Central counterparties (CCPs) sit between buyers and sellers of stock, bonds or derivatives 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, asset-referenced tokens or electronic money tokens and shoulder the risks of a transaction party default.

MEPs want to centralise the supervision of EU CCPs and address the financial stability risks caused by the EU clearing members and clients being exposed to systemically important third-country CCPs. They also want to make clearing services and European CCPs more efficient and competitive.

Bigger role for ESMA

With their vote, MEPs aim to have an adequate supervisory framework. To this end, they proposed that ESMA should directly supervise the EU CCPs. They should apply to the European Securities and Markets Authority (ESMA) for authorisation and report their risk management data as well as consult and inform ESMA about their recovery and resolution plans. Recognised third country CCPs should annually report to ESMA the scope of their clearing activity.

Active account

MEPs agreed that financial counterparties or non-financial counterparties that are subject to the clearing obligation should hold at least one active account at a CCP established in the EU and regularly clear there systematically important products. Given the novelty of the requirement, MEPs also agreed that further measures such as the requirement to clear at least a proportion of trades through the active account should be phased in gradually and only after the Commission carries out a cost-benefit analysis and assess the impact of the requirement on financial stability and international competitiveness of EU counterparties. An account is considered active if it posts initial and daily variation margins, has in place the necessary IT connectivity, internal processes and legal documentation and can demonstrate that its functioning would not be affected in the event of a significant and sudden increase in clearing activity.

Reduced regulatory burden

CCPs would be subject to streamlined procedures if they provide additional services or changing risks models. Where a CCP intends to clear a new currency or offer a new settlement mechanism, it would be subject to a non-objection procedure. In case a CCP adopts changes on a regular basis ('business as usual') it would notify ESMA before implementing them, instead of being subject to authorisation procedures. This should significantly alleviate the burden on competent authorities, and increase the capacity of CCPs to implement changes that will not modify their risk profile.

Transparency

The clients of the EU CCPs, as well as recognised third-country CCPs, should be informed about an option to clear a derivative contract in an EU CCP, which should be transparent on fees, risks associated with the service provided and volumes of cleared transactions...

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