France and Germany’s markets watchdogs have extended by 18 months the time their banks have to transfer trading positions from Indian clearing houses, amid a dispute between regulators regarding oversight of securities settlement.
(Bloomberg) —
France and Germany’s markets watchdogs have extended by 18 months the time their banks have to transfer trading positions from Indian clearing houses, amid a dispute between regulators regarding oversight of securities settlement.
The standoff stems from changes in European Union financial regulation that require agreements between local regulators and other countries that have their own central clearing houses for market transactions.
After the Reserve Bank of India resisted a request by the European Securities and Markets Authority to be allowed to join the RBI in overseeing Indian transactions, ESMA said in October it would withdraw recognition of six Indian central counterparties, with application effective April 30.
The French regulator Autorité des Marchés Financiers said in a statement Friday that it had received strong concerns from some domestic financial institutions about the length of time to terminate membership toward Indian central clearing counterparties and to orderly transfer their positions. As a result, AMF said those institutions could submit transitional plans to transfer positions no later than Oct. 31, 2024.
A small number of German clearing members of the Indian CCPs in question expect a significant impact on their Indian business activities, Germany’s financial regulator Bafin said in a statement Friday.
The ESMA “takes note of the significant impact on some EU market participants” and the regulators’ intent to not prioritize enforcement actions for the time being, it said Friday in a statement.
The broader clash may mean that European financial institutions ultimately have to unwind billions of rupees of transactions or set aside higher capital to trade in India, though they may still be able to use Indian clearing houses through local subsidiaries or banks.
–With assistance from Subhadip Sircar.
(Updates with German comment starting in the first paragraph.)
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