On 15 March 2012, the European Securities and Markets Authority (“ESMA”) published two documents relating to EMIR:
- an opinion incorporating draft regulatory technical standards on colleges for central counterparties (the “CCP College RTS”); and
- a Final Report containing guidelines and recommendations for establishing consistent, efficient and effective assessment of interoperability arrangements.
The CCP College RTS
Article 18(1) of EMIR requires a National Competent Authority (NCA) to establish a CCP college within 30 days of receiving a complete application for authorisation from a CCP. Additionally, Article 18(5) provides that a CCP college cannot be established until the terms upon which it will operate have been agreed between the authorities eligible for participation. ESMA was concerned that a NCA could deliberately avoid agreeing the terms of a CCP College as a way of effectively vetoing the authorisation of a CCP. Accordingly, in its CCP College RTS submitted to the EU Commission on 27 September 2012, it proposed that any authority which was eligible for participation in a CCP college, but which chose not to agree to its operating terms, would not block the functioning of the college.
The EU Commission believed that this aspect of the CCP College RTS exceeded the original legislative mandate granted to ESMA and considered that any NCA acting in the manner described by ESMA would be in breach of EU law. On this basis, it declined to endorse the CCP College RTS and proposed amendments in a letter dated 31 January 2013. ESMA does not consider that the amendments address the veto right in a manner that is consistent with the 30-day timeframe required for the establishment of a CCP college under EMIR. Nonetheless, it regards the amendments as “sensible” and a warning to any NCA that wishes to exercise a veto right and has incorporated the Commissions proposed amendments.
The CCP College RTS will enter into force 20 days after publication in the EU Official Journal.
Guidelines for CCP Interoperability
The Final Report contains guidelines and recommendations as mandated under Article 54 of EMIR. It defines what NCAs should consider in assessing an interoperability arrangement between CCPs with a view to improving the rigor and uniformity of standards in this area. It also discusses feedback received from ESMA’s December 2012 consultation and subsequent changes to the draft Guidelines and Recommendations made by ESMA.
Broadly, the guidelines cover five areas:
- Legal risk within interoperability arrangements;
- Open and fair access to interoperability arrangements;
- Identification, monitoring and management of risk associated with interoperability arrangements;
- Deposit of collateral between interoperable CCPs; and
- Co-operation between NCAs responsible for the assessment and supervision of interoperability arrangements.
The guidelines will become effective one month after publication by ESMA on its website.