The European Securities and Markets Authority (ESMA) has advised the European Commission how to assess comparable compliance of third-country central counterparties (TC-CCPs).
This is just one of the three sets of technical advice ESMA has provided the commission on TC-CCPs under the revised European Market Infrastructure Regulation (EMIR 2.2).
EMIR 2.2 introduced new criteria to be considered by ESMA to determine if a TC-CCP is systemically important or likely to become systemically important to the financial stability of the EU or a member state. If so, it is categorized as a tier two and if not, it is a tier one.
The advice from ESMA suggests indicators to help determine a TC-CCP tiering and discloses what it might consider in the assessment.
Its two-tier system requires all tier two’s comply with EMIR 2.2 once they have been categorized and on an on-going basis in addition to the requirements of its home country. However, comparable compliance allows tier-two TC-CCPs to comply with EMIR requirements by complying with its home country regulations.
Moving forward, ESMA believes a TC-CCP should disclose how compliance with their home country regulations also satisfy EMIR.
Another stipulation of the regulation is TC-CCPs operating in the EU must pay fees to cover relevant supervisory and administrative costs. The regulator suggests fees should be charged for each category of TC-CCPs as well as the payments and reimbursements.
ESMA Chair Steven Maijoor said, “CCPs are important financial market infrastructures that play a key role in helping to mitigate transactional risks related to central clearing. To achieve the stability and safety of the EU financial system, it is important that we capture the risks associated with CCPs, be they EU or third country based.
“Our technical proposals, once implemented, will help to achieve this goal by ensuring proportionate supervision is in place for all CCPs, depending on whether they are systemically important for the EU or not.”
The European Commission will look into the advice and consult publicly before finalising them.
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