No less than seven consultations relating to central counterparty (CCP) clearing were posted last Thursday and Friday under the CCP directorate at the European Securities and Markets Authority. One is about the safeguards for CCP clients, and their clients in turn, when another CCP member goes bust and leaves the others to pay the bill.
Writing with legal news monitoring site Regulation Tomorrow, Norton Rose Fulbright’s expert Jochen Vester has here summed up the six CCP consultations that were published on Thursday.
Simultaneously with the consultations, ESMA has also published a clearing related final report – with draft regulatory technical standards (RTS) on the clearing and derivative trading obligations in view of the benchmark transition to risk free rates (link here).
The seven clearing consultations published on 18 and 19 November all carry a 24 January 2022 deadline for stakeholders who wish to express their view. All consultations by ESMA are available through this page. The were labelled as follows:
• Highly liquid financial instruments with regards to the investment policy of central counterparties [Link here]
• Draft Guidelines on the application of the circumstances under which a CCP is deemed to be failing or likely to fail [Link here]
• Draft RTS on safeguards for clients and indirect clients (Article 63(2) of the CCPRRR) [Link here]
• Draft RTS on Valuation of CCPs assets and liabilities in resolution [Link here]
• Draft Guidelines on Methodology to value each contract prior to termination [Link here]
• Draft RTS on Resolution Colleges [Link here]
• Draft RTS on the content of CCP resolution plans [Link here]
The rules around “resolution” when a member defaults on its obligations to its counterparties – in other words, how the bill should be split between CCPs and their clients/members – is subject to continous discussion across the industry and a recurring topic with panels at PostTrade 360° conferences. From our Stockholm 2021 event, find this article, featuring an extensive summary and a full-session video.