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ESMA Publishes Guidelines for CCP Colleges

On 5 June 2013, the European Securities and Markets Authority (“ESMA”) published a report entitled “Guidelines and Recommendations regarding written agreements between members of CCP colleges”.

Article 18 of EMIR states that:

  • A National Competent Authority (“NCA”) must establish a CCP college within 30 days of receiving a complete application for authorisation as a CCP under EMIR; and
  • a CCP college cannot be established until the NCAs eligible for participation (each an “Eligible NCA”) have first agreed, in writing, the terms on which the CCP college will operate.

The report includes a standard form written agreement that documents the operational elements of the creation and management of CCP colleges.  This is designed to facilitate the process of establishing CCP colleges and requires NCAs to justify any departure from the standard written agreement.

ESMA had previously expressed concern that an Eligible NCA held an effective veto right over authorisation of a CCP if it deliberately refused to agree to the terms for the operation of the CCP college.  This fact would prevent the establishment of the CCP college and, in turn, the authorisation of the CCP.  As such, ESMA proposed in its draft regulatory technical standard (“RTS”) on CCP colleges that any Eligible NCA which chose not to agree to the terms for the operation of the CCP college would not block its operation.  However, on 31 January 2013, the EU Commission refused to endorse ESMA’s draft RTS because it did not consider them compatible with EMIR, particularly in the way in which they addressed the establishment and functioning of CCP colleges under Article 18.   It considered that an Eligible NCA which chose not to agree to the terms for the operation of a CCP college would be in direct breach of EU law, which would give rise to an action under Article 258 of the Treaty on the Functioning of the European Union.

On 14 March 2013, ESMA adopted an opinion to amend the draft RTS on colleges.  Changes suggested by the EU Commission were implemented, and ESMA also introduced a provision such that it would issue Guidelines and Recommendations to ensure the use of standard written agreements across CCP colleges.  Following submission of the opinion, the EU Commission adopted the revised draft RTS on 28 May 2013, triggering a 3-month period during which the EU Parliament and Council may object.  Despite their publication, the Guidelines and Recommendations will have effect only after their publication by ESMA on its website in the official languages of the European Union which will be subsequent to the end of the Parliament and Council’s objection period.

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