TAIFEX Receives Recognition from ESMA as QCCP

ESMA (European Securities and Markets Authority) has recognised TAIFEX (Taiwan Futures Exchange) as a qualified CCP (QCCP).

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TAIFEX launched its new OTC derivatives clearing service in July, initially providing central clearing for TWD-denominated interest rate swaps.

TAIFEX has been seeking recognition as a QCCP from multiple jurisdictions, as under the Basel framework it lowers participants' capital requirements and reduces the burden of managing counterparty credit risks and collateral requirements.

Taiwan's FSC (Financial Supervisory Commission) granted TAIFEX QCCP recognition ahead of the clearing service's launch. TAIFEX has also been seeking QCCP recognition from the US, EU, UK and Canada.

On Wednesday (9 November), the FSC signed an MoU with ESMA to recognise TAIFEX as a QCCP under EMIR (European Markets Infrastructure Regulation).

The recognition is important for enabling EU financial institutions to manage counterparty risk efficiently and lower their capital requirements when participating in the Taiwan financial market.

The MoU follows an equivalence decision from the European Commission, announced in September, which deemed Taiwan's legal and supervisory framework for CCPs equivalent to EMIR.

Through the MoU, the FSC and ESMA have also expressed a desire for enhanced cooperation with the CCPs operating in the EU, and stronger supervisory collaboration between the two markets.

In September, the US CFTC (Commodity Futures Trading Commission) also issued a no-action letter to TAIFEX, to facilitate access for US persons to swaps clearing in Taiwan.

The no-action letter allows US financial institutions to enjoy capital charge concessions from September 2022 to September 2023 when participating in Taiwan financial markets, ahead of a potential QCCP recognition decision.

Australian financial institutions can also recognise TAIFEX as a QCCP.

Source: Regulation Asia