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CCPs

Central Counterparties

EMIR introduces a harmonised set of organisational, business conduct and prudential requirements for clearing service providers. CCPs interpose themselves between counterparties to a derivative contract, becoming the buyer to every seller and the seller to every buyer. In doing so, CCPs become the focal point for derivative transactions thus increasing market transparency and reducing the risks inherent in derivatives markets.

    Firms wanting to offer CCP services in the EU must seek authorisation under EMIR. National securities regulators are responsible for the authorisation of EU-based CCPs. CCPs based outside the EU who want to offer clearing services within the EU, need to be recognised by ESMA.

    ESMA’s role in this respect is that of a standard-setter who further clarifies the CCP provisions under EMIR. In fulfilling this role, ESMA has issued:

    Regulatory technical standards for CCPs

    • General requirements
    • Capital requirements
    • Colleges

    Implementing technical standards

    Guidelines and recommendations

    • CCP interoperability
    • Written agreement for CCP colleges

    CCP authorisation, recognition and supervision

    For each EU-based CCP a college of supervisors will be established made up of relevant national regulators and ESMA. These colleges are responsible for authorising and supervising EU CCPs. ESMA also publishes the list of relevant national CCP regulators and of the CCPs have been authorised.

    ESMA is charged with the recognition of third country (non-EU) CCPs.
    A third country (non-EU) CCP needs to be recognised by ESMA to offer clearing services to EU customers, fulfilling certain requirements. ESMA has issued guidance for third country (non-EU) CCPs and also publishes the names of third country (non-EU CCPs) that have applied or which have already been recognised when applicable.

    Prior to recognition the EC must adopt an implementing act determining, amongst other issues, that the legal and supervisory arrangements of the relevant third country (non-EU country) imposes legally binding requirements which are equivalent to those contained in Title IV of EMIR. For some jurisdictions ESMA has assessed whether third country (non-EU country) legislation meets the EMIR standard through ESMA technical advice to the EC on which to base its decision. Based on this advice the EC has started issuing implementing acts for some jurdisdictions.

    Some cooperation arrangements must also be in place between ESMA and the relevant third country (non-EU) competent authorities whose legal and supervisory frameworks have been recognised as equivalent. Some of those arrangements named Memorandum of Understanding have been signed.

    ESMA does not actively supervise third-country (non-EU) CCPs, but following recognition defers to the third-country (non-EU) CCP’s home supervisor to undertake the day-to-day supervision of that CCP.

    Upcoming enhancements introduced by EMIR 2.2

    On 15 October 2019, the European Parliament and the Council adopted several amendments to the current regime for the authorisation, recognition and supervision of CCPs, through a new regulation amending EMIR (EMIR 2.2)[1]. The final act was signed into law on 23 October 2019 and it will enter into force soon after its publication in the Official Journal, which is upcoming.

    EMIR 2.2 strengthens the role of ESMA with regards to the authorisation and supervision of EU CCPs, promoting supervisory convergence among the activities of national competent authorities, and to the recognition of TC-CCPs, entrusting ESMA with direct supervision of systemically important third country CCPs.

    A new committee will be established within ESMA, the ‘CCP Supervisory Committee’, to carry out the tasks assigned to ESMA in relation to both EU- and third country CCPs. The committee will be composed of a Chair and two Independent Members, as well as national competent authorities responsible for supervision of CCPs and central banks of issue of Union currencies. The committee will be responsible for preparing draft opinions or decisions in relation to EU- and third country CCPs for adoption by the Board of Supervisors.

    In particular, ESMA will determine, in consultation with the ESRB and the relevant central bank of issue, whether a third country CCP is systemically important or likely to become systematically important for the financial stability of the Union or one or more of its Member States. The CCPs which are determined not to be systemically important (Tier 1 CCPs) will continue to be subject to a very similar regime as the one established today for the recognition of third-country CCPs. Instead, third-country CCPs which are deemed to be systemically important or likely to become systemically important (Tier 2 CCPs) will be subject to additional requirements, including compliance with all CCP requirements under EMIR, and to ESMA direct supervision. 

    EMIR 2.2 also tasks ESMA to monitor regulatory and supervisory developments in third country CCP regimes that have been deemed equivalent by the Commission.

     

    [1] Regulation (EU) 2019/… of the European Parliament and of the Council amending Regulation (EU) No 648/2012 as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs, as adopted by the European Parliament and the Council on 15 October 2019 and the final act was signed into law on 23 October 2019 – see https://data.consilium.europa.eu/doc/document/PE-88-2019-REV-1/en/pdf.