Brexit: ESMA Recognizes UK-Based Euroclear as Securities Depository

The CSD can operate within the bloc for six months after the transition expiry.

The European Securities and Markets Authority (ESMA) has announced on Friday that it will recognize Euroclear UK & Ireland Limited (EUI) as a third-country central securities depository (TC-CSD) after the expiry of the Brexit transition period.

This recognition came along with the European market regulator’s previous decision to allow the operation of United Kingdom-based depositories in the European Union for a limited time in case of a no-deal exit of the UK from the bloc.

The decision will kick-off on January 1, 2021, and will last for six months until the held securities are transferred to Europe-based platforms.

To allow the UK CDS’ operation into the bloc after the transition period, ESMA signed a memorandum of understanding (MoU) with the Bank of England to establish cooperation arrangements for the recognition and supervision.

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Uncertainties with Looming Brexit

The Brexit transition is dated to expire on December 31, 2020, and no positive news about a deal between the two parties is coming out. This uncertainty prompted the financial markets regulators of the UK and Europe to come up with plans to facilitate operations of the closely connected industries in the two regions.

Earlier, the European regulator decided to allow three UK-based central counterparties (CCPs) – ICE Clear Europe Limited, LCH Limited, and LME Clear Limited – to operate in the continent.

Furthermore, regulators of both sides are colliding on a few issues as they are coming up with some stark differences in decisions. Earlier, the EU regulator restricted the European companies from executing stock trading within the bloc, with some exceptions, post-Brexit. However, the FCA allowed the British companies to approach European exchanges for share trading.

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