Third Country CCP Supervision as a Catalyst for More Centralized EU CCP Supervision?

Journal of Corporate Law Studies 2023, Vol. 23, Issue 1, 197-229

European Banking Institute Working Paper Series no. 134, 2023

48 Pages Posted: 6 Feb 2023 Last revised: 30 Sep 2023

Date Written: February 6, 2023

Abstract

In early 2022, a UK CCP canceled some $4 billion of transactions in the war-affected nickel market, triggering outrage from market participants that were in the money. The ‘nickel debacle’ illustrates that CCP risk management and loss absorption mechanisms may result in value redistribution among stakeholders. With CCP stakeholders located in multiple jurisdictions, crisis management decisions from a single-jurisdiction CCP supervisor may not pursue multi-jurisdictional financial stability or a fair balance of stakeholder interests across jurisdictions. Although the case for centralized supervision of EU CCPs thus appears strong, national concerns have persistently blocked increased centralization. This paper re-examines decentralized EU CCP supervision in light of the much-debated post-Brexit centralized EU supervisory regime for systemically important third country CCPs. Two new arguments emerge from this juxtaposition, revealing a dichotomy between the named supervisory regimes that appears hard to justify. First, a decentralized supervisory regime for EU CCPs is difficult to logically square with the policy arguments underpinning the post-Brexit EU supervisory system for systemically important third country CCPs. Secondly, the controversial location policy for ‘too systemically important’ third country CCPs could be more justifiable if the EU were to adopt centralized EU supervision of systemically important EU CCPs.

Keywords: CCP, Supervision, Brexit

JEL Classification: K22, K23, G15, G23

Suggested Citation

Callens, Evariest, Third Country CCP Supervision as a Catalyst for More Centralized EU CCP Supervision? (February 6, 2023). Journal of Corporate Law Studies 2023, Vol. 23, Issue 1, 197-229 , European Banking Institute Working Paper Series no. 134, 2023, Available at SSRN: https://ssrn.com/abstract=4349597 or http://dx.doi.org/10.2139/ssrn.4349597

Evariest Callens (Contact Author)

Ghent University ( email )

Coupure Links 653
Ghent, 9000
Belgium

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