The European Fund and Asset Management Association (EFAMA) is one of a number of trade organisations calling for the deletion of the proposed Active Account Requirement in the third iteration of the European Market Infrastructure Regulation.
A statement on EFAMA’s website said that it, along with BFPI Ireland, EACB, FIA EPTA, Federation of the Dutch Pension Funds, Finance Denmark, Nordic Securities Association, AIMA, ICI Global, FIA and ISDA, was calling on the European Commission (EC) to scrap the idea.
Instead, the trade bodies have called on the EC to focus efforts on streamlining the supervisory framework for EU central counterparties (CCPs) across member states while making these parties’ offering for clearing in the EU more attractive and innovative.
‘Sustainable growth path’
“We believe that incentivising measures would provide a path to sustainable growth of EU CCPs while maintaining competitive and open markets,” the statement ran. “Any measures to increase the attractiveness of EU clearing should be guided by the principle of supporting EU financial stability, facilitating client choice regarding where to clear and protecting the international competitiveness of EU market participants.”
It continued: “The post-crisis G20 reforms to the OTC derivatives markets, implemented in the EU through the European Market Infrastructure Regulation (EMIR), have made derivatives markets safer. It is important to build on the progress made and not introduce policies that would disrupt and fragment the global clearing ecosystem.
“Fostering a proportionate regulatory framework, to the benefit of all participants, will promote increased liquidity and clearing volumes in the EU. However, the proposed Active Account Requirement (AAR), would negatively impact EU capital markets by introducing fragmentation and loss of netting benefits, and make the EU less resilient to market stresses, with no benefit to EU financial stability.”
‘Competitive disadvantage’
EFAMA and its allies have also alleged that the AAR would create a “competitive disadvantage” for EU firms compared with third-party firms, which would remain able to transact in global markets without restriction.
The statement argued: “The introduction of quantitative thresholds in the AAR is especially damaging and could lead to a large, volatile and unpredictable price difference between CCPs (called a basis), which would significantly increase the cost and risk of hedging for EU clients. Ultimately, it would harm European pension savers and investors.”
