EBI is happy to announce a contribution of Evariest Callens (Ghent University) in the EBI Working Paper Series No. 134. His paper entitled “Third Country CCP Supervision as a Catalyst for More Centralised EU CCP Supervision?” was published on 6 February 2023.
In early 2022, a UK central counterparty (CCP) cancelled 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, in times of crisis, 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 centralised supervision of EU CCPs thus appears strong, national concerns have persistently blocked increased centralisation. This paper re-examines decentralised EU CCP supervision in light of the much-debated centralised EU supervisory regime for systemically important third country CCPs that was implemented after Brexit. Two new arguments emerge from this juxtaposition, revealing a dichotomy between these supervisory regimes that appears hard to justify. First, a decentralised 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. Second, the controversial location policy for ‘too systemically important’ third country CCPs could be more justifiable if the EU were to adopt centralised EU supervision of systemically important EU CCPs.