Changes from report parliamentary committee draft to plenary report

RemovedClarification that the active account requirement applies only to new trades.

Added(32) To reduce the burden on CCPs and ESMA, it should be clarified that where ESMA undertakes a review of a third-country CCP’s recognition pursuant to Article 25(5), first subparagraph, point (b), that third-country CCP should not be obliged to submit a new application for recognition. It should, however, provide ESMA with all information necessary for such review. Consequently, ESMA's review of a third-country CCP’s recognition should not constitute a new recognition of that CCP.

RemovedRegulation (EU) No 648/2012

Added(33) The Commission should be able, when adopting an equivalence decision, to waive the requirement for that third country to have an effective equivalent system for the recognition of third-country CCPs. In considering where such an approach would be proportionate, the Commission might consider a range of different factors, including compliance with the Principles for Financial Market Infrastructures published by the Committee on Payments and Market Infrastructures and the International Organisation of Securities Commissions, the size of the third-country CCPs established in that jurisdiction and, where known, the expected activity in these third-country CCPs by clearing members and trading venues established in the Union.

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 1 d (new): 1d. Financial counterparties or non-financial counterparties belonging to the same group shall be subject to the obligation set out in paragraph 1, if any entity in the group clears any of the categories of derivative contracts referred to in paragraph 2.

Added(34) To ensure that cooperation arrangements between ESMA and the relevant competent authorities of third countries are proportionate, such arrangements should reflect the specific features of the scope of services provided, or intended to be provided, within the Union by CCPs authorised in that third-country and whether those services entail specific risks to the Union or to one or more of its Member States. The cooperation arrangements should therefore reflect the degree of risk that the CCPs established in a third country potentially present to the financial stability of the Union or of one or more of its Member States.

RemovedClarification that the requirement covers the whole group.

Added(35) ESMA should therefore tailor its cooperation arrangements to different third-country jurisdictions based on the CCPs established in the respective jurisdiction. In particular, Tier 1 CCPs cover a wide range of CCP profiles hence ESMA should ensure that a cooperation arrangement is proportionate to the CCPs established in each third-country jurisdiction. ESMA should consider, amongst others, the liquidity of the markets concerned, the degree to which the CCPs’ clearing activities are denominated in euro or other Union currencies and the extent to which Union entities use the services of such CCPs. Considering that the vast majority of Tier 1 CCPs provide clearing services to a limited extent to clearing members and trading venues established in the Union, ESMA’s scope of assessment and information to be requested should also be limited in all those jurisdictions. To limit information requests for Tier 1 CCPs, a pre-defined range of information should in principle be requested by ESMA annually. Where the risks from a Tier 1 CCP or jurisdiction are potentially greater, more, and at least quarterly, requests and a wider scope of information requested would be justified. However, any cooperation arrangements in place when this Regulation enters into force should not be required to be adjusted unless the relevant third-country authorities so request.

RemovedRegulation (EU) No 648/2012

Added(36) Where recognition is provided under Article 25(2b) of Regulation (EU) No 648/2012, considering that those CCPs are of systemic importance for the Union or one or more of its Member States, the cooperation arrangements between ESMA and the relevant third-country authorities should cover the exchange of information for a broader range of information and with increased frequency. In that case, the cooperation arrangements should also entail procedures to ensure such a Tier 2 CCP is supervised pursuant to Article 25 of that Regulation. ESMA should ensure it can obtain all information necessary to fulfil its duties under that Regulation, including information necessary to ensure compliance with Article 25(2b) of that Regulation and to ensure that information is shared where a CCP has been granted, partially or fully, comparable compliance. ESMA should also, where comparable compliance is granted, regularly assess the continued compliance by Tier 2 CCPs with the conditions for their recognition through comparable compliance, by monitoring CCPs’ compliance with the requirements set out in Article 16 and Titles IV and V under the Commission dDelegated Regulation (EU) 2020/1304. In undertaking that assessment ESMA, should also be able, in addition to receiving the relevant information and confirmations from the Tier 2 CCP, to cooperate and agree on administrative procedures with the third country authority to ensure ESMA has the relevant information and to reduce the administrative and regulatory burdens for those Tier 2 CCPs. To enable ESMA to carry out full and effective supervision of Tier 2 CCPs, it should be clarified that those CCPs should provide ESMA with information periodically.

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 2: 2. The obligation laid down in paragraph 1 of this Article shall apply to any of the following: / (a) OTC interest rate derivatives denominated in euro and Polish zloty; / (b) short-term interest rate derivatives (STIR) denominated in euro; / (c) other categories of derivative contracts pertaining to clearing services identified by ESMA as being of substantial systemic importance in accordance with Article 25(2c). / Where ESMA undertakes an assessment pursuant to Article 25(2c), as referred to in point (c) of the first subparagraph, and concludes that certain services or activities provided by Tier 2 CCPs that were previously identified by ESMA as being of substantial systemic importance for the Union or one or more of its Member States no longer are, the Commission is empowered to adopt a delegated act to amend paragraph 2 accordingly, in accordance with Article 82.

Added(37) To ensure that ESMA is also informed about how a Tier 2 CCP is prepared for, can mitigate and recover from financial distress, the cooperation arrangements should include the right for ESMA to be informed where a Tier 2 CCP establishes a recovery plan or where a third-country authority establishes resolution plans. ESMA should also be informed on the aspects relevant for the financial stability of the Union, or of one or more of its Member States, and on how individual clearing members, and to the extent known clients and indirect clients, could be materially affected by the implementation of such a recovery or resolution plan. The cooperation arrangements should also indicate that ESMA should be informed when a Tier 2 CCP intends to activate its recovery plan or where the third-country authorities have determined that there are indications of an emerging crisis situation that could affect the operations of the CCP, its clearing members, clients and indirect clients.

RemovedProposal to take into account market developments by removing the CDS contracts from the list of categories of derivatives subject to the active account requirement and increase flexibility by cross-referencing to future assessments conducted by ESMA under Article 25(2c). In addition, proposal to introduce a requirement to regularly review the assessment under Article 25(2c).

Added(38) To mitigate potential risks for the financial stability of the Union, or of one or more of its Member States, CCPs and clearing houses should not be allowed to be clearing members of other CCPs nor should CCPs be able to accept to have other CCPs as clearing members or indirect clearing members. That exclusion should not affect interoperability arrangements, or other arrangements such as sponsored-memberships or direct access to cleared repo markets, between CCPs.

RemovedRegulation (EU) No 648/2012

Added(39) The recent events on commodity markets as a result of Russia’s unprovoked and unjustified aggression against Ukraine illustrate the fact that non-financial counterparties do not have the same access to liquidity as financial counterparties. Therefore, non-financial counterparties should not be allowed to offer client clearing services and should be only allowed to keep accounts at the CCP for assets and positions held for their own account. Where a CCP has or intends to accept non-financial counterparties as clearing members that CCP should ensure that the non-financial counterparties can fulfil the margin requirements and default funds contributions, including in stressed conditions. Considering non-financial counterparties are not subject to the same prudential requirements and liquidity safeguards as financial counterparties, their direct access to CCPs should be monitored by the competent authorities of CCPs accepting them as clearing members. . The competent authority for the CCP should report to ESMA and the college on a regular basis on the appropriateness of accepting non-financial counterparties as clearing members. ESMA might issue an opinion on the appropriateness of such arrangements following an ad-hoc peer review.

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 3: 3. A financial counterparty or a non-financial counterparty that is subject to the obligation laid down in paragraph 1 of this Article, shall calculate its activities in the categories of derivative contracts referred to in paragraph 2 at CCPs authorised under Article 14 and, separately, at CCPs recognised under Article 25 to ensure their compliance with the obligations set out in those paragraphs. / The financial counterparty or non-financial counterparty shall include in that calculation all derivative contracts referred to in paragraph 2 of this Article entered into by that counterparty or by other entities within the group to which that counterparty belongs.

Added(40) To ensure clients and indirect clients have better visibility and predictability of margin calls, and thus further develop their liquidity management strategies, clearing members and clients providing clearing services should ensure transparency towards their clients. Due to their closer relationship with CCPs and their professional experience with central clearing and liquidity management, clearing members are best placed to communicate in a clear and transparent manner to clients how CCP models work, including in stress events, and the implications such events can have on the margins clients are requested to post, including any additional margin clearing members themselves may ask. A better understanding of CCP margin models can improve clients’ ability to reasonably predict margin calls and prepare themselves for collateral requests, particularly in stress events. In order to ensure that clearing members are able to provide effectively the required levels of transparency on margin calls and CCP margin models to their clients, CCPs should also provide them with the information needed. ESMA, in consultation with EBA and the ESCB, should further specify the scope and format of the exchange of information between CCPs and clearing members and between clearing members and their clients.

RemovedProposal to include TC-CCPs in the denominator in view of calculating the proportion of clearing activity at EU CCPs out of total clearing activity, as per paragraph 5. The calculations should be carried out at group level, including EU subsidiaries, to calculate their level of activity to ensure compliance with the ‘proportion of activity’. In addition, the reporting should encompass, separately, information on transactions cleared at authorised CCPs and at recognised third-country CCPs. Such enlarged reporting will allow competent authorities to capture cases of non-compliance with the active account requirement.

Added(41) To ensure that margin models reflect current market conditions, CCPs should continuously and not only regularly revise the level of their margins taking into account any potentially procyclical effects of such revisions. When calling and collecting margins on an intraday basis, CCPs should further consider the potential impact of their intraday margin collections and payments on the liquidity position of their participants.

RemovedRegulation (EU) No 648/2012

Added(42) To ensure the liquidity risk is accurately defined, the entities whose default a CCP should take into account to determine such risk should be expanded to cover not only the default of clearing members but also of liquidity service providers, settlement service providers or any other service providers.

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 4: 4. ESMA shall calculate and monitor the level of activity in the derivative contracts referred to in paragraph 2 of this Article, and shall transmit that information to the Joint Monitoring Mechanism referred to in Article 23c.

Added(43) To facilitate access to clearing to those entities that do not hold sufficient amounts of highly liquid assets and in particular energy companies, under conditions to be specified by ESMA and to ensure a CCP takes those conditions into account when calculating its overall exposure to a bank that is also a clearing member, commercial bank and public bank guarantees should be considered eligible collateral, even on an uncollateralised basis for non-financial counterparties, subject to concentration limits and specific requirements to be set by ESMA. In addition, given their low credit risk profile, it should be explicitly specified that public guarantees are also eligible as collateral. Finally, a CCP should, when revising the level of the haircuts it applies to the assets it accepts as collateral, take into account any potential procyclical effects of such revisions.

RemovedInstead of creating another reporting line, proposal for ESMA to calculate the level of activity at entity level and in aggregate based on the reporting already collected under EMIR and the proposed reviewed Article 9, which now includes reporting data from EU subsidiaries (see below). This addition to Article 9 is important to ensure that ESMA has a complete view.

Added(44) To facilitate CCPs’ ability to respond promptly to market developments that may require amendments to their risk models, the process of the validation of changes to such models should be simplified. Where a change is non-significant, a non-objection validation procedure should apply. To ensure supervisory convergence, Regulation (EU) No 648/2012 should specify the changes that should be considered as significant. This should be the case where certain conditions would be met referring to different aspects of the CCP’s financial position and overall risk level.

RemovedRegulation (EU) No 648/2012

Added(44a) The Report on the Functioning of Regulation (EU) No 575/2013 with the related obligations under Regulation (EU) No 648/2012 jointly issued by EBA and ESMA in January 2017 identifies multiple potentially duplicative and inconsistent requirements for CCPs holding a banking license. Consequently, the report recommends a number of clarifications to avoid increased regulatory risk, unnecessary burdens and costs for monitoring by the competent authorities. The duplication of capital requirements identified in that report has not yet been fully addressed. Therefore, as recommended in the report, it should be clarified that CCPs authorised in accordance with Article 14 of Regulation (EU) 648/2012, are not required to set aside own funds for their activities where the incumbent risks are already covered through the CCP-specific financial resources referred to in Articles 41 to 44 of that Regulation. Whilst the Eurosystem is looking into the issue of convergent central bank access policies for Union CCPs, the central banks of issue of the Eurosystem under the lead of the ECB should, at the request of the European Parliament, provide a report assessing the state of play and, if appropriate, provide recommendations how to ensure generalised central bank access for EMIR-authorised Union CCPs without the condition of maintaining a banking licence.

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 4 a (new): 4a. By … [18 months from the date of entry into force of this amending Regulation] ESMA shall, in cooperation with the Joint Monitoring Mechanism established under Article 23c, submit a report to the Commission assessing the following: / (a) the number of accounts opened at CCPs authorised under Article 14 as a result of the obligation set out in paragraph 1; / (b) the amount of activity financial and non-financial counterparties maintain in the active accounts referred to in paragraph 1, relative to their overall clearing activity in the contracts referred to in paragraph 2; / (c) the frequency with which new trades are cleared through active accounts by the different types of counterparties; / (d) an assessment of the effectiveness of the active accounts in mitigating the risks for the Union or for one or more of its Member States posed by substantially systemic Tier 2 CCPs or their clearing services. / Where ESMA concludes that the requirement referred to in paragraph 1 has not led, or is not likely to lead, to sufficient mitigation of the financial stability risks for the Union or for one or more of its Member States, it shall, in cooperation with EBA, EIOPA and the ESRB and after consulting the ESCB, develop draft regulatory technical standards specifying the following: / (a) the proportion of activity in each category of the derivative contracts referred to in paragraph 2 that financial and non-financial counterparties shall clear through their active accounts; / (b) th…

Added(45) Regulation (EU) No 648/2012 should be reviewed no later than 5 years after the date of entry into force of this Regulation. This should allow time to apply the changes introduced by this Regulation. Whilst a review of Regulation (EU) No 648/2012 in its entirety should be carried out, that review should focus on the effectiveness and efficiency of that Regulation in meeting its aims, improving the efficiency and safety of Union clearing markets and preserving financial stability of the Union. The review should also consider the attractiveness of Union CCPs, the impact of this Regulation on encouraging clearing in the Union, and the extent to which the enhanced assessment and management of cross-border risks have benefited the Union.

RemovedProposal to have an ESMA Report 18 months after the entry into force of EMIR 3 to assess whether the situation has improved with the qualitative active account requirement and whether a quantitative thresholds should be introduced to address the situation, and outlining the process for it. See explanatory note for greater details.

Added(46) To ensure consistency of Regulation (EU) 2017/1131 of the European Parliament and of the Council with Regulation (EU) No 648/2012 and to preserve the integrity and stability of the internal market, it is necessary to lay down in Regulation (EU) 2017/1131 a uniform set of rules to address counterparty risk in financial derivative transactions performed by money market funds (MMF), when the transactions have been cleared by a CCP that is authorised or recognised under Regulation (EU) No 648/2012. As central clearing arrangements mitigate counterparty risk that is inherent in financial derivative contracts, it is necessary to take into consideration whether a derivative has been centrally cleared by a CCP that is authorised or recognised under that Regulation, when determining the applicable counterparty risk limits. It is also necessary for regulatory and harmonisation purposes, to lift counterparty risk limits only where the counterparties use CCPs which are authorised or recognised in accordance with that Regulation, to provide clearing services to clearing members and their clients.

RemovedRegulation (EU) No 648/2012

Added(47) To ensure consistent harmonisation of rules and supervisory practice on applications for authorisation, extension of authorisation and model validations the active account requirement and the CCP participation requirements, the Commission should be empowered to adopt regulatory technical standards developed by ESMA with regard to the following: the documents CCPs are required to submit when applying for authorisation, extension of authorisation and validation of model changes;▌ the calculation methodology to be used to calculate that proportion; the scope and details of the reporting by Union clearing members and clients to their competent authorities on their clearing activity in third-country CCPs and whilst providing the mechanisms triggering a review of the values of the clearing thresholds following significant price fluctuations in the underlying class of OTC derivatives to also review the scope of the hedging exemption and thresholds for the clearing obligation to apply; and the elements to be considered when laying down the admission criteria to a CCP. The Commission should adopt those regulatory technical standards by means of delegated acts pursuant to Article 290 of the Treaty on the Functioning of the European Union (TFEU) and in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 5: deleted / (deleted) / (deleted) / (deleted) / (deleted)

Added(48) To ensure uniform conditions for the implementation of this Regulation, the Commission should also be empowered to adopt implementing technical standards developed by ESMA with regard to the format of the required documents for applications and the format of the reporting by Union clearing members and clients to their competent authorities on their clearing activity in third-country CCPs. The Commission should adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1095/2010.

RemovedRegulation (EU) No 648/2012

Added(49) To ensure the list of third countries whose entities may not benefit from those exemptions despite not being identified in those lists is relevant for the objectives of Regulation (EU) No 648/2012, to ensure the consistent harmonisation of the obligation to clear certain transactions in an account with an authorised CCP where ESMA undertakes an assessment pursuant to Article 25(2c) and to ensure the list of non-material changes for the non-objection procedure to apply remains relevant, the power to adopt acts in accordance with Article 290 of the TFEU should be delegated to the Commission to adjust the transactions in scope of the obligation and to change the list of non-material changes. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts

RemovedArticle 1 – paragraph 1 – point 4, Article 7a – paragraph 6: 6. ESMA shall monitor the implementation of the obligation set out in paragraph 1 and report on an annual basis to the European Parliament, the Council and the Commission.

Added(50) Since the objectives of this Regulation, namely to increase the safety and efficiency of Union CCPs by improving their attractiveness, encouraging clearing in the Union and enhancing the cross-border consideration of risks cannot be sufficiently achieved by the Member States but can rather, by reason of their scale and effects, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

RemovedRemove Commission Delegated Act, given cross-reference to ESMA assessment under Article 25(2c). Replaced with proposal to increase feedback and accountability by ESMA, in addition to the annual report by JMM under Article 23c(3).

Added(51) Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 should therefore be amended accordingly.

RemovedRegulation (EU) No 648/2012

AddedHAVE ADOPTED THIS REGULATION:

RemovedArticle 1 – paragraph 1 – point 4, Article 7b – paragraph 1: 1. Clearing members and clients that are established in the Union or are part of a group subject to consolidated supervision in the Union and that clear in a CCP recognised under Article 25, shall report to ESMA the scope of their clearing activity on an annual basis, specifying all of the following:

AddedAmendments to Regulation (EU) No 648/2012

RemovedChange to reflect the move to ESMA as the supervisor of EU CCPs. See explanatory statement for greater details.

AddedRegulation (EU) No 648/2012 is amended as follows:

RemovedRegulation (EU) No 648/2012

Added(-1) in Article 1, paragraph 5, the following subparagraph is added:

RemovedArticle 1 – paragraph 1 – point 4, Article 7b – paragraph 1 – subparagraph 1 a (new): The clearing members and clients referred to in the first subparagraph shall also disclose, in a clear and understandable manner, the costs associated with clearing services of the different CCPs at which it is possible to clear the contract.

Added‘Notwithstanding point (b) of the first subparagraph of this paragraph, by ... [18 months from the date of entry into force of this amending Regulation], ESMA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 to further specify the modalities of public sector entities’ participation in Union CCPs, in particular regarding the calculation of the exposures of public sector entities to Union CCPs and public sector entities’ contributions to Union CCPs’ financial resources, duly taking account of the role and mandate of public entities and the objective of encouraging central clearing by them.”;

RemovedProposal to strengthen cost considerations for clients.

Added(-1a) Article 2 is amended as follows:

RemovedRegulation (EU) No 648/2012

Added(a) in paragraph 1, first subparagraph, point (1) is replaced by the following:

RemovedArticle 1 – paragraph 1 – point 4, Article 7b – paragraph 2 – subparagraph 1 – point b: (b) the values and volumes cleared and the margin posted over 1 year per currency and per asset class;

Added‘(1) “CCP” means a legal person that interposes itself between the counterparties to the contracts traded on one or more financial markets or commodity (spot) markets, including wholesale energy markets, as well as on one or more markets in crypto-assets, as defined in Article 3(5) of Regulation (EU) 2023/1114 of the European Parliament of Council, becoming the buyer to every seller and the seller to every buyer;’;

RemovedRegulation (EU) No 648/2012

Added(b) the following subparagraph is added: