The stability of global markets depends on the resilience of central counterparties. With vast volumes of trades cleared through UK CCPs every day, even small weaknesses can amplify systemic risk. The latest consultation from the Bank of England (BoE) aims to future-proof this critical infrastructure, combining continuity with targeted reforms to strengthen resilience and support innovation.
Central counterparties sit at the heart of financial markets. By stepping between buyers and sellers, they guarantee the performance of trades and reduce counterparty credit risk – a role that becomes even more critical during periods of stress.
The consultation, published in July 2025, seeks to transfer CCP-facing requirements from UK European Market Infrastructure Regulation (UK EMIR) into the BoE's own rulebook. It also introduces targeted reforms to address emerging risks and align with international standards. Responses are invited until 18 November 2025, with final rules expected no earlier than mid-2026.
What's changing?
The proposals have two main components. First, the BoE plans to restate most existing requirements from UK EMIR into its Financial Market Infrastructures (FMI) rulebook. This will make the framework clearer and more adaptable, allowing the BoE to update rules more quickly in response to market developments. Second, the BoE is consulting on a series of policy enhancements in areas where it sees scope to improve resilience and efficiency.
Among the most significant changes are:
Margin transparency and responsiveness
CCPs would need to provide more detailed disclosures and margin simulation tools, helping clearing members anticipate liquidity needs and reducing the risk of sudden calls during stress.
Porting of client positions
New requirements aim to increase the likelihood of successful porting in a default, including advance consent arrangements and more rigorous testing of porting processes.
Second skin in the game
CCPs would be required to contribute an additional tranche of their own capital to the default waterfall, doubling their financial stake and reinforcing incentives for prudent risk management.
Governance and oversight
CCPs would face new obligations to notify the BoE of changes in control and submit annual reports on their ownership structure, ensuring timely supervisory oversight.
Liquidity risk controls and interoperability
The BoE proposes to incorporate elements of European Securities and Markets Authority (ESMA) guidance into its rules and clarify the approval process for interoperability arrangements, including derivatives products.
The Bank of England is also seeking views on whether to expand the range of eligible collateral to include uncollateralised bank guarantees that could ease liquidity pressures but raise important risk considerations.
Why now?
The Financial Services and Markets Act 2023 gave the BoE new rule-making powers for CCPs, replacing retained EU law with a UK-specific framework. This shift is intended to make regulation more proportionate and responsive, while maintaining alignment with international standards such as the Principles for Financial Market Infrastructures (PFMIs).
The proposals also reflect lessons from recent market events, including the volatility seen during the 'dash for cash' in 2020, which highlighted the importance of margin transparency and liquidity preparedness.
What this means for firms?
For CCPs, the consultation signals a period of adjustment rather than wholesale change. Most existing requirements will remain, but the new obligations are material. Firms will need to review their margin frameworks, default management procedures and governance arrangements to ensure they meet the updated expectations. The additional capital required for the second skin in the game will need to be factored into financial planning, and operational teams should prepare for enhanced transparency and reporting obligations.
Clearing members and clients should also pay close attention. Proposals on porting and collateral could affect their own risk management strategies and liquidity planning. Greater transparency around margin models will be welcome, but it will also require firms to engage more actively with CCPs’ risk methodologies.
Future-proofing UK clearing: next steps
The BoE intends to publish final rules in the second half of 2026, with a standard six-month implementation period. Transitional arrangements will apply for some of the more demanding changes, such as the new capital requirements and margin simulation tools, but firms should not wait to act. Early engagement with the consultation is essential. CCPs should begin assessing the operational and financial impact of the proposals, while clearing members review their own processes for managing margin and default scenarios.
Beyond immediate compliance, firms should think about the bigger picture. Moving to a single FMI rulebook will simplify obligations in the long run, but it also signals a more dynamic regulatory environment. Building flexibility into governance, risk management and technology systems now will help firms stay ahead as the framework evolves.
This is a significant step in shaping the UK’s clearing regime for the future – one that aims to safeguard financial stability while supporting innovation. Firms that engage early and prepare thoroughly will be best placed to adapt with confidence.
For further insight and guidance, contact Paul Young.
