisions could be contrary to the EU interests' - for example, the 'closure of

a non or poorly substitutable clearing service which is vital for the EU

economy'.

     Germany also seems keen to take a more proactive approach, with comments

stressing the need to assess further the possibility 'to impose additional

requirements on third-country CCPs'.

--MNI Brussels Bureau; +44 203-865-3851; email: tara.oakes@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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