The European Securities and Markets Authority (ESMA) announced on Monday that it will recognize three central counterparties (CCPs) established in the United Kingdom as third-country CCPs to provide services in the 28 nation bloc after the deadline of the Brexit transaction.

The three CCPs are ICE Clear Europe Limited, LCH Limited, and LME Clear Limited.

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Preparation for Post-Brexit

After years of the referendum for the UK’s exit from the European Union, the divorce between the two was sealed earlier this year with an 11-month transition period till December 31, 2020.

The lawmakers and regulators of the two sides are streamlining the separation as many, including individuals and companies, will be the exit.

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The updated Delegated Acts published on September 21 set out the new regulatory and supervisory regime for the third-country CCPs. Additionally, the European Commission adopted an equivalence decision to determine a limited period of time for the application of the regulatory and supervisory framework applicable to CCPs established in the UK.

“In line with the equivalence decision, the recognition decisions will only take effect on the day following the end of the transition period and continue to apply while the equivalence decision remains in force, which is for 18 months until 30 June 2022,” the announcement stated.

CCPs are financial institutions that take on the counterparty credit risks between parties involved in transactions, providing clearing and settlement services for trades in foreign exchange, securities, options, and derivative contracts. Thus their services are crucial in the financial market.

Meanwhile, the UK’s FCA is also seeking consultation on the authorization of the EEA-licensed companies to operate in the country post-Brexit.