ESMA releases responses from CCP’s conflict of interest report
15 September 2017 Paris
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There are “situations where central counterparty (CCP) conflicts of interest cannot reasonably or proportionately be avoided”, according to the London Stock Exchange.
This statement was a response to an industry consultation by the European Securities and Markets Authority (ESMA), which looked into the issue of conflicts of interests between a CCP and its clearing members under the European Market Infrastructure Regulation (EMIR).
It also tried to verify potential areas where CCPs are not sufficiently bolstered to withstand risks of damage to the interests of a clearing member or client.
As part of the consultation, ESMA proposed giving further counsel to CCP’s management to “ensure common, uniform and consistent application” of the EMIR guidelines, which were first introduced in December 2012 under EU legislation.
In response, the London Stock Exchange said: “The adoption of rules related to the limitation of the number of contracts or mandates board members and executive directors may have is not mandatory to appropriately mitigate the risk of conflict of interests.”
“Independence is a quality that can be possessed by individuals, and is an essential component of professionalism and professional behaviour.”
Deutsche Boerse subsidiary Eurex Clearing, concluded that the “proposed rules of conduct [are] appropriate.”
However it added: “In order to prevent misinterpretations of the term ‘external audits having a link with or receiving benefit from the CCP’, we propose adding a reference to the existing rules or deleting this specific requirement.”
BME Clearing went as far as to propose a complete deletion of this measure, saying: “The limitation of the number of contracts or mandates of board members and executive directors is not reasonable.”
“External auditor appointment is already regulated in the directive on statutory audits of annual accounts and consolidated accounts.”
Other clearinghouses and stakeholders that responded to the consultation included Amundi, European Commodity Clearing, the European Association of CCP Clearing Houses and the International Swaps and Derivative Association.
Subscribe for free to the next issue of Securities Lending Times, published on 19 September, to read analysis of all the responses in full.
This statement was a response to an industry consultation by the European Securities and Markets Authority (ESMA), which looked into the issue of conflicts of interests between a CCP and its clearing members under the European Market Infrastructure Regulation (EMIR).
It also tried to verify potential areas where CCPs are not sufficiently bolstered to withstand risks of damage to the interests of a clearing member or client.
As part of the consultation, ESMA proposed giving further counsel to CCP’s management to “ensure common, uniform and consistent application” of the EMIR guidelines, which were first introduced in December 2012 under EU legislation.
In response, the London Stock Exchange said: “The adoption of rules related to the limitation of the number of contracts or mandates board members and executive directors may have is not mandatory to appropriately mitigate the risk of conflict of interests.”
“Independence is a quality that can be possessed by individuals, and is an essential component of professionalism and professional behaviour.”
Deutsche Boerse subsidiary Eurex Clearing, concluded that the “proposed rules of conduct [are] appropriate.”
However it added: “In order to prevent misinterpretations of the term ‘external audits having a link with or receiving benefit from the CCP’, we propose adding a reference to the existing rules or deleting this specific requirement.”
BME Clearing went as far as to propose a complete deletion of this measure, saying: “The limitation of the number of contracts or mandates of board members and executive directors is not reasonable.”
“External auditor appointment is already regulated in the directive on statutory audits of annual accounts and consolidated accounts.”
Other clearinghouses and stakeholders that responded to the consultation included Amundi, European Commodity Clearing, the European Association of CCP Clearing Houses and the International Swaps and Derivative Association.
Subscribe for free to the next issue of Securities Lending Times, published on 19 September, to read analysis of all the responses in full.
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