On 22 November 2018, HM Treasury published a letter updating the House of Common’s European Scrutiny Committee on the progress of the proposed EU Regulation (the Regulation) amending the EMIR supervisory regime for EU and third country central counterparties (CCPs).

The letter notes that the European Parliament have agreed a position on the draft Regulation. It is noted that the European Parliament have altered the ‘location policy’ – which concerns the treatment of substantial systemically important third country CCPs where ESMA and the European Commission may refuse recognition. The European Parliament seeks to amend the draft Regulation to ensure any decision to use such power is more proportionate than originally proposed.

With regards the European Council, the Austrian Presidency has published its compromise text – making clear that the location policy should be used as a last resort: equally stressing the principle of proportionality. This has not been agreed at the Council level. Separately, the European Council have made progress on the framework to the EU CCPs regime, which will include the establishment of a CCP supervisory regime within the European Securities and Markets Authority.

HM Treasury is concerned that the implementation of any location policy risks cutting the EU off from the global liquidity pools in UK CCPs and will raise costs for EU businesses. HM Treasury concludes the Letter by noting progress on the separate EMIR REFIT has been slow, with delays at trilogue stage: it is unclear when discussions will be concluded.