Regulators approve framework for clearing links

Regulators approve framework for clearing links

British, Dutch and Swiss regulators have agreed a new framework for linkages between clearing counterparties in an effort to allay fears about systemic risks and inject fresh competition into the market.

In October, LCH.Clearnet suspended plans to begin offering clearing services across a range of execution venues due to regulatory concerns about systemic weaknesses in clearing house interoperability arrangements.

The London-based clearing house alerted the market to the problems in a letter to shareholders in which it said regulators had expressed concerns regarding "inter-CCP margin requirements".

The new framework - which has yet to be published - has been agreed by market authorities in conjunction with the European Commission.

The Dutch-based European Multilateral Clearing Facility (EMCF) welcomed the breakthrough: "EMCF is happy that there is now clarity about the direction regulators are going with regard to interoperability. EMCF is busy studying the document, speaking to clearing participants, trading venues, regulators and other CCPs and will have a fuller statement next week after the conclusion of these meetings."

It is believed the document clarifies the conditions under which interoperable links will be approved, but is vague as to the precise controls that will need to be put in place to satisfy those conditions.

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