Brexit. EU extends equivalency for UK CCPs, as the EU takes a safety-first approach

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https://ec.europa.eu/commission/press...
https://en.wikipedia.org/wiki/Central...
Notes:
The EU need time to expand central clearing activities in the EU and to make it more attractive for CCPs to set up in the EU, therefore reducing the reliance on CCPs in the UK. They are also working on a supervisory framework for risks.

CCPs play a big part in the overall financial system in the EU. The EU do not want to create any financial instability by removing equivalence to the UK prior to having a robust system for clearing within the EU. This will take time, however, they are working on it. The previous timeframe was far too short to establish such a system within the EU. Preserving EU financial stability is the priority.

The extension of equivalence was not granted for the benefit of the UK. The EU is reshaping its financial structures now that the UK is out. Always going for the long time view, it's more important to the EU to get it right than get it fast - and having the upper hand in terms of being the one to grant equivalence, the EU can extend equivalence until everybody is ready and then cut off the UK (and perhaps others, too). Stability is what matters most.

As soon as the EU has enough CCPs within the EU, equivalence will be withdrawn. Yes, it's a temporary relief for London. It's complex - and by taking back control, I think there's a wish among the EU countries that financial services should be distributed among several cities and not just one.
I think it makes sense to extend, when you're not ready - yes, I know... novel concept
Clearinghouses need to be able to guarantee the transactions, even if one of the counter parties wouldn’t be able to pay (in time). For that purpose clients of a clearinghouse (banks) need to guarantee a certain amount of money depending on the volumes that are traded.
The larger the volumes the larger the guarantee must be but because the risk of non-payment is spread over larger volumes the guarantee relative to the volume can be smaller.

That’s why a few large clearinghouses have a competitive advantage over the smaller ones.
The two largest ones are based in London.

If one of those wouldn’t be able to meet their obligations at some point, then no one could be sure that their transactions on the stockmarket would be carried out correctly and the whole market would collapse.

Now that the UK has left the EU, the EU cannot regulate those clearinghouses anymore. The EU does not want to be dependent on UK regulations over which they have no say.
Clearinghouses need to be able to guarantee the transactions, even if one of the counter parties wouldn’t be able to pay (in time). For that purpose clients of a clearinghouse (banks) need to guarantee a certain amount of money depending on the volumes that are traded.
The larger the volumes the larger the guarantee must be but because the risk of non-payment is spread over larger volumes the guarantee relative to the volume can be smaller.

That’s why a few large clearinghouses have a competitive advantage over the smaller ones.
The two largest ones are based in London.

If one of those wouldn’t be able to meet their obligations at some point, then no one could be sure that their transactions on the stockmarket would be carried out correctly and the whole market would collapse.

Now that the UK has left the EU, the EU cannot regulate those clearinghouses anymore. The EU does not want to be dependent on UK regulations over which they have no say.