ESMA peers at interoperability in CCPs
04 January 2012 Paris
Image: Shutterstock
The European Securities and Markets Authority (ESMA) has published a consultation paper on guidelines regarding the assessment of interoperability arrangements for central counterparty clearing (CCPs).
CCPs enter into such agreements to allow their users to execute trades with a counterparty that has chosen another CCP. From 2013, CCPs will have to obtain authorisation under the European Market Infrastructure Regulation (EMIR) in order to do business in the EU.
ESMA’s draft guidance focuses on the following issues related to interoperability arrangements:
• Legal risk: in order to properly mitigate and manage any legal risk, all rights and obligations of the relevant CCPs, their processes and procedures should be easy to identify at any time
• Ensure fair and open access: any future expansion of interoperability arrangements (to other CCPs) should not be restricted other than on risk grounds. On the other hand, the interoperability arrangement should also permit its termination on risk grounds
• Identification, monitoring and management of risks are critical for ensuring the prudent management of any interoperability arrangement in order to guarantee the safety of all interoperable CCPs
• Collateral deposits should be ring-fenced in in order to put CCPs in a position where collateral is available in a timely manner at all times, including upon the default of an interoperable CCP
• Cooperation between national regulators is essential in order to ensure a smooth approval process for the interoperability arrangement. The closing date for responses to this consultation is 31 January 2013. The feedback received will be used to finalise the guidelines for use by national regulators when receiving applications for interoperability arrangements by CCPs under EMIR.
CCPs enter into such agreements to allow their users to execute trades with a counterparty that has chosen another CCP. From 2013, CCPs will have to obtain authorisation under the European Market Infrastructure Regulation (EMIR) in order to do business in the EU.
ESMA’s draft guidance focuses on the following issues related to interoperability arrangements:
• Legal risk: in order to properly mitigate and manage any legal risk, all rights and obligations of the relevant CCPs, their processes and procedures should be easy to identify at any time
• Ensure fair and open access: any future expansion of interoperability arrangements (to other CCPs) should not be restricted other than on risk grounds. On the other hand, the interoperability arrangement should also permit its termination on risk grounds
• Identification, monitoring and management of risks are critical for ensuring the prudent management of any interoperability arrangement in order to guarantee the safety of all interoperable CCPs
• Collateral deposits should be ring-fenced in in order to put CCPs in a position where collateral is available in a timely manner at all times, including upon the default of an interoperable CCP
• Cooperation between national regulators is essential in order to ensure a smooth approval process for the interoperability arrangement. The closing date for responses to this consultation is 31 January 2013. The feedback received will be used to finalise the guidelines for use by national regulators when receiving applications for interoperability arrangements by CCPs under EMIR.
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