| LCH circular number: | 4072 |
| Date: | December 23, 2019 |
| To: | All LCH Clearing Members |
Dear Customer,
We are writing to update you on LCH Group’s approach to the United Kingdom’s (“UK”) withdrawal from the European Union (“EU”).
As a systemically important institution, our priority remains to ensure the orderly functioning of markets, continuity of service to our customers and supporting financial stability. We wrote to you on 5 April 2019 to confirm that the European Commission had announced that the temporary equivalence for UK CCPs would apply at any point from which the UK becomes a third country under a no deal scenario until 30 March 2020.
On 29 October 2019 the EU accepted the UK's request for a further Article 50 extension until 31 January 2020, with an option to leave sooner if a deal is approved by the UK Parliament. In order to continue to provide legal certainty and predictability to clearing members and clients established in the Union, in the case of a no-deal Brexit, the European Commission published in the Official Journal on 23 December 2019, an extension of this temporary equivalence for UK CCPs. The one year extension period will apply from the date of the UK’s exit from the EU in the event of a no-deal. The European Securities and Markets Authority have also confirmed that the temporary recognition of LCH Limited remains valid and is extended in line with the temporary equivalence.
Accordingly, we are pleased to confirm that there is no change in the fact that LCH Limited will be able to continue to offer all clearing services for all products and services to all members and clients in the event of a no-deal scenario.
We will continue to engage with the relevant regulatory authorities in respect of the long-term recognition of LCH Limited under the revised supervisory framework for EU and third country CCPs (“EMIR 2.2”). It remains LCH’s objective to ensure a smooth transition for our customers whatever the outcome of the negotiations around the UK’s withdrawal from the EU.
LCH reserves its right to take any action it considers appropriate at any time should there be a material change in circumstances. Members should continue to make their own assessment of the risks, take such advice as they consider necessary, and continue with their own Brexit preparations.
We thank you for your continued support and look forward to continuing to partner with you in 2020 and beyond. Please do not hesitate to contact us directly if you would like to discuss further.
Yours faithfully
Daniel Maguire Isabelle Girolami
CEO, LCH Group CEO, LCH Limited