.jpg)
EACH has published its response to the ESMA Consultation on EMIR article 15 and article 49, which discusses extension of services and activities (Article 15) and the approval of model and parameter changes (Article 49). The below bullet points summarise the high-level concerns raised by EACH members within:
- Complexity of the proposed approach - EACH believes that the proposed process would not improve the existing one and would unnecessarily increase complexity and duration of the processes of extending services and activities (Article 15) and the approval of model and parameter changes (Article 49).
- Structure of incentives - The elongated and complex model governance procedures suggested by the draft ESMA RTS may increase the contradictory outcomes to those initially intended that are already being experienced in some cases. The cost-benefit assessment of maintaining the modelling framework at the state-of-the-art, and keeping parameters up-to-date for prevailing market conditions, are not so simple any more.
- Accountability Vs. Responsibility - EACH notes and appreciates the accountability of ESMA and the relevant colleges when it comes to CCP supervision, however at the same time it can be argued that the steps proposed in this consultation represent a move by authorities from accountability to responsibility. Accountability and responsibility should not be confused. CCPs are responsible for the day-to-day management of their models, and the suggested text by the DRAFT ESMA RTS seems to preclude the execution of such role. Regulators, complementarily, have the important role of overseeing those practices, using legislation to establish the boundaries of appropriate action.
- Allocation of Responsibility and level playing field – The proposed transfer of responsibilities from the NCAs to ESMA and respective colleges could imply that the level of context and information is reduced during the decision-taking process. Furthermore, an additional consultation which might lead to unlevel playing field between CCPs and the governing processes applied due to potentially not always consistent decisions and unified practices.
- Decrease of possibilities for risk management - The proposed approach unnecessarily increases ‘time-to-market' of new risk products, services and changes to risk models, without a particular governance and crucially, without any defined timing. The proposed approach could significantly (or even in some extreme cases indefinitely) postpone the approval of new products.This would have the paradoxical consequence of decreasing, rather than increasing the possibilities to enhance risk management at CCPs, inhibiting the offering and quality of risk management products to the market.
- Governance of the proposed approach - The consultation paper does not include any governance to operate the new processes. There is no definition of the new timeline for the process of determining whether an extension of activities or services is subject to Article 15 and whether a change to the models and parameters is significant in line with Article 49. We believe that in line with the EMIR provisions, a specific and efficient timeline must be developed and most importantly enforced. Limiting the amount of time necessary for launching new services is key to spur innovation and competition within the EU, but also on global markets where EU CCPs enter into competition with CCPs from other jurisdictions which may benefit from faster processes.
For more information, please visit our website www.eachccp.eu
