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BREXIT: Six UK credit rating agencies and four trade repositories stripped of UK trading rights

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The European Securities and Markets Authority (ESMA), the supervisor of European Union (EU) credit rating agencies (CRAs) and trade repositories (TRs), has withdrawn the registrations of the following UK-based credit rating agencies (CRAs):

  • AM Best Europe-Rating Services Ltd;
  • DBRS Ratings Ltd;
  • Fitch Ratings Ltd;
  • Fitch Ratings CIS Ltd;
  • Moody’s Investors Service Ltd;
  • The Economist Intelligence Unit Ltd;

And the following UK-based TRs:

  • DTCC Derivatives Repository Plc;
  • UnaVista Limited;
  • CME Trade Repository Ltd; and
  • ICE Trade Vault Europe Ltd.

ESMA’s decisions follow the end of the transition period of the UK’s withdrawal from the EU, which occurred on 31 December 2020.

The CRA Regulation and the European Market Infrastructure Regulation (EMIR), as well as the Regulation on transparency of securities financing transactions and of reuse (SFTR), requires ESMA to withdraw the registration of a firm where it no longer meets the “conditions” under which it was registered, including being a legal person established in the EU.

UK credit ratings will need to be endorsed for EU use. The ratings issued by the above mentioned CRAs cannot be used for regulatory purposes in the EU unless endorsed by an EU CRA. ESMA, in a previous communication on 27 October 2020, confirmed that all UK-based CRAs except the Economist Intelligence Unit Ltd took steps to ensure that an EU CRA is willing and able to endorse its credit ratings.

For example, Fitch Ratings’ UK international scale public credit ratings can continue to be used post-Brexit for regulatory purposes in the EU, and its EU international scale public credit ratings can similarly be used for regulatory purposes in the UK, even if there isn’t a Brexit agreement between the UK and EU.

The Financial Times reported that trading in equities such as Santander, Deutsche Bank and Total moved back to primary exchanges such as the Madrid, Frankfurt and Paris stock exchanges, according to early data from Refinitiv — an abrupt change for investors in London, who have grown accustomed to trading shares in Europe across borders without restrictions.

“Hubs for euro-denominated share trading in London, including Cboe Europe, Turquoise and Aquis Exchange, all rapidly shifted business to their new EU marketplaces set up late last year to cater for the end of the Brexit transition,” reported the FT.

UK-TRs banned for derivatives and SFTs reporting

As a result of these withdrawal decisions, EU derivatives and securities financing transactions subject to the reporting obligation under EMIR and SFTR can no longer be reported to any of the TRs above but need to be reported to an EU established TR.

EU companies and investors will now have to use EU-based entities. An updated list of the available TRs is included on ESMA’s register webpage.

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