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The derivatives industry is reacting positively to the finalization of the European Union’s derivatives regulations, particularly the “active account requirement” (AAR), which aims to repatriate more euro derivatives clearing to the EU from London.
Background on Euro Derivatives Clearing Post-Brexit:
* Dominance of London: Following Brexit, the location of euro derivatives clearing became a major point of contention. Despite efforts by the EU, London’s LCH (part of LSEG) has largely maintained its dominance in euro-denominated interest rate swaps (IRS) clearing. ClarusFT reported that in 2024, approximately 95% of euro-denominated IRS were cleared through LCH.
* Partial Migration: While credit default swap (CDS) clearing activity saw a greater shift to Paris after ICE closed its London-based CDS clearinghouse in 2023, a mass migration of euro-denominated interest rate swaps has not occurred.
* EU’s Forceful Approach: To increase its share of euro swaps clearing, the EU implemented the AAR. This regulation mandates that EU firms with over €3bn of gross notional value in these derivatives must maintain an “active account” at an EU clearinghouse and clear a minimum number of trades there annually. ESMA published the final version of the AAR on June 19, 2025.
Industry Concerns and Amendments:
* Initial Opposition: Derivatives users initially criticized earlier versions of the AAR, calling them “clumsy and onerous.” A significant concern was the proposed real-time reporting requirements, which would have required EU firms to report individual trade IDs for their euro interest rate derivatives exposures to regulators.
* Streamlined Reporting: ESMA has since amended these reporting requirements. Firms now only need to report their positions every six months and are no longer required to provide as many granular details. Sarah Crowley, director, clearing services at the International Swaps and Derivatives Association, welcomed this change, stating that “The final reporting requirement has very much been streamlined and completely revisited compared to consultative version of the rules.” This suggests ESMA has been responsive to industry feedback on the practicality and burden of the initial proposals.
Impact and Outlook:
* Expected Shift, Not a “Step-Jump”: While the AAR is designed to boost EU clearing activity, particularly for Eurex, market participants do not expect an immediate, drastic shift. Instead, a continuous increase in activity at EU CCPs like Eurex is anticipated over the coming months and years. Eurex has already seen an increase in Euribor futures activity and open interest, indicating some success in attracting business ahead of the AAR’s implementation.
* Operational and Cost Burden: Despite the streamlining, concerns about increased operational and cost burdens for firms are still present. Firms need to ensure their active accounts are “permanently functional” with legal documentation, IT connectivity, and internal processes in place, and be able to handle large volumes of derivative contracts.
* Strengthening EU Financial Infrastructure: The EU’s ultimate goal is to enhance the resilience of its clearing services, reduce dependence on third-country CCPs, and ensure greater control over its financial infrastructure. This move is seen as essential for achieving financial autonomy and strengthening the bloc’s position in global finance.

Video courtesy of IPO-VID In Patrick’s Opinion

Video courtesy of IPO-VID In Patrick’s Opinion