The Securities and Exchange Board of India (SEBI) and the European Securities and Markets Authority (ESMA) signed a new Memorandum of Understanding (MoU) on 4 September 2026 in Paris to deepen bilateral cooperation and exchange of information on Central Counterparties (CCPs). The pact, signed by SEBI Chairman Tuhin Kanta Pandey and ESMA Chair Verena Ross, replaces the earlier MoU of 21 June 2017. It clears the way for CCPs established in India and supervised by SEBI to re-apply for recognition in the European Union and restore access for European banks to Indian clearing houses.
What Is a Central Counterparty and What Is a Clearing House?
A Central Counterparty (CCP) is an institution that stands between the buyer and the seller in a financial trade. It becomes the buyer to every seller and the seller to every buyer. This ensures that even if one side fails to pay or deliver, the other side still gets its money or securities.
A clearing house is the broader term for the system that performs this function. Clearing means checking, netting and guaranteeing trades, while settlement means the actual exchange of money and securities. In the securities market, which includes shares, bonds and derivatives, CCPs reduce the risk that a single default will spread across the whole system. They collect margins and default funds from members so that losses can be absorbed in an orderly way.
In India, clearing corporations that act as CCPs in the securities market are regulated by SEBI. These include NSE Clearing Limited, Indian Clearing Corporation Limited (ICCL) linked to BSE, and Multi Commodity Exchange Clearing Corporation Limited (MCXCCL). The Clearing Corporation of India Limited (CCIL), which clears government securities, forex and interest rate derivatives, is regulated by the Reserve Bank of India (RBI). All such large CCPs are also treated as Qualified Central Counterparties (QCCPs), which means they follow global risk standards set for financial market infrastructure.
What Does the New SEBI-ESMA MoU Say?
The MoU concerns cooperation and exchange of information in relation to CCPs regulated and supervised by SEBI. It does not create legally binding duties on either side. It lays down how the two regulators will consult, share information and support each other in line with their own laws.
The central feature is a framework for ESMA to place reliance on SEBI supervision. In simple terms, ESMA will trust SEBI daily oversight of Indian CCPs, while keeping safeguards for the financial stability of the European Union. The MoU also requires both sides to inform each other quickly about rule changes, supervisory actions, defaults or emergencies that could affect covered CCPs. Cooperation will work on the principle of reciprocity, which means the same duties to share information apply equally to SEBI and ESMA.
The MoU was signed in two originals in English and Hindi, with the English text to prevail in case of any difference in interpretation. It also states that information received under the pact will remain confidential even if the MoU is ended. If the arrangement ends without a replacement, ESMA can withdraw recognition of the covered CCPs after informing SEBI.
Why Was a New Pact Needed? From the 2017 MoU to Derecognition
SEBI and ESMA had first signed an MoU on CCP monitoring on 21 June 2017. That pact was based on the unamended European Market Infrastructure Regulation (EMIR), which is the European Union law of 2012 on over the counter derivatives, CCPs and trade repositories. In 2019, the European Union amended EMIR through a law known as EMIR 2.2. The old MoU no longer met the new legal conditions, so it had to be replaced.
The gap became visible on 31 October 2022. ESMA announced that it would withdraw recognition from six CCPs established in India. The reason was not a failure of the CCPs themselves. ESMA found that the condition for cooperation arrangements with Indian regulators was not met, because no updated MoU compliant with the amended EMIR existed with the RBI, SEBI or the International Financial Services Centres Authority (IFSCA).
The six affected CCPs are listed below.
| CCP | Supervising Authority in India |
|---|---|
| Clearing Corporation of India Limited (CCIL) | Reserve Bank of India |
| NSE Clearing Limited | SEBI |
| Indian Clearing Corporation Limited (ICCL) | SEBI |
| Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) | SEBI |
| India International Clearing Corporation (IFSC) Limited | IFSCA |
| NSE IFSC Clearing Corporation Limited | IFSCA |
After the announcement, ESMA deferred the effect of withdrawal until 30 April 2023 to avoid sudden disruption for European banks. But European clearing members could not use unrecognised Indian CCPs for compliance with EU clearing duties. This raised costs and created uncertainty for cross border trades.
The logjam began to clear in 2026. On 27 January 2026, the RBI and ESMA signed a revised MoU for CCPs supervised by the RBI. On 1 July 2026, ESMA recognised CCIL as a Tier 1 third country CCP. The SEBI pact of 4 September 2026 follows the same path and marks more than two years of engagement between ESMA and Indian authorities. ESMA has said it is still in talks with IFSCA for a similar arrangement.
How Does EU Recognition Work Under EMIR Article 25?
Under Article 25 of EMIR, a CCP set up outside the European Union can serve clearing members or trading venues inside the Union only if ESMA recognises it. Recognition depends on four broad tests. First, the European Commission must decide that the home country rules are equivalent to EU rules. Second, the CCP must be properly authorised and supervised at home on an ongoing basis. Third, cooperation arrangements must exist between ESMA and the home regulator. Fourth, the home country must not be on the list of high risk countries for money laundering and terror financing.
The new SEBI ESMA MoU meets the third test. It is therefore a key requirement, but not the only one, for recognition.
ESMA also places recognised foreign CCPs in two groups based on how important they are for EU financial stability. Tier 1 CCPs are not seen as systemically important for the Union and face lighter direct demands. Tier 2 CCPs are seen as systemically important or likely to become so, and face stricter EU rules and direct supervision by ESMA. CCIL has been recognised as a Tier 1 CCP. SEBI supervised CCPs will now be able to re-apply, after which ESMA will assess tiering and recognition afresh.
Who Are the Two Regulators? SEBI and ESMA at a Glance
SEBI stands for the Securities and Exchange Board of India. It was first set up as a non statutory body on 12 April 1988 and became a statutory body in 1992 when the SEBI Act, 1992 came into force on 30 January 1992. Its mandate is to protect investors in securities and to promote and regulate the securities market. SEBI is headquartered in Mumbai at Bandra Kurla Complex, with regional offices in New Delhi, Kolkata, Chennai and Ahmedabad. The current Chairman is Tuhin Kanta Pandey, a 1987 batch Indian Administrative Service officer of the Odisha cadre who took charge on 1 March 2025 as the eleventh Chairman. SEBI regulates stock exchanges and clearing corporations under the SEBI Act and the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018.
ESMA stands for the European Securities and Markets Authority. It is the financial markets regulator and supervisor of the European Union. It started work on 1 January 2011 under its founding regulation, replacing the Committee of European Securities Regulators. It is based in Paris at 201-203 Rue de Bercy. Its mission is to improve investor protection and to promote stable and orderly financial markets. It works with the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) as part of the European System of Financial Supervision, and it directly supervises credit rating agencies, trade repositories and systemically important foreign CCPs. The current Chair is Verena Ross, who took office on 1 November 2021 for a five year term.
| Feature | SEBI | ESMA |
|---|---|---|
| Full form | Securities and Exchange Board of India | European Securities and Markets Authority |
| Legal basis | SEBI Act, 1992 | EU founding regulation, operational from 1 January 2011 |
| Headquarters | Mumbai, India | Paris, France |
| Current head | Tuhin Kanta Pandey, Chairman | Verena Ross, Chair |
| Core role in this MoU | Home supervisor of Indian securities CCPs | Recognising authority for foreign CCPs under EMIR |
Why the Pact Matters for India and Europe
For India, the MoU protects the standing of its market infrastructure. If European banks cannot use Indian CCPs, trades shift to other centres and Indian exchanges lose business. Recognition restores normal clearing links, keeps transaction costs low and supports foreign participation in Indian equity, commodity and currency derivatives.
For Europe, the MoU protects financial stability without cutting market access. ESMA keeps the right to get information, carry out checks and act if risks build up, while relying on SEBI for daily supervision. This model of deference avoids duplicate inspections but keeps EU safeguards intact.
For the wider system, the MoU shows the value of cross border cooperation in clearing. CCPs sit at the centre of derivatives and repo markets. A common framework for information sharing lowers the chance that a default in one country creates panic in another.
What Happens Next?
The immediate next step is re-application. CCPs established in India and supervised by SEBI can now apply again to ESMA for recognition under EMIR. ESMA will then assess each CCP, decide its tier and publish its name in the list of recognised third country CCPs.
A parallel track will continue with IFSCA, which oversees CCPs in the GIFT City international financial services centre in Gujarat. Until a similar MoU is signed with IFSCA, the two IFSC clearing corporations remain outside the restored framework. Market participants will watch the timing of that third pact and the final recognition decisions for NSE Clearing, ICCL and MCXCCL.
Key Takeaways
- SEBI and ESMA signed a new MoU on CCP cooperation on 4 September 2026 in Paris.
- The pact replaces the earlier SEBI-ESMA MoU of 21 June 2017 to meet the amended EMIR conditions.
- It covers Central Counterparties regulated and supervised by SEBI and lets ESMA rely on SEBI oversight while protecting EU financial stability.
- The MoU was signed by SEBI Chairman Tuhin Kanta Pandey and ESMA Chair Verena Ross.
- SEBI supervised CCPs can now re-apply for recognition under Article 25 of EMIR to serve EU clearing members.
- The pact follows the RBI-ESMA MoU of 27 January 2026 and ESMA recognition of CCIL as a Tier 1 CCP on 1 July 2026.
