The European Association of CCP Clearing Houses (EACH) has responded to ESMA’s consultation on EMIR 3 draft RTS on Participation Requirements. EACH Members particularly welcome that the draft RTS preamble seeks to give CCPs the flexibility to adapt the conditions to their participants, and would like to emphasise the importance of calibrating the type of issues this draft RTS is trying to address
The key messages that EACH Members would like to convey are the following:
- Support the adaptive risk-based approach proposed by ESMA and suggests tweaks to its implementation – We agree with the provisions specifying that a CCP should tailor its admission criteria to its specific risks and the risk profile of the type of product cleared, the type of membership, and/or the type of clearing member. However, we believe that the draft RTS does not reflect this flexibility explicitly enough in the articles themselves, and suggest some amendments to address this matter.
- Avoid overly extensive and unrealistic criteria – EACH Members have noted that, cumulatively, the list of criteria that a CCP shall consider is extensive and many of the criteria would be difficult for a CCP to verify. For example, to truly verify compliance with the operational conditions, a full on-premises audit including potentially of suppliers would be required, which would be very costly and of limited added value. We would therefore like to clarify that CCPs should not be forced to become a quasi-regulator of their clearing members: especially where clearing members are regulated financial institutions, they are already subject to extensive requirements and supervision.
- Complement rather than duplicate the CCP risk management framework – We would like to emphasise that the draft RTS in its current form includes elements that are covered in the risk management framework of the CCP and should not be addressed via the admission criteria. For example, during the onboarding phase of clearing members, the CCP cannot assess the future portfolio of a clearing member or the relative importance of client activity in comparison to proprietary clearing. Such risks are however sufficiently covered in a CCP’s risk management framework.
Please find the full EACH response here.
