On 13 January 2017, the European Commission (Commission) published a proposed Regulation for central counterparty (CCP) supervision. Ahead of this proposal, the International Swaps and Derivatives Association (ISDA) highlighted the issues associated with a possible location policy in a letter sent to the Commission Vice- President Valdis Dombrovskis on 8 June 2017.

ISDA has now published a position paper entitled Brexit –  CCP location and legal uncertainty. The paper outlines the analysis contained in the ISDA’s letter to the Commission and states that the  ISDA and its members are working through the Commission’s proposed rules on CPP supervision and will summarise the results of this analysis in a future whitepaper.

Key messages in the paper include:

  • a location requirement for euro-denominated swaps could increase risk and costs in the EU and raise overall initial margin levels by 15% to 20%;
  • post-Brexit transitional provisions for cross-border transactions are vital to prevent legal uncertainty, higher costs and greater complexity; and
  • clearing location and choice of English law are key issues affecting derivatives markets that need to be addressed.

View ISDA paper on Brexit, CCP location and legal uncertainty, 21 August 2017