EU Opens Door to U.S. Clearing Firms After a Years-Long Wait

The European Union granted equivalence to a set of U.S. clearinghouses, easing their access to its financial markets.

The decision, which allows U.S. central counterparties to provide clearing services in the European Union, is conditional and applies to U.S. Securities and Exchange Commission-regulated firms, according to a statement Wednesday. Clearinghouses stand between the two sides of a derivatives trade and hold collateral, also known as margin, from both in case a member defaults.

The move will help companies including the Depository Trust & Clearing Corporation and the Options Clearing Corporation offer their services to companies in the world’s biggest trading bloc.

“OCC looks forward to working with regulators to achieve recognition as a qualified central counterparty,” the clearinghouse said in a statement. “Recognition will allow OCC’s clearing members that are affiliates of European banks to avoid punitive capital charges under the European Capital Requirements Regulation.”

The long-awaited decision comes almost five years after U.S. and European Union regulators reached an agreement on clearinghouses regulated by the U.S. Commodity Futures Trading Commission, which oversees the multi-trillion dollar market for over-the-counter derivatives.

The delay highlights the opaque decision-making behind the mechanism that determines financial services relations between the EU and the rest of the world. Similarly slow progress has become a source of frustration for the City of London since Britain departed the bloc. British regulators have granted a number of equivalence deals to the EU, but so far their European counterparts have assented to just two in return and have little incentive to speed up the unilateral process.

While progress with the U.K. has been slow, the EU is also considering recognizing the rules for OTC derivatives in countries including Australia, Brazil and Hong Kong as equivalent, according to its website. It’s seeking feedback on these measures until Feb. 17.

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