London Clearing House
LCH
LCH Group is a leading multi-asset class and multi-national clearing house, serving major international exchanges and platforms as well as a range of OTC markets.
ID: 458219510100-89
Lobbying Activity
Response to Extension of transitional period for CCPs
10 Nov 2016
Dear Sirs,
This letter provides the submission of LCH Group (“LCH”) to the European Commission's (“EC”) consultation on the extension of transitional periods for CCPs.
LCH is a leading multi-asset class and international clearing house, which services major international exchanges and platforms, as well as a range of OTC markets. It clears a broad range of asset classes including cash equities, exchange traded derivatives, commodities, energy, freight, interest rate swaps, credit default swaps, bonds, repos, and foreign exchange derivatives. LCH is majority owned by the London Stock Exchange Group (“LSEG”), a diversified international exchange group that sits at the heart of the world’s financial community.
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General Remarks
We understand the EC's decision to extend the deadline for QCCP status for an additional six months, particularly as otherwise, the resulting increase in risk capital requirements for some market participants would cause significant disruption. We do not have any concerns with the drafting of the implementing regulation; however, we would like to make a few comments about the manner in which the process is undertaken, and how it will continue in the future.
1. Assumption of extensions: We believe that the market now assumes that the QCCP deadline will be extended by six months for an indefinite period. While we understand and agree with the EC's view that an increase in capital requirements should be currently avoided, we also appreciate that the transitional period is meant to be in place for a limited amount of time. We suggest that the EC communicates its views to the market about when and how the rolling extensions will come to an end.
2. Support a robust approach by ESMA to CCP recognition: Faith in the robustness of EMIR recognition requirements is an important aspect of market participants and regulators having trust in recognised non-EU CCPs. To this end, LSEG supports ESMA's work in conducting thorough examinations of non-EU CCPs to ensure that they are suitable and meet the appropriate requirements before being recognised under EMIR.
3. Rejection of recognition: In combination with the points above, we believe that where a CCP seeking recognition cannot satisfy ESMA that it is suitable, its application can be rejected and the CCP can lose its transitional QCCP status. Were this not to happen, it would undermine the credibility of both the recognition regime, and the difference in capital treatment of EMIR compliant CCPs and those which are not.
We hope that the EC finds this submission useful and we look forward to engaging further as policies are developed. Should you have any questions on the response or wish to discuss it in detail, please do not hesitate to contact us at cpoilvetclediere@lseg.com or jean-philippe.collin@lch.com.
Read full responseMeeting with Jack Schickler (Cabinet of Commissioner Jonathan Hill)
20 Oct 2015 · CCP recovery and resolution