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Hamilton, Bermuda: 28 August 2019— In a press release today The World Federation of Exchanges has today a published a letter regarding market fragmentation arising from EMIR 2.2.The release stated:








London, Wednesday 28 August 2019 – The World Federation of Exchanges ("WFE"), the global industry group for exchanges and CCPs, has today published a letter that it has sent to the European Commission and the European Securities and Markets Authority (ESMA), setting out principles that could avoid international regulatory dissonance in the cross-border supervision of central counterparties (CCPs), as the EU sets about adopting rules to implement EMIR 2.2.


In today’s letter, the WFE sets out its concerns that ESMA proposals on the implementation of EMIR 2.2 risk unduly fragmenting global markets, increasing costs for end users, and exacerbating tensions in international relations. 


The letter includes a number of principles that the WFE believes would support the objective of EMIR 2.2 to concentrate supervisory efforts on Third Country (TC) CCPs that have a systemic importance to the stability of the EU or one of its Member States, while limiting potential negative impacts associated with international regulatory dissonance. These principles are:


·         Fairness and due process in tiering CCPs: It is essential that the process for determining systemic importance is characterised by predictability, fairness and due process, therefore the process could be enhanced by introducing a series of formal milestones for communication and decision-making – prior to the tiering process, during it, and following designation.

·         Direct nexus to the EU: The basis for determining that a TC-CCP is a Tier 2 CCP and as such, systemically important to the financial stability of the EU or one of its Member States, should be based on their clearing of financial instruments denominated in EU currencies, relevant to the transmission of EU monetary policy and/or significant exposure to financial institutions domiciled in the EU.

·         Relative importance of indicators: The WFE recommends that the factors to be considered in the tiering process be substantially reduced, and prioritised with a focus on evaluating the risks posed by a TC-CCP to the financial stability of the EU or its Member States — risks that are “direct, substantial and foreseeable.”

·         Predictability of determinations: Fewer indicators would also result ingreater predictability about the threshold for a Tier 2 CCP, reducing the lack of clarity around determinations. Predictability could be enhanced by the provision of a series of tests or indicative case studies to help guide the market in its understanding of the relevant threshold.

·         Comparable outcomes: The WFE recommends that the comparable compliance process adheres more closely to the principle of regulatory deference by taking an outcomes-based approach, as opposed to requirement-by-requirement. Moreover, as outlined in previous policy work, the WFE recommends work towards enshrining best practices for such assessments be undertaken at the international level.


Promoting international regulatory coherence is a strategic priority for the WFE and its CCP members; the Federation also commented on the initial legislative proposal for EMIR 2.2. Ahead of the June 2019 G20 Finance Ministers and Central Bank Governors meeting, the WFE published a statement entitled ‘Financial Stability through International Regulatory Coherence’ which discussed cross-border fragmentation arising from unjustified dissonance between jurisdictions’ financial services regimes.  In addition, the WFE is engaging with the CFTC regarding US authorities’ proposals on supervising and exempting non-US CCPs.


Nandini Sukumar, Chief Executive Officer, WFE said: “The WFE recognises that EMIR 2.2 has sought to balance the principle of regulatory deference with authorities’ objectives related to financial stability. We hope that as the implementing rules are made, EU authorities will keep in mind G20 commitments to promote international cooperation in financial regulation, and carefully consider how EU citizens and financial institutions benefit from global securities and derivatives markets.”


You can read the WFE letter in full here.


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About the World Federation of Exchanges (WFE):

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 37% are in Asia-Pacific, 43% in EMEA and 20% in the Americas. WFE exchanges are home to nearly 48,000 listed companies, and the market capitalisation of these entities is over $70.2 trillion; around $95 trillion (EOB) in trading annually passes through the infrastructures WFE members safeguard (at end 2018).


The WFE is the definitive source for exchange-traded statistics, and publishes over 350 market data indicators.  Its free statistics database stretches back more than 40 years, and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system.  


With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system.


For more information, please contact:


Anna Watson

Head of Communications, The World Federation of Exchanges 


Phone:   +44 20 7151 4137 / 7850 287 685

Twitter:   @TheWFE


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