ESMA has proposed that the period for which money should be held by a central counterparty in derivatives transactions should be reduced from two days to one, in a move that would change the rules to be closer to those of the US.
In a consultation paper looking at possible changes under the European Markets Infrastructure Regulation (EMIR), ESMA said this would allow European clearing houses to calculate margins in a similar way to their US counterparts, and may help to resolve an on-going debate about the equivalence between the legal and supervisory arrangements for central counterparties in the US and the EU.
The cost to EU banking groups of trading through US clearing houses is set to rise this week because of this disagreement.
Under rules introduced after the banking crisis EU banks must ensure they have capital to cover part of their exposure to derivatives trades transacted through clearing houses. That requirement is higher for trades routed through US clearing houses than through those in the EU or in countries whose rules, as regards clearing houses, are treated by the EU as 'equivalent' to EU rules.
The EU Capital Requirements Regulation had set a transitional period until 15 December, during which the higher capital requirements will not apply. If an EU 'equivalence determination' has not been agreed by the deadline, however, the costs for European clearing firms to use US clearing houses will increase.
The Commission said in November that Canada, Switzerland, South Africa, Mexico and the Republic of Korea have the equivalent regulatory regimes for central counterparties as the European Union.
ESMA will accept responses on its consultation paper until 1 February 2016.