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HMRC internal manual

Stamp Taxes on Shares Manual

From:
HM Revenue & Customs
Published:
7 March 2016
Updated:
20 July 2026 - See all updates

STSM125010 - Financial markets: central counterparties: what is a central counterparty

A central counterparty or CCP is a body corporate or unincorporated association which interposes itself between the counterparties to the contracts traded on one or more financial markets, becoming the buyer to every seller and the seller to every buyer.

The benefits of a CCP include:

  • The reduction of counterparty credit risk by having the CCP as a counterparty. Counterparty credit risk is the risk that one party to a contract ‘defaults’ and cannot meet its obligations under the contract. In the event of a default by a member, the CCP will replace the positions of the defaulting member.

  • Operational efficiencies due to the netting or aggregation of payments and deliveries, which in turn leads to reduced settlement costs.  

  • Increased market liquidity, by increasing confidence in the market. 

CCPs are financial market infrastructures (FMIs) and are supervised by the Bank of England (BoE) in the UK.

UK CCP

A UK CCP is a CCP which is established in the UK and authorised by the BoE in accordance with Article 17 of the European Market Infrastructure Regulation, as onshored into UK law (UK EMIR), for the purposes of that Article and in relation to which a recognition order made under section 290 of the Financial Services Market Act 2000 (FSMA) is in force. 

Details of UK CCPs which have been authorised by the BoE can be found on the BoE website.

Third country CCP

The UK has retained the EU framework for recognising non-UK CCPs (known as ‘EMIR 2.2’). A third country CCP is a CCP established in a country other than the UK which is recognised by the BoE pursuant to Article 25 of the EMIR. 

The BoE has recognised certain third country CCPs, details of which can be found on the BoE website.  

A number of third country CCPs are also eligible for temporary deemed recognition in the UK (until December 2027) by virtue of the Temporary Recognition Regime (TRR) established by the Central Counterparties (Amendments, etc., and Transitional Provision) (EU Exit) Regulations 2018. Their details are published here.

In addition, some third-country CCPs have entered (for a period of up to three and a half years) the run-off regime established under The Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019. This enables non-UK CCPs which did not enter the TRR or exited it without permanent recognition to wind down relevant contracts and business with UK counterparties. Further details are published here. 

Other definitions

EMIR means Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories as it forms part of assimilated law, and any reference to requirements contained in or to functions under the regulation includes a reference (as the case may be) to requirements contained in or to functions under:

  1. any EU regulation, originally made under the regulation, which is assimilated direct legislation; or
  2. any subordinate legislation (within the meaning of the Interpretation Act 1978) made under the regulation on or after IP completion day (31 December 2020 at 11pm).