EMIR 3.0 is “the essential pipework” that will enable EU policymakers “to make future amendments faster and more efficiently”, says Deloitte. In a report on the active account requirement (AAR) recently introduced to the regulation, the consultancy firm cautions that if these changes do not result in the desired effect of shifting clearing activity away from tier-two CCPs, “there is a likelihood of additional measures being introduced”.

The AAR has been the catalyst for heated debates within the industry for the past year. Concerns have been voiced that it could lead to market fragmentation, loss of netting benefits, increased collateral costs, and competitive disadvantage for EU firms. To address these concerns, the AAR has been “scaled back from its initial ambition”, writes Deloitte.

Nevertheless, should current measures not achieve desired results, policymakers are likely to introduce additional ones. These might be in the form of quantitative thresholds or an extended scope to cover a wider variety of products. Although any quantitative threshold is likely to be “phased in and carefully calibrated to reflect considerations around competition and competitiveness”, it will probably still increase the cost of clearing in the EU.

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Embracing change

Deloitte advises that firms should “consider how the cost of clearing could change for them for each of the products in scope and start preparing for setting up the active account”. Firms should also consider client interests and best execution principles in moving clearing volumes.

The report sees the current changes as “laying the foundation for the EU’s longer-term ambition for achieving strategic autonomy and creating the capital markets union (CMU)”. It expects “the uncertainty around clearing equivalence to continue”. The measures are likely to extend beyond June 2025, unless policymakers see “a significant shift in clearing activity away from UK CCPs”.