The European Securities and Markets Authority (ESMA) and India's Securities and Exchange Board (SEBI) signed a memorandum of understanding on 4 September 2026 that reopens the door for Indian central counterparties to seek Tier-1 recognition under the European Market Infrastructure Regulation (EMIR). The move ends a suspension lasting more than two years that had blocked EU clearing members from using Indian clearing services.

A two-step diplomatic process

The SEBI agreement follows a similar MoU concluded earlier this year between ESMA and the Reserve Bank of India (RBI). That first arrangement covered CCPs supervised by the central bank; the second extends the framework to those overseen by the securities regulator. Together they complete a regulatory bridge that had been under construction since the original recognition lapsed.

Both memoranda satisfy the cooperation requirement set out in Article 25 of EMIR, which mandates that ESMA can only recognise a third-country CCP once a suitable information-sharing and supervisory cooperation arrangement exists with the relevant home authority. Without such an MoU, the recognition process cannot even begin.

What Tier-1 recognition means in practice

Tier-1 status under EMIR allows a third-country CCP to provide clearing services to EU clearing members without those members needing to hold additional capital against the exposure. It is the highest level of equivalence the EU grants. The suspension forced European banks and clearing houses to either cease activity in Indian markets or operate under more onerous Tier-2 conditions, which impose higher capital charges and stricter operational limits.

For Indian CCPs, the ability to re-apply does not guarantee immediate recognition. ESMA will still need to assess each applicant against EMIR's substantive requirements, financial resources, governance, risk management and the legal enforceability of netting and default procedures in India. The MoU simply restores the procedural pathway.

CCIL's position and the wider market

The Clearing Corporation of India Limited (CCIL) is the most prominent candidate to seek renewed recognition. ESMA had previously recognised CCIL as a Tier-1 third-country CCP, principally for its role in clearing Indian rupee interest rate swaps and foreign exchange forwards. Its re-application will be watched closely by European banks with Indian exposure, many of which have had to restructure hedging programmes since the suspension took effect.

Other SEBI-supervised CCPs, including those clearing equity derivatives and commodity contracts, may also apply. The Indian clearing landscape has expanded since the original recognition, with new entrants and product lines that did not exist when CCIL was first assessed.

The IFSCA dimension

ESMA disclosed that it is continuing discussions with the International Financial Services Centres Authority (IFSCA), the regulator for India's GIFT City international financial centre. A third MoU would cover CCPs operating in that jurisdiction, which operates under a distinct regulatory regime. GIFT City has positioned itself as an offshore hub for global financial services, and EU recognition would strengthen its appeal to European participants.

The three-pronged approach, RBI, SEBI, IFSCA, reflects the fragmented nature of Indian financial regulation, where different authorities supervise different market segments. ESMA's willingness to negotiate separate memoranda with each suggests a pragmatic accommodation of India's institutional architecture rather than insisting on a single unified framework.

Why the suspension lasted two years

The original recognition expired after ESMA determined that the cooperation arrangements then in place no longer met EMIR's standards. Negotiations stalled over the scope of information sharing, the treatment of confidential data, and the legal enforceability of close-out netting under Indian insolvency law. The breakthrough came after sustained engagement at technical level, followed by political endorsement from both sides.

Regulatory context and precedent

EMIR's third-country regime has been tested repeatedly since its inception. The United States, Japan and Switzerland all maintain Tier-1 recognition through standing MoUs. The UK's post-Brexit recognition was negotiated as part of a broader financial services agreement. India's case is notable because the suspension was not triggered by a deterioration in Indian standards but by the expiry of the cooperation agreement itself, a procedural gap that took two years to close.

What happens next

CCIL and any other SEBI-supervised CCP must now submit formal recognition applications to ESMA. The assessment typically takes six to twelve months. In parallel, the IFSCA negotiations are expected to conclude before the end of 2026, according to officials familiar with the talks. EU clearing members should prepare for a phased return: first CCIL, then potentially other CCPs, and finally GIFT City entities if the third MoU materialises.

Organisations

European Securities and Markets Authority · Securities and Exchange Board of India · Reserve Bank of India · The Clearing Corporation of India Limited · International Financial Services Centres Authority