Despite many debates and criticisms from industry heavyweights, a committee of policymakers has voted in favour of the active clearing account requirement in EMIR 3.0. Now, negotiations between the European Parliament and member states are set to begin for drawing out the final text before the year ends.

A common criticism of the active account requirement is that it might reduce competition and exacerbate liquidity pressures especially in times of market stress. In a discussion led by the European Fund and Asset Management Association (EFAMA) in June this year, participants pointed out that “without a free choice to clear where the best prices and netting benefits were available, asset managers also expect to struggle in delivering best execution to clients. This would lead to discrimination or unfair treatment of clients”.

The debate has even crossed the Atlantic. In an opinion piece published in May, Bloomberg columnist Marcus Ashworth cited numbers from post-trade network Osttra that showed that 51 percent of euro-denominated interest rate swaps in March this year happened in the US. Instead of turning back into the EU, trades have simply funnelled into the US post-Brexit. In the meantime, “clearing has very much stayed put in London”.

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More recently in September, a debate among members of the European Parliament’s Committee on Economic and Monetary Affairs (ECON) highlighted the lack of consensus on how the threshold for active accounts should be set. Some were in favour of a quantitative threshold, while others considered a quantitative threshold to be “arbitrary”.

The committee claimed to have considered these challenges and will take a phased approach in introducing changes. It also suggested that the European Commission should assess the stability of the markets with a cost benefit analysis before imposing a threshold.