Changes from report parliamentary committee draft to plenary report

Added‘1a. A CCP shall accept non-financial counterparties as clearing members only if they are able to demonstrate that they are able to fulfil the margin requirements and default fund contributions, including in stressed market conditions.

AddedESMA shall regularly review the arrangements put in place by a CCP accepting non-financial counterparties as clearing members and report to the CCP's competent authority and to the college on their appropriateness.

AddedA non-financial counterparty acting as a clearing member shall not be permitted to offer client clearing services and shall only keep accounts at the CCP for assets and positions held for its own account.

AddedESMA may issue an opinion or a recommendation on the appropriateness of such arrangements following an ad-hoc peer review.’;

Added(c) the following paragraph 7 is added:

Added‘7. ESMA shall, after having consulted the EBA and the ESCB, develop draft regulatory technical standards further specifying the elements to be considered when laying down the admission criteria referred to in paragraph 1 and the participation requirements for accepting non-financial counterparties as clearing members in accordance with paragraph 1a.

AddedESMA shall submit those draft regulatory technical standards to the Commission by … [PO please enter 12 months after entry into force of this Regulation].

AddedPower is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010”.

Added(30) Article 38 is amended as follows:

Added"Article 38

AddedTransparency

Added"1. A CCP and its clearing members shall publicly disclose the prices and fees associated with the services provided. They shall disclose the prices and fees of each service provided separately, including discounts and rebates and the conditions to benefit from those reductions. A CCP shall allow its clearing members and, where relevant, their clients separate access to the specific services provided.

AddedA CCP shall account separately for costs and revenues of the services provided and shall disclose that information to ESMA and the competent authority.

Added2. A CCP shall disclose to clearing members and clients the risks associated with the services provided.

Added3. A CCP shall disclose to ESMA, its clearing members and to its competent authority the price information used to calculate its end-of-day exposures to its clearing members.

AddedA CCP shall publicly disclose the volumes of the cleared transactions for each class of instruments cleared by the CCP on an aggregated basis.

Added4. A CCP shall publicly disclose the operational and technical requirements relating to the communication protocols covering content and message formats it uses to interact with third parties, including the operational and technical requirements referred to in Article 7.

Added5. A CCP shall publicly disclose any breaches by clearing members of the criteria referred to in Article 37(1) and the requirements laid down in paragraph 1 of this Article, except where ESMA, after consulting the competent authority, considers that such disclosure would constitute a threat to financial stability or to market confidence or would seriously jeopardise the financial markets or cause disproportionate damage to the parties involved.

Added6. A CCP shall provide its clearing members with a simulation tool allowing them to determine the amount of additional initial margin at portfolio level, that the CCP may require upon the clearing of a new transaction, including simulation of the margin requirements that they might be subject to under different scenarios. That tool shall only be accessible to clearing members on a secured access basis, and the results of the simulation shall not be binding.

Added7. A CCP shall provide its clearing members with information on the margin models it uses in a clear and transparent manner. That information shall:

Added(a) clearly explain the design of the margin model and how it operates;

Added(b) clearly describe the key assumptions and limitations of the margin model and the circumstances under which those assumptions are no longer valid;

Added(c) be documented.

Added▌

Added8. ‘Clearing members ▌ and clients providing clearing services shall inform their clients in a clear and transparent manner of the way the margin models of the CCP work, including in stress situations, and provide them with access to a simulation of the margin requirements that they might be subject to under different scenarios, based on the simulation tool provided by the CCP as referred to in paragraph 6.. The clearing members shall ensure that the simulation includes both the margins required by the CCP and any additional margins required by the clearing members and the clients providing clearing services themselves.’;

AddedA CCP shall provide its clearing members with any information they require to comply with the provisions under the first subparagraph of this paragraph, unless that information is already provided pursuant to the provisions as referred to in paragraphs 1 to 7 of this Article. Upon request by one of its clearing, the CCP shall transmit that information without delay.

Added▌

Added‘9. The clearing members of the CCP and clients providing clearing services, shall clearly inform their existing and potential clients of the potential losses or other costs that they may bear as a result of the application of default management procedures and loss and position allocation arrangements under the CCP’s operating rules, including the type of compensation they may receive, taking into account Article 48(7). Clients shall be provided with sufficiently detailed information to ensure that they understand the worst-case losses or other costs they could face should the CCP undertake recovery measures.’;

Added10. ESMA shall, in consultation with EBA and the ESCB, develop draft regulatory technical standards further specifying the information to be provided under paragraphs 1 to 9, as well as the requirements related to the simulation tools as referred to in paragraphs 6 and 8.

AddedESMA shall submit those draft regulatory technical standards to the Commission by … [12 months from the date of entry into force of this amending Regulation]. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’

Added(31) Article 41 is amended as follows:

Added(a) paragraphs 1, 2 and are replaced by the following:

Added‘1. A CCP shall impose, call and collect margins to limit its credit exposures from its clearing members and, where relevant, from CCPs with which it has interoperability arrangements. Such margins shall be sufficient to cover potential exposures that the CCP estimates will occur until the liquidation of the relevant positions. They shall also be sufficient to cover losses that result from at least 99 % of the exposures movements over an appropriate time horizon and they shall ensure that a CCP fully collateralises its exposures with all its clearing members, and, where relevant, with CCPs with which it has interoperability arrangements, at least on a daily basis. A CCP shall continuously monitor and revise the level of its margins to reflect current market conditions taking into account any potentially procyclical effects of such revisions.

Added2. A CCP shall adopt models and parameters in setting its margin requirements that capture the risk characteristics of the products cleared and take into account the interval between margin collections, market liquidity and the possibility of changes over the duration of the transaction. The models and parameters shall be validated by ESMA and subject to an opinion▌ in accordance with the procedure under Article 17b.

Added3. A CCP shall call and collect margins on an intraday basis, at least when predefined thresholds are exceeded. In doing so a CCP shall consider the potential impact of its intraday margin collections and payments on the liquidity position of its participants and on the resilience of the CCP’;

Added(32) in Article 44(1), the second subparagraph is replaced by the following :

Added‘A CCP shall measure, on a daily basis, its potential liquidity needs. It shall take into account the liquidity risk generated by the default of at least the two entities, being either clearing members or liquidity providers, to which it has the largest exposures.’;

Added(33) Article 46 is amended as follows:

Added(a) paragraph 1 is replaced by the following:

Added‘1. A CCP shall accept highly liquid collateral with minimal credit and market risk to cover its initial and ongoing exposure to its clearing members. A CCP may accept public guarantees or public bank or commercial bank guarantees, including on an uncollateralised basis for non-financial counterparties, provided that they are unconditionally available upon request within the liquidation period referred to in Article 41. Where bank guarantees are provided to a CCP, that CCP shall take them into account when calculating its exposure to the bank that is also a clearing member, and shall subject uncollateralised bank guarantees provided by non-financial counterparties to concentration limits. The CCP shall apply adequate haircuts to asset values and guarantees to reflect the potential for their value to decline over the interval between their last revaluation and the time by which they can reasonably be assumed to be liquidated. It shall take into account the liquidity risk following the default of a market participant and the concentration risk on certain assets that may result in establishing the acceptable collateral and the relevant haircuts. When revising the level of the haircuts it applies to the assets it accepts as collateral, the CCP shall take into account any potential procyclicality effects of such revisions.’;

Added(b) in paragraph 3, first subparagraph, point (b) and (c) are is replaced by the following:

Added‘(b) the haircuts referred to in paragraph 1, taking into account the objective to limit their procyclicality; and’;

Added(c) the conditions under which public guarantees, public bank guarantees and commercial bank guarantees may be accepted as collateral under paragraph 1, including the conditions under which uncollateralised bank guarantees may be accepted as collateral and the concentration limits as referred to in paragraph 1.’

Added(33a) Article 48 is amended as follows:

Added(a) paragraph 5 is replaced by the following:

Added"5. Where assets and positions are recorded in the records and accounts of a CCP as being held for the account of a defaulting clearing member’s clients in accordance with Article 39(2), the CCP shall, at least, contractually commit itself to trigger the procedures for the transfer of the assets and positions held by the defaulting clearing member for the account of its clients to another clearing member designated by all of those clients, on their request or unless all clients object before the transfer of assets and positions is concluded and without the consent of the defaulting clearing member. That other clearing member shall be obliged to accept those assets and positions only where it has previously entered into a contractual relationship with the clients by which it has committed itself to do so. When designating a clearing member, clients shall contractually designate an alternative clearing member to be used in case their positions need to be transferred in the event of default. If the transfer to that other clearing member has not taken place for any reason within a predefined transfer period specified in its operating rules, the CCP may take all steps permitted by its rules to actively manage its risks in relation to those positions, including liquidating the assets and positions held by the defaulting clearing member for the account of its clients.”;

Added(b) paragraph 6 is replaced by the following:

Added"6. Where assets and positions are recorded in the records and accounts of a CCP as being held for the account of a defaulting clearing member’s client in accordance with Article 39(3), the CCP shall, at least, contractually commit itself to trigger the procedures for the transfer of the assets and positions held by the defaulting clearing member for the account of the client to another clearing member designated by the client, on the client’s request and without the consent of the defaulting clearing member. That other clearing member shall be obliged to accept these assets and positions only where it has previously entered into a contractual relationship with the client by which it has committed itself to do so. If the transfer to that other clearing member has not taken place for any reason within a predefined transfer period specified in its operating rules, the CCP may take all steps permitted by its rules to actively manage its risks in relation to those positions, including liquidating the assets and positions held by the defaulting clearing member for the account of the client.

AddedIn the case of default of an existing clearing member and for the purposes of porting clients from the defaulting clearing members towards an alternative clearing member, such alternative clearing member, the client subject to porting and the CCP shall be temporary waived from the requirements of Directive (EU) 2015/849, Directive (EU) 2018/843 and Directive (EU) 2019/1153. The alternative clearing member shall be temporarily waived from the requirements of capital for clearing members towards clients under Regulation (EU) No 575/2013.”;

Added(34) Article 49 is amended as follows:

Added(a) paragraphs 1 to 1e are replaced by the following:

Added‘1. A CCP shall regularly review the models and parameters adopted to calculate its margin requirements, default fund contributions, collateral requirements and other risk control mechanisms. It shall subject the models to rigorous and frequent stress tests to assess their resilience in extreme but plausible market conditions and shall perform back tests to assess the reliability of the methodology adopted. The CCP shall obtain independent validation, shall inform ▌ESMA of the results of the tests performed and shall obtain ESMA’s validation in accordance with paragraphs 1a, to 1e before adopting any significant change to the models and parameters.

AddedThe adopted models and parameters, including any significant change thereto, shall be subject to an opinion of the college in accordance with this Article.

AddedESMA shall ensure that information on the results of the stress tests is passed on to the ESAs, the ESCB and the Single Resolution Board to enable them to assess the exposure of financial undertakings to the default of CCPs.

Added1a. Where a CCP intends to adopt any significant change to the models and parameters referred to in paragraph 1, it shall submit an application for validation of such change in an electronic format via the central database referred to in Article 17(7) where it shall be immediately shared with the CCP’s competent authority, ESMA and the college. The CCP shall enclose an independent validation of the intended change to its application.

AddedWhere a CCP considers that the change to the models and parameters referred to in paragraph 1 it intends to adopt is not significant as referred to in paragraph 1ga, the CCP shall request that the application be subject to a non-objection procedure under paragraph 1b. In that case, the CCP may start applying such change before the decision of the CCP’s competent authority and ESMA pursuant to paragraph 1b.

AddedESMA shall▌ within 5 working days after such application has been received, acknowledge receipt of the application, confirming to the CCP that it contains the required documents. Where ESMA concludes that the application does not contain the required documents, the application shall be rejected.

Added1b. Within 15 working days of the date referred to in the third subparagraph of paragraph 1a, ESMA, after considering the input of the college, shall assess if the proposed change qualifies as a significant change pursuant to paragraph 1g. Where ESMA concludes that the change meets one of the conditions referred to in paragraph 1g, the application shall be assessed under paragraphs 1c, 1d and1e and ESMA shall inform in writing the applicant CCP thereof.

AddedWhere within 10 working days of the date referred to in the third subparagraph of paragraph 1a, the applicant CCP has not been informed in writing that its request for the non-objection procedure to apply has been denied, that change shall be deemed as validated.

AddedWhere a request for the non-objection procedure has been denied, the CCP shall, within 5 working days from the notification referred to in the first subparagraph, no longer use that model change. Within 10 working days from that notification, the CCP shall either withdraw the application or complement the application with the independent validation of the change.