On March 15, 2016, the European Commission (EC) published the provisional text of the Commission Implementing Decision it has adopted determining that US central clearing counterparties (CCPs), or clearinghouses, registered with the CFTC are subject to a regulatory regime that is equivalent to that of the EU under EMIR (the Regulation on OTC derivatives, CCPs, and trade repositories) ((EU) 648/2012).

The decision enables CCPs registered with the CFTC to obtain recognition in the EU.

In a press release announcing adoption of the decision, the European Commission explains that a CCP wishing to obtain recognition must apply to the European Securities and Markets Authority (ESMA), which will then process the application in co-operation with the relevant regulators of that CCP. Under this equivalence decision, US CCPs seeking recognition in the EU must confirm that their internal rules and procedures meet the conditions set out in the decision relating to the calculation of initial margin and the CCP's default fund.

This decision enters into force on April 5, 2016, twenty days after its publication in the Official Journal of the EU (OJ).

Adoption of the implementing decision followed the announcement made in February 2016 that the EC and CFTC had agreed on a common approach on requirements for transatlantic CCPs (see Legal Update, CFTC-EU Reach Agreement on Derivatives Clearing Equivalence).

The CFTC has also released a related corollary comparability determination and substituted compliance framework for CCPs that are also CFTC-registered derivatives clearing organizations (DCOs). For details, see Legal Update, CFTC Approves Substituted Compliance for US-EU Derivatives Clearinghouses and Provides No-Action Relief.

For more information on the clearing requirement in EMIR, see Practice Note, EMIR: Requirement to Clear OTC Derivative Contracts Through a CCP.