Activity

The terms “equivalency” in the context of Central Counterparties (CCPs) and clearing houses generally refer to the European Commission’s decision that the regulatory framework of a non-EU country for CCPs is equivalent to its own EMIR (European Market Infrastructure Regulation) framework. This allows CCPs based in that third country to be recognized by the European Securities and Markets Authority (ESMA) and thus provide services to EU-based clearing members and trading venues.
For London-based clearing houses, the key point is their relationship with the EU post-Brexit.
Current Status of UK CCP Equivalence:
As of today, May 1, 2025, the European Commission has extended the time-limited equivalence for the United Kingdom’s regulatory framework for CCPs until June 30, 2028. This decision was announced on January 31, 2025.
This extension ensures that EU financial institutions can continue to access clearing services provided by UK CCPs for the time being, avoiding potential disruptions to financial stability. The extension aims to provide sufficient time for the implementation of EMIR 3, which includes measures to enhance the attractiveness and competitiveness of EU clearing markets and reduce the EU’s reliance on UK CCPs in the medium term.
Key London-Based Clearing Houses:
The primary clearing houses based in London are part of the LCH Group, specifically:
* LCH Ltd: This is the UK-registered clearing house. Its services include SwapClear (for interest rate swaps), ForexClear, RepoClear, EquityClear Ltd, and cleared Listed Rates business.
Equivalency and LCH Ltd:
* Following Brexit, LCH Ltd became a “third country CCP” under EU regulations.
* The EU’s equivalence decisions have allowed ESMA to recognize LCH Ltd, enabling it to continue offering clearing services to EU members. The latest extension ensures this recognition remains in place until June 30, 2028.
Other Considerations:
* The Bank of England is responsible for recognizing non-UK CCPs seeking to provide clearing services in the UK. The UK has retained the EU framework for recognizing non-UK CCPs (known as EMIR 2.2).
* CCPs deemed systemically important by the Bank of England (“Tier 2”) are required to meet specific UK standards and are subject to direct supervision by the Bank.
* LCH SA is the LCH Group’s clearing house based in France and benefits from temporary deemed recognition from the Bank of England.
In summary, while London-based clearing houses like LCH Ltd are now “third country CCPs” from an EU perspective, the European Commission has granted equivalence to the UK’s regulatory framework, allowing them to continue serving EU clients until at least June 30, 2028. This equivalence is crucial for maintaining stability in the financial markets.

Video courtesy of Thinking Crypto

Video courtesy of Thinking Crypto