Transitional regimes

Temporary Recognition Regime for non-UK CCPs

The Temporary Recognition Regime (TRR) came into effect at the end of the transition period. The TRR was amended on 1 November 2023 to extend until 31 December 2025, and it remains further extendable by HMT. The TRR allows eligible non-UK CCPs to continue to provide clearing services in the UK before recognition is granted, so long as they continue to be eligible for the TRR. Non-UK CCPs in the TRR must submit an application for recognition within 18 months of the end of the transition period (30 June 2022). See application information.

The Bank has published the list of non-UK CCPs that are taken to be eligible for temporary deemed recognition in the UK by virtue of the TRR. Further CCPs cannot enter the TRR. This list may be subject to change if CCPs no longer meet the eligibility criteria or withdraw from the TRR. 

There is more information in the letters sent to non-UK CCPs in October 2018 and November 2020, and in the practical guidance for recognition of non-UK CCPs.

Please feel free to contact us at FMI-Enquiries@bankofengland.co.uk. 

Non-UK CCP run-off regime

The Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019 establishes a ‘CCP run-off regime’ which provides certain non-UK CCPs time-limited recognition to continue to offer clearing services. This allows UK firms time to close out relevant contracts and business with a non-UK CCP in an orderly manner, in the event that an eligible non-UK CCP did not enter the TRR. The legislation also empowers the Bank to determine a run-off period for non-UK CCPs that entered the TRR but subsequently exit without being granted recognition. The CCP run-off regime came into effect at the end of the transition period.

For non-UK CCPs that were eligible for but did not enter the TRR, the CCP run-off regime provides recognition to provide clearing services in the UK for a period of one year (non-extendable) from the end of the transition period. For eligible non-UK CCPs that have entered the TRR but exit without being granted recognition, the CCP run-off regime provides recognition for a period of up to one year (non-extendable) from the day the CCP exits the TRR.

Firms in the CCP run-off regime are only permitted to carry on the range of services they were permitted to carry on immediately before entering the regime.  

On 18 January 2023, the Government introduced an amendment to the Financial Services and Markets Bill to extend the maximum period of run-off for non-UK CCPs. The Bank has published a statement about that proposed extension and the use of its discretion to extend the maximum period of run-off for such CCPs if the amendment comes into force.

Transitional Regime for non-UK CSDs

On 25 September 2020, the UK parliament further approved legislation, and the Equivalence Determinations for Financial Services (Amendment etc.) (EU Exit) Regulations 2020 (“Equivalence Determinations SI”) came into force on 30 September 2020. Under this legislation, because HMT made an equivalence decision in relation to the EEA during the transition period, EEA CSDs had to submit a formal recognition application within 6 months from the end of the transition period. The Bank further published a letter to EEA CSDs to notify them of the actions that they need to take.

The Bank has published a list of CSDs that intend to provide CSD services in the UK using transitional provisions. These provisions are now in effect following the end of the transition period.

Any enquiries about the transitional regime for non-UK CSDs should be directed to CSD-Enquiries@bankofengland.co.uk along with a contact name and details for further discussion.

The Temporary Designation Regime for non-UK Systems

Certain EEA systems receive temporary UK settlement finality protection under the Temporary Designation Regime (TDR) of the Financial Markets and Insolvency (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (as amended) until they receive ‘steady state’ settlement finality designation and so long as they remain eligible for the TDR.

The Bank has published a list of EEA systems whose operators have notified the Bank for such systems to receive settlement finality protection pursuant to the TDR. The TDR is now in operation.

EEA systems in the TDR who applied for ‘steady state’ designation by 30 June 2021 will continue to receive UK settlement finality protection under the TDR, which lasts until 31 December 2023 as long as systems remain eligible.

On 30 November 2020, the Bank published a letter to systems in the TDR reminding them of the actions that they need to take to prepare for the end of the transition period. This letter provides details of how to apply for ‘steady state’ settlement finality designation and follows the Bank’s previous letters sent on 6 November 2018 and 24 July 2018. On 31 July 2019, the Bank announced that it does not intend, at this time, to charge fees to non-UK law FMIs for UK settlement finality designation.

Any queries from systems or their users regarding this process should be sent to SFD-Enquiries@bankofengland.co.uk.

Qualifying Central Counterparties 

The Qualifying Central Counterparties (“QCCP”) transitional regime sits within the Capital Requirements Regulation (“CRR”). This regime helps prevents UK firms with indirect exposures to non-UK CCPs from being faced with a sudden and disruptive increase in their capital requirements. 

The QCCP transitional regime provides non-UK CCPs with QCCP status for four years after they have submitted an application for recognition. The expiry date of the QCCP transitional regime for each individual non-UK CCP, after which it no longer benefits from QCCP status, depends on several factors, including when firms submitted their recognition applications, and whether equivalence has been granted by HMT in relation to that non-UK CCP’s home jurisdiction. For eligible non-UK CCPs that submitted their application before 31 December 2020, the date on which they are deemed to have applied is 31 December 2020, with a current expiry date of 31 December 2024.

It is possible for HMT to extend the regime by 12 month increments in exceptional circumstances, where it is necessary and proportionate in order to avoid disruption to international financial markets. 

For further information on the QCCP transitional regime please see the Explanatory Memorandum for the central counterparties (Transition Provision) (Extension and Amendment) Regulation 2023