The European Commission has announced that Canada, Switzerland, South Africa, Mexico and the Republic of Korea now have the “equivalent regulatory regimes for central counterparties” as the European Union.

This means that authorities in each of the five countries were able to show that its rules achieve the same objectives as those of the EU. In other words, their CCPs have a robust framework promoting financial stability through a reduction in systemic risk. The rules in each country do not have to be identical to EU regulations.

Once equivalence of CCP regulations have been assessed and a determination of equivalence is made, it becomes legally binding under the European Market Infrastructure Regulation (EMIR).

CCPs are the central processing and reporting hubs for derivatives trading contracts. The G20 has encouraged the use of CCPs since the financial crisis to reduce risk in derivatives trading.

CCPs in Australia, Singapore, Japan and Hong Kong were given regulatory equivalence in October 2014.

EU Commissioner Jonathan Hill, responsible for Financial Stability, Financial Services and Capital Markets Union said: “I am pleased to announce these equivalence decisions for Canada, Switzerland, South Africa, Mexico and the Republic of Korea today. Derivatives markets are global in nature and today's decisions reflect that. We continue to work with other third country regulators to assess the equivalence of further regimes and will make additional decisions as soon as is possible.”