ESMA consults on CCP interoperability arrangements

On 20 December 2012, the European Securities and Markets Authority (ESMA) published a consultation paper on guidelines for establishing consistent, efficient and effective assessments of interoperability arrangements (IAs) for central counterparties (CCPs).

The consultation paper is required under Article 54(4) of EMIR and seeks to improve rigor and uniformity of standards, defining  five criteria against which National Competent Authorities (NCAs) should assess IAs, as set out below.

• Legal risk:  IAs must be clearly defined, transparent, valid and enforceable in all relevant jurisdictions in terms of:
  • documentation;
  • netting arrangements;
  • transfer orders;
  • default procedures; and
  • collateral arrangements;
• Open and fair access: IAs should ensure fair and open access with any restrictions being based solely on risk factors;
• Identification, monitoring and management of risks:  before entering into an IA, a CCP must establish a general framework for the identification, monitoring and management of potential risks arising from the IA;
• Deposit of collateral: CCPs depositing collateral pursuant to an IA must do so in a way which protects it from the default of any other interoperable CCP; and
• Cooperation:  NCAs responsible for the assessment of an IA should cooperate closely, sharing information and risk assessments throughout the process.

ESMA asks for responses to the consultation paper by 31 January 2013 and expects to publish final guidelines by the end of Q1 2013.

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