EUROPEAN COMMISSION 

Brussels, 

COM(2010) 484/5 

2010/0250 (COD) 

 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on OTC derivatives, central counterparties and trade repositories 

{SEC(2010) 1058} 

{SEC(2010) 1059} 

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EXPLANATORY MEMORANDUM

1. CONTEXT OF THE PROPOSAL 

The financial crisis has brought over-the-counter (OTC) derivatives to the forefront of 

regulatory attention. The near-collapse of Bear Sterns in March 2008, the default of Lehman 

Brothers on 15 September 2008 and the bail-out of AIG the following day highlighted the 

shortcomings in the functioning of the OTC derivatives market. Within that market, regulators 

devoted particular attention to the role that credit default swaps (CDS) played during the 

crisis. 

The Commission responded rapidly. In its broad Communication of 4 March 2009 on 

“Driving European Recovery”1, the Commission committed to deliver, on the basis of a 

report on derivatives and other complex structured products, appropriate initiatives to increase 

transparency and to address financial stability concerns. On 3 July 2009, the Commission 

adopted a first Communication2 that specifically examined the role played by derivatives in 

the financial crisis and looked at the benefits and risks of derivatives markets. That 

Communication assessed how the identified risks could be reduced3. 

In September 2009, G-20 Leaders agreed in Pittsburgh that: 

All standardised OTC derivative contracts should be traded on exchanges or 

electronic trading platforms, where appropriate, and cleared through central 

counterparties by end-2012 at the latest. OTC derivative contracts should be 

reported to trade repositories. Non-centrally cleared contracts should be subject to 

higher capital requirements. 

In June 2010, G20 Leaders in Toronto reaffirmed their commitment and also committed to 

accelerate the implementation of strong measures to "improve transparency and regulatory 

oversight of over-the-counter derivatives in an internationally consistent and nondiscriminatory way". 

On 20 October 2009, the Commission adopted a second Communication4 that set out the 

future policy actions the Commission intended to propose to increase transparency of the 

derivatives market, reduce counterparty and operational risk in trading and enhance market 

integrity and oversight. That Communication also announced the Commission's intention to 

proceed with legislative proposals in 2010, to ensure implementation of the G20 commitments 

to clear standardised derivatives5, and that Central Counterparties (CCPs) comply with high 

prudential standards and adequate regulation of trade repositories. This proposal for a 

 

1

 COM(2009) 114. 

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0114:FIN:EN:PDF. 2

 “Ensuring efficient, safe and sound derivatives markets”, COM(2009)332. The document is available at 

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0332:FIN:EN:PDF. 3

 The Communication is accompanied by a Staff Working Paper, which contains an overview of (i) 

derivatives markets and (ii) OTC derivative market segments, as well as an assessment of the 

effectiveness of current measures to reduce risks, notably as regards CDS. The document is available at 

http://ec.europa.eu/internal_market/docs/derivatives/report_en.pdf. 4

 “Ensuring efficient, safe and sound derivatives markets: Future policy actions” - COM(2009) 563. 

Available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2009:0563:FIN:EN:PDF. 5

 http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf 
EN 3 EN 

DS market. 

 

Regulation delivers the Commission's commitments to proceed rapidly and with 

determination. It takes also into account the strong support and the many of the measures 

suggested in the Resolution of the European Parliament of 15 June 2010, on "Derivatives 

markets: future policy actions" (Langen-report). 

As already indicated above, this initiative is part of a larger international effort to increase the 

stability of the financial system in general, and the OTC derivatives market in particular. 

Given the global nature of the OTC derivatives market an internationally coordinated 

approach is crucial. It is therefore important that this proposal takes into account what other 

jurisdictions intend to do or have already done in the area of OTC derivatives regulation to 

avoid the risk of regulatory arbitrage. 

In this context, this proposal is consistent with the recently adopted US legislation on OTC 

derivatives, the so-called Frank-Dodd Act. The Act has a broadly identical scope of 

application. It contains similar provisions requiring the reporting of OTC derivative contracts 

and the clearing of eligible contracts. Furthermore, it puts in place strict capital and collateral 

requirements for OTC derivatives that remain bilaterally cleared. Finally, it puts in place a 

regulatory framework for trade repositories and upgrades the existing regulatory framework 

for CCPs. Similarly to the Commission's proposal, the Act foresees the further elaboration of 

a number of technical rules. 

2. RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND

IMPACT ASSESSMENT 

Since October 2008, the Commission services have been engaged in almost continuous, 

extensive consultation with stakeholders to determine the appropriate policy response. This 

interaction has taken the form of many bilateral and multilateral meetings, two public 

consultations and a conference. 

Initially the Commission services’ attention focused solely on the Credit Default Swap (CDS) 

market which was at the centre of attention with Bear Sterns and Lehman's. In order to 

facilitate the monitoring of the major dealers’ commitment in this area, the Commission 

established the Derivatives Working Group (DWG), that included representatives from the 

financial institutions that committed to clear European referenced CDS by July 20096

, 

representatives from central counterparties, trade repositories and other relevant market 

participants and from relevant European (ECB, CESR, CEBS and CEIOPS)7

 and national 

(AMF, BaFin and FSA)8

 authorities. In addition to the meetings of the DWG, the 

Commission held separate, ad-hoc bilateral and multilateral meetings with a large number of 

stakeholders in the C

Following industry compliance with the above-mentioned commitment and to prepare 

legislative measures, the Commission formed a Member States Experts Working Group on 

Derivatives and Market Infrastructures. It discussed regulatory approaches with experts 

6

 The letter of commitment and the list of signatories of the letter can be found on DG MARKT’s website 

at http://ec.europa.eu/internal_market/financial-markets/derivatives/index_en.htm#cds. 7

 Respectively the European Central Bank, the Committee of European Securities Regulators, the 

Committee of European Banking Supervisors, and Committee of European Insurance and Occupational 

Pensions Supervisors. 8

 Respectively the Autorité des marchés financiers, Bundesanstalt für Finanzdienstleistungsaufsicht and 

the Financial Services Authority. 
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representing Member States, the ECB, CESR and CEBS. It held a series of meetings from 

January to July 2010. 

The Commission has also gained valuable information by participating in various

international fora, in particular the OTC Derivatives Regulators Group and the Basel 

Committee's Risk Management and Modelling Group. The Commission has recently also 

gained observer status on the steering committee of the joint CPSS-IOSCO9 working group 

that is currently reviewing the recommendations for CCPs and preparing recommendations 

for trade repositories. In addition, the Commission has engaged in frequent dialogue with nonEU authorities, in particular US authorities (the CFTC, the SEC10, the Federal Reserve Bank 

of New York and the Federal Reserve Board and the US Congress) and is co-chairing a work 

stream of the Financial Stability Board (FSB) focusing on addressing the challenges related to 

the implementation of the reporting, clearing and trading obligations agreed at G20 level. 

In parallel with the publication of the first Communication, DG MARKT launched a public 

consultation11 from 3 July to 31 August 2009. The Commission services received 111 

responses, 100 of which have been authorised for publication and have been published on the 

consultation website12. A summary of responses including an introductory analysis of the 

public stakeholder consultation is available on DG MARKT’s website13. This was followed 

by a major conference in Brussels, on 25 September 200914. Three panels of academics, 

industry representatives and regulators, coming from the EU and the US, presented their 

views on the need (or lack thereof) to reform the OTC derivatives market to an audience of 

more than 400 participants and answered their questions. The conference broadly confirmed 

the views and information obtained through the public consultation. 

A second open consultation was organised from 14 June to 10 July 2010 to obtain feedback 

from interested stakeholders on the contours of the legislative measures. The Commission 

services received 210 responses, which were for the most part supportive of the suggested 

reforms.15 

3. IMPACT ASSESSMENT 

The Regulation is accompanied by an impact assessment16 analysing the options to reduce 

systemic risk by increasing the safety and efficiency of the OTC derivatives market. 

Following the analysis, the impact assessment concludes that the largest net benefits would be 

achieved through the adoption of measures that would: 

9

 Respectively the Committee on Payment and Settlement Systems and the International Organisation of 

Securities Commissions. 10 Respectively the Commodity Futures Trading Commission and the Securities and Exchange 

Commission. 11 http://ec.europa.eu/internal_market/consultations/2009/derivatives_en.htm. 12 http://circa.europa.eu/Public/irc/markt/markt_consultations/library?l=/financial_services/derivatives_ 

derivatives&vm=detailed&sb=Title. 13 http://ec.europa.eu/internal_market/consultations/docs/2009/derivatives/summaryderivcons_en.pdf. 14 The conference’s recordings and documents are available on DG MARKT’s website at 

http://ec.europa.eu/internal_market/financial-markets/derivatives/index_en.htm#conference. 15 The non-confidential responses can be found on: 

http://circa.europa.eu/Public/irc/markt/markt_consultations/library?l=/financial_services/infrastructures

&vm=detailed&sb=Title. 16 The impact assessment report can be found on http://ec.europa.eu/internal_market/financialmarkets/index_en.htm. 
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 require the use of CCP clearing for OTC derivatives that meet predefined eligibility 

criteria; 

 set specific targets for legal and process standardisation; 

 set specific targets for the bilateral clearing of OTC derivatives transactions; 

 require market participants to report all the necessary information on their OTC derivatives 

portfolios to a trade repository or, if that would not be possible, directly to regulators; and 

 require the publication of aggregate position information. 

4. LEGAL ELEMENTS OF THE PROPOSAL 

4.1. Legal basis 

The proposal is based on Article 114 TFEU as the most appropriate legal basis for a 

Regulation in this field. A Regulation is considered to be the most appropriate legal 

instrument to introduce a mandatory requirement directed to all actors to clear standardised 

OTC derivatives through CCPs and to ensure that CCPs, that will as a consequence assume 

and concentrate significant risk, are subject to uniform prudential standards in the EU. A 

Regulation is the appropriate legal instrument to confer new powers on ESMA as the sole 

authority with the responsibility to register and exercise surveillance of trade repositories in 

the EU. 

4.2. Subsidiarity and proportionality 

A uniform process at EU-level is needed to determine which OTC Derivatives are eligible for 

mandatory clearing through CCPs. This can not be left to the discretion of Member States as 

this would give rise to different and inconsistent application of the clearing obligation 

throughout the EU. A central role needs therefore to be given to the European Commission 

and ESMA in identifying the eligible class of derivatives that must be centrally cleared. 

Furthermore, as the use of CCPs becomes compulsory under EU-law, they must be subject to 

rigorous organisational, conduct of business and prudential requirements. 

In respect of authorisation and supervision of CCPs the Regulation aims at striking a balance 

between the need for an important central role of ESMA, the competences of national 

authorities, and the interests of other competent authorities. It takes into account the potential 

fiscal responsibility of Member States and the cross-border nature of the CCP business. 

ESMA will have a central role in the college of competent authorities for the authorisation, 

withdrawal of authorisation and amendment of authorisation of a CCP. In order to establish a 

single process and avoid discrepancies between Member States, ESMA is also responsible for 

recognising a CCP from a third country that seeks to provide clearing services to entities 

established in the European Union, if certain conditions are met. 

As regards the reporting requirement, given the fact that information reported to a trade 

repository will be of interest to all competent authorities in the European Union and given the 

need to ensure that all competent authorities will have the same degree of unfettered access 

under the same conditions to that information, this should be regulated at the EU-level. 
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ESMA is therefore empowered to deal with both the registration and surveillance of trade 

repositories. 

For these reasons, the provisions are in accordance with the principles of subsidiarity and 

proportionality as set out in Article 5 of the Treaty, as the objectives of the proposal cannot be 

sufficiently achieved by the Member States and can therefore be better achieved by the 

European Union. 

4.3. Detailed explanation of the proposal 

4.3.1. Title I (Subject matter, scope and definitions) 

The scope of the Regulation is wide and lays down uniform requirements covering financial 

counterparties, non-financial counterparties (exceeding certain thresholds) and all categories 

of OTC derivative contracts. Its prudential parts apply to central counterparties as a result of 

the clearing obligation and, for the reporting requirement, to trade repositories. It is important 

to note, however, that the authorisation and supervision requirements for CCPs apply 

irrespective of the financial instrument the CCPs clear: OTC or other. This is clarified in 

Article 1(3). Exemptions are explicitly foreseen for the members of the European System of 

Central Banks, public bodies charged with or intervening in the management of the public 

debt, and to multilateral development banks, in order to avoid limiting their powers to 

intervene to stabilise the market, if and when required. 

4.3.2. Title II (Clearing, reporting and risk mitigation of OTC Derivatives) 

This part of the regulation is central to implementing the obligation to clear all 'standardised 

OTC derivatives' as agreed in the G-20. In order to implement this commitment into 

legislative obligations, 'standardised' contracts will mean those contracts that are eligible for 

clearing by CCPs. In order to apply this, the Regulation establishes a process that will take 

into account the risk aspects connected to mandatory clearing. The process is devised so as to 

ensure that a clearing obligation for OTC derivative contracts will in practice achieve its final 

objective of reducing risk in the financial system, rather than increasing it: forcing a CCP to 

clear OTC contracts that it is unable to risk-manage may have adverse repercussions on the 

stability of the system. 

However, in order to establish a process that ensures that as many OTC contracts as possible 

will be cleared, the Regulation introduces two approaches to determine which contracts must 

be cleared: 

(1) a 'bottom-up' approach, according to which a CCP decides to clear certain 

contracts and is authorised to do so by its competent authority, who is then 

obliged to inform ESMA once it approves the CCP to clear those contracts. 

ESMA will then have the powers to decide whether a clearing obligation 

should apply to all of those contracts in the EU. ESMA will need to base that 

decision on certain objective criteria; 

(2) a 'top-down' approach according to which ESMA, together with the European 

Systemic Risk Board, will determine which contracts should potentially be 

subject to the clearing obligation. This process is important to identify and 

capture those contracts in the market that are not yet being cleared by a CCP. 
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Both approaches are necessary because, on the one hand, meeting the G20 clearing 

commitment cannot be left entirely to the initiative of the industry. On the other hand, a 

regulatory check at European level of the appropriateness of certain arrangements is necessary 

before the clearing obligation enters into force. 

It is important to note that counterparties that are subjected to the clearing obligation cannot 

simply avoid the requirement by deciding not to participate in a CCP. If those counterparties 

do not meet the participation requirements or are not interested in becoming clearing 

members, they must enter into the necessary arrangements with clearing members to access 

the CCP as clients. 

Furthermore, and in order to avoid the erection of barriers and to preserve the global nature of 

OTC derivatives, CCPs should not be allowed to accept only those transactions concluded on 

execution venues with which they have a privileged relationship or which are part of the same 

group. For these reasons, a CCP that has been authorised to clear eligible derivative contracts 

is required to accept clearing such contracts on a non-discriminatory basis, regardless of the 

venue of execution. 

As regards non-financial (corporate) counterparties, they will in principle not be subject to the 

rules of this Regulation, unless their OTC derivatives positions reach a threshold and are 

considered to be systemically important. Because their derivatives activities are generally 

assumed to cover those derivatives that are directly linked to their commercial activity rather 

than speculation, those derivatives positions will not be covered by this Regulation. 

In concrete terms, this means that the clearing obligation will only apply to those OTC 

contracts of non-financial counterparties that are particularly active in the OTC derivatives 

market and if this is not a direct consequence of their commercial activity. For example, this 

may be the case for energy suppliers that sell future production, agricultural firms fixing the 

price at which they are going to sell their crops, airlines fixing the price of their future fuel 

purchases or any commercial companies that must legitimately hedge the risk arising from 

their specific activity. 

There are, however, reasons for not granting non-financial counterparties a full exemption 

from the scope of this Regulation. 

First, non-financial counterparties are active participants in the OTC derivatives market and 

often transact with financial counterparties. Excluding them entirely would diminish the 

effectiveness of the clearing obligation. Second, some non-financial counterparties may take 

systemically important positions in OTC derivatives. Leaving systemically relevant nonfinancial counterparties whose failure may have a significant negative effect on the market 

completely outside the scope of regulatory attention would not be an acceptable course of 

action. Third, a full exclusion of non-financial counterparties could lead to regulatory 

arbitrage. A financial counterparty could easily circumvent the obligations set out in the 

Regulation by establishing a new non-financial entity and direct its OTC derivative business 

through it. Finally, their inclusion in the scope of application is also necessary to ensure 

global convergence with third countries. The US legislation does not provide a complete 

exemption of non-financial counterparties from the reporting and the clearing obligations. 

In view of the above, the Regulation sets out a process that helps to identify the non-financial 

institutions with systemically important positions in OTC derivatives and subjects them to 
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certain obligations specified under the Regulation. The process is based on the definition of 

two thresholds: 

a) an information threshold; 

b) a clearing threshold . 

These thresholds will be specified by the European Commission on the basis of draft 

regulatory standards proposed by ESMA, in consultation with the European Systemic Risk 

Board ("ESRB") and other relevant authorities. For example, in case of energy markets, 

ESMA would have to consult the Agency for the Cooperation of Energy Regulators 

established by Regulation (EC) No 713/2009 in order to ensure that the particularities of the 

energy sector would be fully taken into account. 

The information threshold will allow financial authorities to identify non-financial 

counterparties that have accumulated significant positions in OTC derivatives. This is 

necessary, because those counterparties are usually not subject to the supervision of these 

authorities. In practice, when the Regulation foresees that when the positions of a nonfinancial counterparty exceed the information threshold, the non-financial counterparty will 

be required to notify the competent authority defined in the Regulation of this fact. In 

addition, that counterparty will automatically become subject to the reporting obligation and 

will be required to provide justification for taking those positions. 

The clearing threshold, on the other hand, will be used to establish whether a non-financial 

counterparty will become subject to the clearing obligation. In practice, if the positions of the 

counterparty will exceed that threshold, then the counterparty will become subject to the 

clearing obligation for all its contracts. If some of those contracts will happen to be not 

eligible for CCP clearing, then the non-financial counterparty will be subject to the capital or 

collateral requirements specified in the Regulation (see below). 

Both thresholds will be defined taking into account the systemic relevance of the sum of net 

positions and exposures by counterparty per class of derivatives. However, and importantly, 

and as clarified and confirmed above, in calculating the positions for the clearing threshold, 

derivative contracts should not be taken into account if they have been entered into to cover 

the risks arising from an objectively measurable commercial activity. 

As not all OTC derivatives will be considered eligible for central clearing, there remains a 

need to improve arrangements and the safety of those contracts that will continue to be 

managed on a so-called 'bilateral' basis. The Regulation therefore requires the use of 

electronic means and the existence of risk management procedures with timely, accurate and 

appropriately segregated exchange of collateral, and an appropriate and proportionate holding 

of capital. 

Finally, financial counterparties and non-financial counterparty above the clearing threshold 

must report the details of any derivative contract they have entered into and any modification 

thereof (including novation and termination) to a registered trade repository. Greater 

transparency of the OTC market is critical for regulators, policymakers, and the marketplace. 

In the exceptional case that a trade repository is not capable of recoding the details of a 

particular OTC derivatives contract, the Regulation requires that this information should be 

provided directly to the relevant competent authority. The Commission will need to be 

empowered to determine the details, type, format and frequency of the reports for the different 

classes of derivatives, following draft technical standards to be developed by ESMA. 
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4.3.3. Title III (Authorisation and supervision of CCPs) 

To ensure that CCPs established in the European Union are safe, the authorisation of a CCP 

will be subject to that CCP having access to adequate liquidity. Such liquidity could result 

from access to central bank or to creditworthy and reliable commercial bank liquidity, or a 

combination of both. 

National competent authorities should retain the responsibility for authorising (including 

withdrawal) and supervising CCPs, as they remain best placed to examine how the CCPs 

operate on a daily basis, to carry out regular reviews and to take appropriate action, where 

necessary. Given the systemic importance of CCPs and the cross-border nature of their 

activities, it is important that in the authorisation process a central role is played by ESMA. 

This will be achieved in the following ways: 

– the adoption of this legislative act in the specific form of a Regulation will give ESMA a 

central role and responsibility for ensuring its common and objective application, as clearly 

specified in the ESMA Regulation; 

– ESMA will be required to develop a number of draft technical standards in critical areas 

for the correct application of the Regulation; 

– ESMA will facilitate the adoption of an opinion by the college. 

As CCPs are considered to be systemically relevant institutions, the relevant competent 

authorities in the college of competent authorities must define contingency plans to cope with 

emergency situation. Furthermore, the Commission in its future initiative on crisis 

management and resolution will need to define the specific policy and measures to address a 

crisis situation in a systemically relevant institution. 

As regards CCPs from third countries, ESMA will also have the direct responsibility of 

recognising such CCPs, if certain conditions are met. In particular, the recognition will 

require that the Commission has ascertained the legal and supervisory framework of that third 

country as equivalent to the EU one, that the CCP is authorised and subject to effective 

supervision in that third country and ESMA has established co-operation arrangements with 

the third country competent authorities. A CCP of a third country will not be allowed to 

perform activities and services in the Union, if these conditions are not met. 

4.3.4. Title IV (Requirements for CCPs) 

Organisational requirements 

As the Regulation will introduce a mandatory clearing obligation for OTC derivatives, critical 

attention needs to be awarded to the robustness and regulation of CCPs. To begin with, a CCP 

must have in place robust governance arrangements. These will respond to any potential 

conflicts of interest between owners, management, clearing members and indirect 

participants. The role of independent board members is particularly relevant. The roles and 

responsibilities of the risk committee are also clearly defined in the Regulation: its risk 

management function should report directly to the board and not be influenced by other 

business lines. The Regulation also requires governance arrangements to be publicly 

disclosed. In addition, a CCP should have adequate internal systems, operational and 

administrative procedures, and should be subject to independent audits. 
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All of these measures are considered more effective in addressing any potential conflicts of 

interest that may limit the capacity of CCPs to clear, than any other form of regulation which 

may have undesirable consequence on market structures (e.g. limitation of ownership, which 

would need to extend also to so-called vertical structures in which exchanges own a CCP). 

Prudential requirements 

As the CCP will be a counterparty to every position, it bears the risk that one of its 

counterparties might fail. Similarly, any counterparty of a CCP bears the risk that the CCP 

itself might fail. The Regulation therefore provides that a CCP must mitigate its counterparty 

credit risk exposure through a number of reinforcing mechanisms. These include stringent, 

but non-discriminatory participation requirements, financial resources, and other guarantees. 

By virtue of its central role, a CCP is a critical component of the market it serves. 

Consequently, the failure of a CCP would in almost all cases become a potential systemic 

event for the financial system. In view of their systemically important role and in view of the 

proposed legislative requirement to clear all 'standardised' OTC derivatives through CCPs, the 

need to subject them to strict prudential regulation at EU-level cannot be over-emphasized. As 

the present national laws regulating CCPs differ between Member States, the resulting unlevel 

playing field also makes the cross-border provision of CCP services potentially less safe and 

more costly than would be desirable and represents a barrier to the integration of the European 

financial market. 

Outsourcing of functions by a CCP will only be allowed, if it does not impact on the proper 

operation of the CCP and on its ability to manage risks, including those arising from the 

outsourced functions. Thus, CCPs must always monitor and have full control of the 

outsourced functions and continuously manage the risks they face. In practical terms, no risk 

management functions will be allowed to be outsourced. 

A minimum quantum of capital must be required for authorisation to exercise the activities of 

a CCP. A CCP’s own capital is also its last line of defence in the event of the default of one or 

more members, after the margins collected from the defaulting member(s), the default fund 

and any other financial resources have been exhausted. If a CCP decides to use part of its 

capital as an additional financial resource to be used for risk management purposes, then this 

portion must be in addition to the capital needed to perform the services and activities of a 

CCP on an on-going basis. 

The Regulation will require a CCP to have a mutualised default fund to which members of the 

CCP will have to contribute. A default fund enables loss-mutualisation and thus represents an 

additional line of defence that a CCP can use in case of the insolvency of one or more of its 

members. 

The Regulation also introduces important rules on segregation and portability of positions and 

corresponding collateral. These are critical to effectively reduce counterparty credit risk 

through the use of CCPs, to achieve a level playing field among European CCPs and to 

protect the legitimate interests of clients of clearing members. This responds to a call by 

clearing members and their clients for greater harmonisation and protection in this field. It 

also responds to the issues highlighted by Lehman's demise. 
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4.3.5. Title V (Interoperability) 

Interoperability is an essential tool to achieve an effective integration of the post-trading 

market in Europe. However, interoperability may expose CCPs to additional risks. For this 

reason regulatory approval is required before entering into an interoperable arrangement. 

CCPs should carefully consider and manage the extra risks that interoperability entails and 

satisfy the competent authorities about the soundness of the systems and procedures adopted. 

In view of the complexity of derivatives markets and the early stage of development of CCP 

clearing for OTC derivatives, it is not appropriate to extend the provisions on interoperability 

to instruments other than cash securities at this point in time. However, this exclusion should 

not limit the possibility of CCPs to enter into such arrangements in a safe manner, subject to 

the conditions provided in the Regulation.

4.3.6. Title VI (Registration and surveillance of trade repositories) 

As mentioned above (section 4.3.2) the Regulation provides for a reporting requirement of 

OTC derivative transactions to increase the transparency of this market. The information must 

be reported to trade repositories. The latter will therefore hold regulatory information which 

will be relevant for a number of regulators. In view of the central role of trade repositories in 

the collection of regulatory information, the Regulation gives ESMA the powers to register 

trade repositories, withdraw the registration and to perform the surveillance of trade 

repositories. Granting surveillance powers to authorities in the Member State where a trade 

repository is established would create an unbalanced situation between competent authorities 

of the different Member States. Furthermore, as there are no fiscal responsibilities 

implications connected to the surveillance of trade repositories, a national supervisory 

approach is not necessary. ESMA's role will also ensure an unfettered access to all the 

relevant European authorities and a unique counterparty representing Europe to deal with 

competent authorities of third countries trade repositories. 

4.3.7. Title VII (Requirements for trade repositories) 

The Regulation also contains provisions for trade repositories to guarantee their compliance 

with a set of standards. These are designed to ensure that the information that trade 

repositories maintain for regulatory purposes is reliable, secured and protected. In particular, 

trade repositories will be subject to organisational and operational requirements and ensure 

appropriate safeguarding and transparency of data. 

In order to be registered, trade repositories must be established in the EU. However, a trade 

repository established in a third country can be recognised by ESMA if it meets a number of 

requirements designed to establish that such trade repository is subject to equivalent rules and 

appropriate surveillance in that third country. In order to ensure that there are no legal 

obstacles in place that would prevent an effective mutual exchange of information and 

unfettered access to data maintained in a trade repository located in a third country, the 

Regulation foresees the need to conclude an international agreement to that effect. The 

Regulation stipulates that if such an agreement is not in place a trade repository established in 

that third country would not be recognised by ESMA. 

5. FINAL PROVISIONS 

The Commission should be empowered to adopt delegated acts in accordance with Article 

290 of the Treaty on the Functioning of the European Union in respect of the details to be 
EN 12 EN 

included in the notification to ESMA and in the register and the criteria for the decision of 

ESMA on the eligibility for the clearing obligation, on the information and clearing threshold, 

on the maximum time lag regarding the contract, on liquidity, on the minimum content of 

governance rules, on details of record keeping, on minimum content of business continuity 

plan and the services guaranteed, on percentages and time horizon for margin requirements, 

on extreme market conditions, on highly liquid collateral and haircuts, on highly liquid 

financial instruments and concentration limits, on details for performance of tests, on details 

concerning the application of a trade repository for registration with ESMA, on fines and on 

details concerning the information that a trade repository should make available, as referred to 

in this Regulation. ESMA should draft regulatory technical standards for these delegated acts 

and carry out appropriate impact assessments. 

The Commission should be empowered to determine the format of reports, record keeping 

and the format for the registration application of a trade repository. According to Article 291 

TFEU, rules and general principles concerning mechanisms for the control by Member States 

of the Commission's exercise of implementing powers are to be laid down in advance by a 

Regulation adopted in accordance with the ordinary legislative procedure. Pending the 

adoption of that new Regulation, Council Decision 1999/468/EC of 28 June 1999 laying 

down the procedures for the exercise of implementing powers conferred on the Commission 

continues to apply, with the exception of the regulatory procedure with scrutiny, which is not 

applicable. 

6. BUDGETARY IMPLICATION 

The proposal has no implication for the Union budget. 
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2010/0250 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on OTC derivatives, central counterparties and trade repositories 

(Text with EEA relevance) 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 

thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national Parliaments, 

Having regard to the opinion of the European Economic and Social Committee17, 

Having regard to the opinion of the European Central Bank, 

Acting in accordance with the ordinary legislative procedure,

Whereas: 

(1) At the request of the Commission, a report published on 25 February 2009 by a high-level 

group of experts chaired by J. de Larosière concluded that the supervisory framework needed to 

be strengthened to reduce the risk and severity of future financial crisis and recommended farreaching reforms to the structure of supervision of the financial sector in Europe, including the 

creation of a European System of Financial Supervisors, comprising three European 

Supervisory Authorities, one for the securities sector, one for the insurance and occupational 

pensions sector and one for the banking sector, and the creation of a European Systemic Risk 

Board. 

(2) The Commission Communication of 4 March 2009, "Driving European Recovery"18, proposed 

to strengthen the Union's regulatory framework for financial services. In its Communication of 

3 July 200919, the Commission assessed the role of derivatives in the financial crisis, and in its 

Communication of 20 October 200920, the Commission outlined the actions it intends to take to 

reduce the risks associated with derivatives. 

17 OJ C , , p. . 

18 "Driving European Recovery" - COM(2009) 114. 

19 "Ensuring efficient, safe and sound derivatives markets" - COM(2009) 332. 

20 "Ensuring efficient, safe and sound derivatives markets: Future policy actions" - COM(2009) 563. 
EN 14 EN 

 

(3) On 23 September 2009, the Commission adopted proposals for three Regulations establishing 

the European System of Financial Supervisors, including the creation of three European 

Supervisory Authorities to contribute to a consistent application of Union legislation and to the 

establishment of high quality common regulatory and supervisory standards and practices. 

These are the European Banking Authority (EBA) established by Regulation .../...EU..., the 

European Securities and Markets Authority (ESMA) established by Regulation .../...EU..., and 

the European Insurance and Occupational Pensions Authority (EIOPA) established by 

Regulation .../...EU.... 

(4) Over-the-counter (OTC) derivatives lack transparency as they are privately negotiated contracts 

and any information concerning them is usually only available to the contracting parties. They 

create a complex web of interdependence which can make it difficult to identify the nature and 

level of risks involved. The financial crisis has demonstrated that such characteristics increase 

uncertainty in times of market stress and accordingly, pose risks to financial stability. This 

Regulation lays down conditions for mitigating those risks and improving the transparency of 

derivative contracts. 

(5) At the 26 September 2009 summit in Pittsburgh, G20 Leaders agreed that all standardised OTC 

derivative contracts should be cleared through central counterparties (CCP) by end-2012 at the 

latest and that OTC derivative contracts should be reported to trade repositories. In June 2010, 

G20 Leaders in Toronto reaffirmed their commitment and also committed to accelerate the 

implementation of strong measures to improve transparency and regulatory oversight of overthe-counter derivatives in an internationally consistent and non-discriminatory way. The 

Commission will endeavour to ensure that these commitments are implemented in a similar way 

by our international partners. 

(6) The European Council, in its Conclusions of 2 December 2009, agreed with the need to 

substantially improve the mitigation of counterparty credit risk and with the importance of 

improving transparency, efficiency and integrity for derivative transactions. The European 

Parliament resolution of 15 June 2010 on "Derivatives markets: future policy actions" called for 

mandatory clearing and reporting of OTC derivatives. 

(7) The European Securities and Markets Authority (ESMA) acts within the scope of this 

Regulation by safeguarding the stability of financial markets in emergency situations and 

ensuring the consistent application of Union rules by national supervisory authorities and 

settling disagreements between them. It is also entrusted with developing legally binding 

regulatory technical standards and has a central role in the authorisation and monitoring of 

central counterparties and trade repositories. 

(8) Uniform rules are required for derivative contracts set out in Annex I, Section C, numbers (4) to 

(10) of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 

on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC 

and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council 

Directive 93/22/EEC21 that are traded over-the-counter. 

21 OJ L 145, 30.4.2004, p. 1. 
EN 15 EN 

 

(9) Incentives to promote the use of CCPs have not proven to be sufficient to ensure that 

standardised OTC derivatives are actually cleared. Mandatory CCP clearing requirements for 

those OTC derivatives that can be cleared are therefore necessary. 

(10) It is likely that Member States will adopt divergent national measures which could create 

obstacles to the smooth functioning of the internal market and be to the detriment of market 

participants and financial stability. A uniform application of the clearing obligation in the Union 

is also necessary to ensure a high level of investor protection and to create a level playing field 

between market participants 

(11) Ensuring that the clearing obligation reduces systemic risk requires a process of identification of 

eligible classes of derivatives that should be subject to that obligation. That process should take 

into account that not all CCP-cleared OTC derivatives can be considered suitable for mandatory 

CCP-clearing. 

(12) This Regulation sets out the criteria for determining the eligibility to the clearing obligation. In 

view of its pivotal role, ESMA should decide whether a class of derivatives meets the eligibility 

criteria and from when the clearing obligation take effect. 

(13) For an OTC derivative contract to be cleared, both parties to that contract must consent. 

Therefore, exemptions to the clearing obligation should be narrowly tailored as they would 

reduce the effectiveness of the obligation and the benefits of CCP clearing and may lead to 

regulatory arbitrage between groups of market participants. 

(14) OTC derivatives that are not considered suitable for CCP clearing still entail counterparty credit 

risk and therefore, rules should be established to manage that risk. Those rules should be only 

applicable to the market participants that are subject to the clearing obligation. 

(15) Rules on clearing and reporting obligations and rules on risk mitigation techniques for OTC 

derivative contracts not cleared by a CCP should apply to financial counterparties, namely 

investment firms as set out in Directive 2004/39/EC, credit institutions as defined in Directive 

2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the 

taking up and pursuit of the business of credit institutions (recast)22, insurance undertakings as 

defined in Directive 73/239/EEC [NB: to be repealed by Solvency II in 2012], assurance 

undertakings as defined in Directive 2002/83/EC of the European Parliament and of the Council 

of 5 November 2002 concerning life assurance23, reinsurance undertakings as defined in 

Directive 2005/68/EC, undertakings for collective investments in transferable securities 

(UCITS) as defined in Directive 2009/65/EC of the European Parliament and of the Council of 

13 July 2009 on the coordination of laws, regulations and administrative provisions relating to 

undertakings for collective investment in transferable securities (UCITS)24, institutions for 

occupational retirement provision as defined in Directive 2003/41/EC of the European 

Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for 

occupational retirement provision25 and alternative investment funds managers as defined in 

Directive 2010/.../EU. 

22 OJ L 177, 30.6.2006, p. 1. 

23 OJ L 345, 19.12.2002, p. 1. 

24 OJ L 302, 17.11.2009, p. 32. 

25 OJ L 235, 23.9.2003, p. 10. 
EN 16 EN 

 

(16) Where appropriate, rules applicable to financial counterparties, should also apply to nonfinancial counterparties. It is recognised that non-financial counterparties use OTC-contracts in 

order to cover themselves against commercial risks directly linked to their commercial 

activities. Consequently, in determining whether a non-financial counterparty should be subject 

to the clearing obligation, consideration should be given to the purpose for which that nonfinancial counterparty uses OTC derivatives and to the size of the exposures that it has in those 

instruments. When establishing the threshold for the clearing obligation, ESMA should consult 

all relevant authorities, as for example regulators responsible for commodity markets, in order 

to ensure that the particularities of these sectors are fully taken into account. Moreover, by 31 

December 2013, the Commission shall assess the systemic importance of the transactions of 

non-financial firms in OTC derivatives in different sectors, including the energy sector. 

(17) A contract entered into by a fund, whether managed by a fund manager or not, should be 

considered within the scope of this Regulation. 

(18) Central banks and other national bodies performing similar functions, other public bodies 

charged with or intervening in the management of the public debt, and multilateral development 

banks listed in Section 4.2 of Part 1 of Annex VI of Directive 2006/48/EC of the European 

Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the 

business of credit institutions26 should be excluded from the scope of this Regulation in order to 

avoid limiting their powers to intervene to stabilise the market, if and when required. 

(19) As not all market participants that are subject to the clearing obligation are able to become 

clearing members of the CCP, they should have the possibility to access CCPs as clients. 

(20) The introduction of a clearing obligation along with a process to establish which CCPs can be 

used for the purpose of this obligation may lead to unintended competitive distortions of the 

OTC derivatives market. For example, a CCP could refuse to clear transactions executed on 

certain trading venues because the CCP is owned by a competing trading venue. In order to 

avoid such discriminatory practices, CCPs should accept to clear transactions executed in 

different venues, to the extent that those venues comply with the operational and technical 

requirements established by the CCP. Generally, the Commission should continue to closely 

monitor the evolution of the OTC derivatives market and should, where necessary, intervene in 

order to prevent such competitive distortions from occurring in the Internal Market. 

(21) In order to identify the relevant classes of OTC derivatives that should be subject to the clearing 

obligation, the thresholds and systemically relevant non-financial counterparties, reliable data is 

needed. Therefore, for regulatory purposes, it is important that a uniform OTC derivatives data 

reporting requirement is established at Union level. 

(22) It is important that market participants report all details regarding OTC derivative contracts they 

have entered into to trade repositories. As a result, information on the risks inherent in OTC 

derivatives markets will be centrally stored and easily accessible to ESMA, the relevant 

competent authorities and the relevant central banks of the ESCB. 

(23) In order to allow for a comprehensive overview of the market, both cleared and non-cleared 

contracts should be reported to trade repositories. 

26 OJ L 177, 30.6.2006, p. 1. 
EN 17 EN 

 

(24) The obligation to report any modification or termination of a contract, should apply to the 

original counterparties to that contract and to any other entities reporting on behalf of the 

original counterparties. A counterparty or its employees that reports the full details of a contract 

to a trade repository on behalf of another counterparty, in accordance with this Regulation, 

should not be in breach of any restriction on disclosure. 

(25) There should be effective, proportionate and dissuasive penalties with regard to the clearing and 

reporting obligations. Member States should enforce those penalties in a manner that does not 

reduce the effectiveness of those rules. 

(26) Authorisation of a CCP should be conditional on a minimum amount of initial capital. Capital, 

together with retained earnings and reserves of a CCP, should be proportionate to the size and 

activity of the CCP at all times in order to ensure that it is adequately capitalised against 

operational or residual risks and that it is able to conduct an orderly winding down or 

restructuring of its operations if necessary. 

(27) As this Regulation introduces a legal obligation to clear through specific CCPs for regulatory 

purposes, it is essential to ensure that those CCPs are safe and sound and comply at all times 

with stringent organisational, conduct of business and prudential requirements established by 

this Regulation. They should apply to the clearing of all financial instruments CCPs deal with, 

in order to ensure a uniform application. 

(28) It would therefore be necessary, for regulatory and harmonisation purposes, to ensure that 

financial counterparties only use CCPs which comply with the requirements laid down in this 

Regulation. 

(29) Direct rules regarding the authorisation and supervision of CCPs are an essential corollary to 

the obligation to clear OTC derivatives. It is appropriate that national competent authorities 

should retain the responsibility for all aspects of the authorisation and the supervision of CCPs, 

including the verification that the applicant CCP is compliant with this Regulation and with 

Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on 

settlement finality in payment and securities settlement systems27, in view of the fact that those 

national competent authorities remain best placed to examine how the CCPs operate on a daily 

basis, to carry out regular reviews and to take appropriate action, where necessary. 

(30) Where a CCP risks insolvency, the fiscal responsibility may lie predominantly with the Member 

State in which it is established. It follows that authorization and supervision of that CCP should 

be exercised by the relevant competent authority of that Member State. However, since a CCP’s 

clearing members may be established in different Members States and they will be the first to 

be impacted by the CCP's default, it is imperative that all relevant competent authorities are 

involved in the authorization and supervision process and that appropriate cooperation 

mechanisms, including colleges, are put in place. This will avoid divergent national measures or 

practices and obstacles to the internal market. ESMA should be a participant in every college in 

order to ensure the consistent and correct application of this Regulation. 

(31) It is necessary to reinforce provisions on exchange of information between competent 

authorities and to strengthen the duties of assistance and cooperation between them. Due to 

27 OJ L 166, 11.6.1998, p. 45. 
EN 18 EN 

increasing cross-border activity, competent authorities should provide each other with the 

relevant information for the exercise of their functions so as to ensure the effective enforcement 

of this Regulation, including in situations where infringements or suspected infringements may 

be of concern to authorities in two or more Member States. For the exchange of information, 

strict professional secrecy is needed. It is essential, due to the wide impact of OTC derivative 

contracts, that other relevant authorities, such as tax authorities and energy regulators, have 

access to information necessary to the exercise of their functions. 

(32) In view of the global nature of financial markets, ESMA should be directly responsible for 

recognising CCPs established in third countries and thus allowing them to provide clearing 

services within the Union, provided that the Commission has recognised the legal and 

supervisory framework of that third country as equivalent to the Union framework and that 

certain other conditions are met. In this context, agreements with the Union's major 

international partners will be of particular importance in order to ensure a global level playing 

field and ensure financial stability. 

(33) CCPs should have robust governance arrangements, senior management of good repute and 

independent members on its board, irrespective of its ownership structure. However, different 

governance arrangements and ownership structures of a CCP may influence a CCP's willingness 

or ability to clear certain products. It is thus appropriate that the independent members of the 

board and the risk committee to be established by the CCP should address any potential conflict 

of interests within a CCP. Clearing members and clients need to be adequately represented as 

they may be impacted by decisions taken by the CCP. (34) A CCP may outsource functions 

other than its risk management functions, but only where those outsourced functions do not 

impact on the proper operation of the CCP and on its ability to manage risks. 

(35) The participation requirements for a CCP should therefore be transparent, proportionate, and 

non-discriminatory and should allow for remote access to the extent that this does not expose 

the CCP to additional risks. 

(36) Clients of clearing members that clear their OTC derivatives with CCPs should be granted a 

high level of protection. The actual level of protection depends on the level of segregation that 

those clients choose. Intermediaries should segregate their assets from those of their clients. For 

this reason, CCPs should keep updated and easily identifiable records. 

(37) A CCP should have a sound risk management framework to manage credit risks, liquidity risks, 

operational and other risks, including the risks that it bears or poses to other entities as a result 

of interdependencies. A CCP should have adequate procedures and mechanisms in place to deal 

with the default of a clearing member. In order to minimise the contagion risk of such a default, 

the CCP should have in place stringent participation requirements, collect appropriate initial 

margins, maintain a default fund and other financial resources to cover potential losses. 

(38) Margin calls and haircuts on collateral may have procyclical effects. CCPs and competent 

authorities should therefore adopt measures to prevent and control possible procyclical effects 

in risk management practices adopted by CCPs, to the extent that a CCP's soundness and 

financial security is not negatively affected. 

(39) Exposure management is an essential part of the clearing process. Access to, and use of, the 

relevant pricing sources should be granted to provide clearing services in general. Such pricing 
EN 19 EN 

 

sources should include, but not be limited to, those related to indices that are used as references 

to derivatives or other financial instruments. 

(40) Margins are the primary line of defence for a CCP. Although CCPs should invest the margins 

received in a safe and prudent manner, they should make particular efforts to ensure adequate 

protection of margins to guarantee that they are returned in a timely manner to the nondefaulting clearing members or to an interoperable CCP where the CCP collecting these 

margins defaults. 

(41) The "European Code of Conduct for Clearing and Settlement" of 7 November 200628

established a voluntary framework for establishing links between CCPs and trade repositories. 

However, the post-trade sector remains fragmented along national lines, making cross-border 

trades more costly and hindering harmonisation. It is therefore necessary to lay down the 

conditions for the establishment of interoperable arrangements between CCPs to the extent 

these do not expose the relevant CCPs to risks that are not appropriately managed. 

(42) Interoperability arrangements are important tools for greater integration of the post-trading 

market within the Union and regulation should be provided for. However, interoperability 

arrangements may expose CCPs to additional risks. Given the additional complexities involved 

in an interoperability arrangement between CCPs clearing OTC derivative contracts, it is 

appropriate at this stage to restrict the scope of interoperability arrangements to cash securities. 

However, by 30 September 2014, ESMA should submit a report to the Commission on whether 

an extension of that scope to other financial instruments would be appropriate. 

(43) Trade repositories collect data for regulatory purposes that are relevant to authorities in all 

Member States. In view of the fact that surveillance of trade repositories does not have any 

fiscal implications and that many authorities across Member States will need access to the data 

maintained by trade repositories, ESMA should assume responsibility for the registration, 

withdrawal and surveillance of trade repositories. 

(44) Given that regulators, CCPs and other market participants rely on the data maintained by trade 

repositories, it is necessary to ensure that those trade repositories are subject to strict recordkeeping and data management requirements. 

(45) Transparency of prices and fees associated with the services provided by CCPs and trade 

repositories is necessary to enable market participants to make an informed choice. 

(46) ESMA should be able to propose to the Commission to impose periodic penalty payments. The 

purpose of those periodic penalty payments should be to achieve that an infringement 

established by ESMA is put to an end, that complete and correct information which ESMA has 

requested is supplied and that trade repositories and other persons submit to an investigation. 

Moreover, for deterrence purposes and to compel trade repositories to comply with the 

Regulation, the Commission should also be able to impose fines, following a request of ESMA, 

where intentionally or negligently, specific provisions of the Regulation have been breached. 

The fine shall be dissuasive and proportionate to the nature and seriousness of the breach, the 

duration of the breach and the economic capacity of the trade repository concerned. 

28 http://ec.europa.eu/internal_market/financial-markets/docs/code/code_en.pdf 
EN 20 EN 

 

(47) In order to effectively survey trade repositories, ESMA should have the right to conduct 

investigations and on-site-inspections. 

(48) It is essential that Member States and ESMA protect the right to privacy of natural persons 

when processing personal data, in accordance with Directive 95/46/EC of the European 

Parliament and of the Council of 24 October 1995 on the protection of individuals with regard 

to the processing of personal data and of the freedom of movement of such data29. 

(49) It is important to ensure international convergence of requirements for central counterparties 

and trade repositories. This Regulation follows the recommendations developed by CPSSIOSCO30 and ESCB-CESR31 and creates a Union framework in which CCPs can operate safely. 

ESMA should consider these developments when drawing up the regulatory technical standards 

as well as the guidelines and recommendations foreseen in this Regulation. 

(50) The Commission should be empowered to adopt delegated acts in accordance with Article 290 

of the Treaty in respect of the details to be included in the notification to ESMA and in the 

register and the criteria for the decision of ESMA on the eligibility for the clearing obligation, 

on the information and clearing threshold, on the maximum time lag regarding the contract, on 

liquidity, on the minimum content of governance rules, on details of record keeping, on 

minimum content of business continuity plan and the services guaranteed, on percentages and 

time horizon for margin requirements, on extreme market conditions, on highly liquid collateral 

and haircuts, on highly liquid financial instruments and concentration limits, on details for 

performance of tests, on details concerning the application of a trade repository for registration 

with ESMA, on fines and on details concerning the information that a trade repository should 

make available, as referred to in this Regulation. In defining the delegated acts, the Commission 

should make use of the expertise of the relevant European Supervisory Authorities (ESMA, 

EBA and EIOPA). In view of the expertise of ESMA regarding issues concerning securities and 

securities markets, ESMA should play a central role in advising the Commission on the 

preparation of the delegated acts. However, where appropriate, ESMA should consult closely 

with the other two European Supervisory Authorities. 

(51) According to Article 291 TFEU, rules and general principles concerning mechanisms for the 

control by Member States of the Commission's exercise of implementing powers are to be laid 

down in advance by a Regulation adopted in accordance with the ordinary legislative procedure. 

Pending the adoption of that new Regulation, Council Decision 1999/468/EC of 28 June 1999 

laying down the procedures for the exercise of implementing powers conferred on the 

Commission continues to apply, with the exception of the regulatory procedure with scrutiny, 

which is not applicable. 

(52) Since the objectives of this Regulation, namely to lay down uniform requirements for over-thecounter (OTC) derivative contracts and to also lay down uniform requirements for the 

performance of activities of central counterparties and trade repositories, cannot be sufficiently 

achieved by the Member States and can therefore, by reason of the scale of the action, 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 

29 OJ L 281, 23..1.1995, p. 31. 

30 Committee on Payment and Settlement Systems (CPSS) of the central banks of the Group of Ten countries and the 

Technical Committee of the International Organization of Securities Commissions. 31 European System of Central Banks and the Committee of European Securities Regulators. 
EN 21 EN 

principle of proportionality, as set out in that Article, this Regulation does not go beyond what 

is necessary in order to achieve those objectives. 

(53) In view of the rules regarding interoperable systems, it was deemed appropriate to amend 

Directive 98/26/EC to protect the rights of a system operator that provides collateral security to 

a receiving system operator in the event of insolvency proceedings against that receiving system 

operator. 

HAVE ADOPTED THIS REGULATION: 

Title I 

Subject matter, scope and definitions 

Article 1 

Subject matter and scope 

1. This Regulation lays down uniform requirements for derivative contracts set out in Annex I 

Section C numbers (4) to (10) of Directive 2004/39/EC that are traded over-the-counter and 

lays down uniform requirements for the performance of activities of central counterparties and 

trade repositories. 

2. This Regulation shall apply to central counterparties, financial counterparties and to trade 

repositories. It shall apply to non-financial counterparties where so provided. 

3. Title V shall only apply to transferable securities and money-market instruments, as defined in 

Article 4(1) point 18 (a) and (b) and point 19 of Directive 2004/39/EC. 

4. This Regulation shall not apply to: 

(a) the Members of the European System of Central Banks and other national bodies 

performing similar functions and other public bodies charged with or intervening in the 

management of the public debt; 

(b) multilateral development banks, as listed under Section 4.2 of Part 1 of Annex VI to 

Directive 2006/48/EC. 

Article 2 

Definitions 

For the purposes of this Regulation, the following definitions shall apply: 

(1) 'central counterparty (CCP)' means an entity that legally interposes itself between the 

counterparties to the contracts traded within one or more financial markets, becoming the 

buyer to every seller and the seller to every buyer and which is responsible for the operation of 

a clearing system; 

(2) 'trade repository' means an entity that centrally collects and maintains the records of OTC 

derivatives; 
EN 22 EN 

 

(3) 'clearing' means the process of establishing settlement positions, including the calculation of 

net positions, and the process of checking that financial instruments, cash or both are available 

to secure the exposures arising from a transaction; 

(4) 'class of derivatives' means a number of OTC derivative contracts that share common, 

essential characteristics; 

(5) 'over the counter (OTC) derivatives' means derivative contracts whose execution does not take 

place on a regulated market as defined by Article 4 (1) point 14 of Directive 2004/39/EC; 

(6) 'financial counterparty' means investment firms as set out in Directive 2004/39/EC, credit 

institutions as defined in Directive 2006/48/EC, insurance undertakings as defined in Directive 

73/239/EEC, assurance undertakings as defined in Directive 2002/83/EC, reinsurance 

undertakings as defined in Directive 2005/68/EC, undertakings for collective investments in 

transferable securities (UCITS) as defined in Directive 2009/65/EC, institutions for 

occupational retirement provision as defined in Directive 2003/41/EC and alternative 

investment funds managers as defined in Directive 2010/.../EU; 

(7) 'non-financial counterparty' means an undertaking established in the Union other than the 

entities referred to in point (6); 

(8) 'counterparty credit risk' means the risk that the counterparty to a transaction defaults before 

the final settlement of the transaction's cash flows; 

(9) 'interoperability arrangement' means an arrangement between two or more CCPs that involves 

a cross-system execution of transactions; 

(10) 'competent authority' means the authority designated by each Member State in accordance 

with Article 18; 

(11) 'clearing member' means an undertaking which participates in a CCP and which is responsible 

for discharging the financial obligations arising from that participation; 

(12) 'client' means an undertaking with a contractual relationship with a clearing member which 

enables that undertaking to clear its transactions with that CCP; 

(13) ‘qualifying holding’ means any direct or indirect holding in a CCP or trade repository which 

represents 10% or more of the capital or of the voting rights, as set out in Articles 9 and 10 of 

Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 

on the harmonisation of transparency requirements in relation to information about issuers 

whose securities are admitted to trading on a regulated market32, taking into account the 

conditions regarding aggregation thereof laid down in Article 12(4) and (5) of that Directive, 

or which makes it possible to exercise a significant influence over the management of the CCP 

or trade repository in which that holding subsists; 

(14) ‘parent undertaking’ means a parent undertaking within the meaning of Articles 1 and 2 of 

Council Directive 83/349/EEC33; 

32 OJ L 390, 31.12.2004, p. 38. 

33 OJ L 193, 18.7.1983, p. 1. 
EN 23 EN 

 

(15) ‘subsidiary’ means a subsidiary undertaking within the meaning of Articles 1 and 2 of 

Directive 83/349/EEC, including any subsidiary of a subsidiary undertaking of an ultimate 

parent undertaking; 

(16) ‘control’ means control as defined in Article 1 of Directive 83/349/EEC; 

(17) ‘close links’ means a situation in which two or more natural or legal persons are linked by: 

(a) participation which means the ownership, direct or by way of control, of 20% or more of 

the voting rights or capital of an undertaking, 

(b) control which means the relationship between a parent undertaking and a subsidiary, in 

all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar 

relationship between any natural or legal person and an undertaking, any subsidiary 

undertaking of a subsidiary undertaking also being considered a subsidiary of the parent 

undertaking which is at the head of those undertakings. 

A situation in which two or more natural or legal persons are permanently linked to one 

and the same person by a control relationship shall also be regarded as constituting a 

close link between such persons. 

(18) 'capital' means capital within the meaning of Article 22 of Directive 86/635/EEC of 8 

December 1986 on the annual accounts and consolidated accounts of banks and other financial 

institutions34 in so far it has been paid up, plus the related share premium accounts, it fully 

absorbs losses in going concern situations, and in the event of bankruptcy or liquidation ranks 

after all other claims; 

(19) 'reserves' means reserves as set out in Article 9 of Council Directive 78/660/EEC of 25 July 

1978 based on Article 54 (3) (g) of the Treaty on the annual accounts of certain types of 

companies35 and profits and losses brought forward as a result of the application of the final 

profit or loss; 

(20) 'the board' means the administrative or supervisory board, or both, in accordance with national 

company law; 

(21) 'independent member of the board' means a member of the board that has no business, family 

or other relationship that raises a conflict of interest with the CCP, its controlling 

shareholder(s) or management or its clearing members or management; 

(22) 'senior management' means the person or persons who effectively direct the business of the 

CCP and the executive member or members the board. 

34 OJ L 372, 31.12.1986, p. 1. 

35 OJ L 222, 14.8.1978, p. 11. 
EN 24 EN 

Title II 

Clearing, reporting and risk mitigation of OTC Derivatives 

Article 3 

Clearing obligation 

1. A financial counterparty shall clear all OTC derivative contracts which are considered eligible 

pursuant to Article 4 and are concluded with other financial counterparties in the relevant 

CCPs listed in the register as referred to in Article 4(4). 

That clearing obligation shall also apply to financial counterparties and to the non-financial 

counterparties referred to in Article 7(2) which enter into eligible OTC derivative contracts 

with third country entities. 

2. For the purpose of complying with the clearing obligation under paragraph 1, financial 

counterparties and the non-financial counterparties referred to in Article 7(2) shall become 

either a clearing member or a client. 

Article 4 

Eligibility for the clearing obligation 

1. Where a competent authority has authorised a CCP to clear a class of derivatives under Article 

10 or 11, it shall immediately notify ESMA of that authorisation and request a decision on the 

eligibility for the clearing obligation referred to in Article 3. 

2. ESMA, after receiving the notification and request referred to in paragraph 1, shall, within six 

months, address a decision to the requesting competent authority stating the following: 

(a) whether that class of derivatives is eligible for the clearing obligation pursuant to Article 

3; 

(b) the date from which the clearing obligation takes effect. 

3. ESMA shall base its decision on the following criteria: 

(a) reduction of systemic risk in the financial system; 

(b) the liquidity of contracts; 

(c) availability of pricing information; 

(d) ability of the CCP to handle the volume of contracts; 

(e) level of client protection provided by the CCP. 

Before taking a decision, ESMA shall conduct a public consultation and, where appropriate, 

consult with the competent authorities of third countries. 
EN 25 EN 

4. ESMA shall promptly publish any decision under paragraph 2 in a register. That register shall 

contain the eligible classes of derivatives and the CCPs authorised to clear them. ESMA shall 

regularly update that register. 

ESMA shall regularly review its decisions and shall amend them where necessary. 

5. ESMA shall, on its own initiative and in consultation with the European Systemic Risk Board 

(ESRB), identify and notify to the Commission the classes of derivatives contracts that should 

be included in its public register, but for which no CCP has yet received authorisation. 

6. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

following: 

(a) the details to be included in the notification referred to in paragraph 1; 

(b) the criteria referred to in paragraph 3; 

(c) the details to be included in the register referred to in paragraph 4. 

The details in paragraph 4 shall at minimum correctly and unequivocally identify the class of 

derivatives subject to the clearing obligation. 

The draft regulatory standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory standards to the Commission by 30 June 2012. 

Article 5 

Access to a CCP 

A CCP that has been authorised to clear eligible OTC derivative contracts shall accept clearing such 

contracts on a non-discriminatory basis, regardless of the venue of execution. 

Article 6 

Reporting obligation 

1. Financial counterparties shall report to a trade repository registered in accordance with Article 

51 the details of any OTC derivative contract they have entered into and any modification or 

termination. The details shall be reported no later than the working day following the 

execution, clearing, or modification of the contract. 

Other entities may report any such modification or termination as referred to in paragraph 1, 

on behalf of the original counterparties, to the extent that all the details of the contract are 

reported without duplication. 

2. Where a trade repository is not able to record the details of an OTC derivative contract, 

financial counterparties shall report the details of their positions in those contracts to the 

competent authority designated in accordance with Article 48 of Directive 2004/39/EC. 
EN 26 EN 

The details to be reported to the competent authority shall be at least those that would be 

reported to the trade repository. 

3. A counterparty which is subject to the reporting obligation may delegate the reporting of the 

details of the OTC derivative contract to the other counterparty. 

A counterparty that reports the full details of a contract to a trade repository on behalf of 

another counterparty shall not be considered in breach of any restriction on disclosure of 

information imposed by that contract or by any legislative, regulatory or administrative 

provision. 

No liability resulting from that disclosure shall lie with the reporting entity or its directors or 

employees. 

4. Powers are delegated to the Commission to determine the details and type of the reports 

referred to in paragraphs 1 and 2 for the different classes of derivatives. 

Those reports shall contain at least: 

(a) the parties to the contract and, where different, the beneficiary of the rights and 

obligations arising from it are appropriately identified; 

(b) the main characteristics of the contract, including the type, underlying, maturity and 

notional value are reported. 

The draft regulatory technical standards referred to in the first subparagraph shall be adopted 

in accordance with [Articles 7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall develop draft regulatory technical standards for submission to the Commission by 

30 June 2012. 

5. In order to ensure uniform conditions of application of paragraphs 1 and 2, powers are 

conferred upon the Commission to determine format and frequency of the reports referred to 

in paragraphs 1 and 2 for the different classes of derivatives. The draft implementing standards 

referred to in the first subparagraph shall be adopted in accordance with [Article 7e] of 

Regulation .../... [ESMA Regulation]. 

ESMA shall develop draft implementing technical standards for submission to the 

Commission by 30 June 2012. 

Article 7 

Non-financial counterparties 

1. Where a non-financial counterparty takes positions in OTC derivative contracts that exceed 

the information threshold to be determined pursuant to paragraph 3(a), it shall notify the 

competent authority designated in accordance with Article 48 of Directive 2004/39/EC 

thereof, providing justification for taking those positions. 

That non-financial counterparty shall be subject to the reporting obligation set out in Article 

6(1). 
EN 27 EN 

2. Where a non-financial counterparty takes positions in OTC derivative contracts exceeding the 

clearing threshold to be determined pursuant to paragraph 3(b), it shall be subject to the 

clearing obligation set out in Article 3 with regard to all its eligible OTC derivative contracts. 

The competent authority designated in accordance with Article 48 of Directive 2004/39/EC 

shall ensure that the obligation under the first subparagraph is met. 

3. Powers are delegated to the Commission to adopt regulatory technical standards specifying: 

(a) the information threshold; 

(b) the clearing threshold. 

Those thresholds shall be determined taking into account the systemic relevance of the sum of 

net positions and exposures by counterparty per class of derivatives. 

The regulatory standards referred to in the first subparagraph shall be adopted in accordance 

with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA, in consultation with the European Systemic Risk Board ("ESRB") and other relevant 

authorities, shall submit drafts for those regulatory standards to the Commission by 30 June 

2012 at the latest. 

4. In calculating the positions referred to in paragraph 2, OTC derivative contracts entered into 

by a non-financial counterparty that are objectively measurable as directly linked to the 

commercial activity of that counterparty shall not be taken into account. 

5. The Commission, in consultation with ESMA, ESRB and other relevant authorities, shall 

periodically review the thresholds established in paragraph 3 and amend them, where 

necessary. 

Article 8 

Risk mitigation techniques for OTC derivative contracts not cleared by a CCP 

1. Financial counterparties or the non-financial counterparties referred to in Article 7(2), that 

enter into an OTC derivative contract not cleared by a CCP, shall ensure that appropriate 

procedures and arrangements are in place to measure, monitor and mitigate operational and 

credit risk, including at least: 

(a) where possible, electronic means ensuring the timely confirmation of the terms of the 

OTC derivative contract; 

(b) robust, resilient and auditable processes in order to reconcile portfolios, to manage the 

associated risk and to identify disputes between parties early and resolve them, and to 

monitor the value of outstanding contracts. 

For the purposes of point (b), the value of outstanding contracts shall be marked-to-market on 

a daily basis and risk management procedures shall require the timely, accurate and 

appropriately segregated exchange of collateral or the appropriate and proportionate holding 

of capital. 
EN 28 EN 

2. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

maximum time lag between the conclusion of an OTC derivative contract and the 

confirmation referred to in paragraph 1(a). 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit a draft to the Commission for those regulatory technical standards by 30 

June 2012. 

3. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

arrangements and levels of collateral and capital required for compliance with paragraph 1(b) 

and the second subparagraph of paragraph 1. 

Depending on the legal nature of the counterparty, the regulatory technical standards referred 

to in the first subparagraph shall be adopted in accordance with either Articles [7 to 7d] of 

Regulation EU.../...[ EBA], Articles [7 to 7d] of Regulation EU.../...[ESMA] or Articles [7 

to 7d] of Regulation EU.../...[ EIOPA]. 

EBA, ESMA and EIOPA shall submit, jointly, a common draft to the Commission for those 

regulatory technical standards by 30 June 2012. 

Article 9 

Penalties 

1. Member States shall lay down the rules on penalties applicable to infringements of the rules 

under this Title and shall take all measures necessary to ensure that they are implemented. 

Those penalties shall include at least administrative fines. The penalties provided for shall be 

effective, proportionate and dissuasive. 

2. Member States shall ensure that the competent authorities responsible for the supervision of 

financial, and where, appropriate, non-financial counterparties disclose every penalty that has 

been imposed for infringements of Articles 3 to 8 to the public, unless such disclosure would 

seriously jeopardise the financial markets or cause disproportionate damage to the parties 

involved. 

By 30 June 2012 at the latest, the Member States shall notify the rules referred to in paragraph 

1 to the Commission. They shall notify the Commission of any subsequent amendment thereto 

without delay. 

3. The Commission, with the assistance of ESMA, shall verify that the administrative penalties 

referred to in paragraph 1 and the thresholds referred to in Article 7 (1) and (2) are effectively 

and consistently applied. 
EN 29 EN 

Title III 

Authorisation and supervision of CCPs 

Chapter 1 

Conditions and Procedures for the Authorisation of a CCP 

Article 10 

Authorisation of a CCP 

1. Where a CCP that is a legal person established in the Union and has access to adequate 

liquidity intends to perform its services and activities, it shall apply for authorisation to the 

competent authority of the Member State where it is established. 

Such liquidity could result from access to central bank liquidity or to creditworthy and reliable 

commercial bank liquidity, or a combination of both. Access to liquidity could result from an 

authorisation granted in accordance with Article 6 of Directive 2006/48/EC or other 

appropriate arrangements. 

2. The authorisation shall be effective for the entire territory of the Union. 

3. The authorisation shall specify the services or activities which the CCP is authorised to 

provide or perform including the classes of financial instruments covered by the authorisation. 

4. A CCP shall comply at all times with the conditions necessary for the initial authorisation. 

A CCP shall, without undue delay, notify the competent authority of any material changes 

affecting the conditions for the initial authorisation. 

5. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

criteria for adequate liquidity referred to in paragraph 1. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

EBA shall, in consultation with ESMA, submit a draft to the Commission for those regulatory 

technical standards by 30 June 2012. 

Article 11 

Extension of activities and services 

1. A CCP wishing to extend its business to additional services or activities not covered by the 

initial authorisation shall submit a request for extension. The offering of clearing services in a 

different currency or in financial instruments that significantly differ in their risk 

characteristics from those for which the CCP has already been authorised shall be considered 

an extension of that authorisation. 
EN 30 EN 

The extension of an authorisation shall follow the procedure under Article 13. 

2. Where a CCP wishes to extend its business into a Member State other than where it is 

established, the competent authority of the Member State of establishment shall immediately 

notify the competent authority of that other Member State. 

Article 12 

Capital requirements 

1. A CCP shall have a permanent, available and separate initial capital of at least EUR 5 million 

to be authorised pursuant to Article 10. 

2. Capital, together with retained earnings and reserves of a CCP, shall at all times be sufficient 

to ensure an orderly winding-down or restructuring of the activities over an appropriate time 

span and that the CCP is adequately protected against operational and residual risks. 

3. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

capital, retained earnings and reserves of a CCP referred to in paragraph 2. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall, in consultation with EBA, submit a draft to the Commission for those regulatory 

technical standards by 30 June 2012. 

Article 13 

Procedure for granting and refusing authorisation 

1. The competent authority shall only grant authorisation where it is fully satisfied that the 

applicant CCP complies with all the requirements set out in this Regulation, the requirements 

adopted pursuant to Directive 98/26/EC, and following the joint positive opinion of the college 

referred to in Article 15 and the opinion of ESMA. 

2. The applicant CCP shall provide all information, necessary to enable the competent authority 

to satisfy itself that the applicant CCP has established, at the time of initial authorisation, all 

the necessary arrangements to meet its obligations set out in this Regulation. 

3. Within six months of the submission of a complete application, the competent authority shall 

inform the applicant CCP in writing whether the authorisation has been granted. 

Article 14 

Colleges 

1. The competent authority of the Member State of establishment of a CCP shall establish and 

chair a college to facilitate the exercise of the tasks referred to in Articles 10, 11, 46 and 48. 

The college shall consist of: 
EN 31 EN 

(a) ESMA ; 

(b) the competent authority of the Member State of establishment of the CCP; 

(c) the competent authorities responsible for the supervision of the clearing members of the 

CCP established in the three Member States with the largest contributions to the default 

fund of the CCP referred to in Article 40 on an aggregate basis; 

(d) the competent authorities responsible for the supervision of regulated markets, or 

multilateral trading facilities, served by the CCP or both; 

(e) the competent authorities supervising CCPs with whom interoperability arrangements 

have been established; 

(f) the authority responsible for the oversight of the CCP and the central banks of issue of 

the most relevant currencies of the financial instruments cleared. 

2. The college shall, without prejudice to the responsibilities of the competent authorities under 

this Regulation, ensure: 

(a) the preparation of the joint opinion referred to in Article 15; 

(b) the exchange of information, including requests for information pursuant to Article 21; 

(c) agreement on the voluntary entrustment of tasks among its members; 

(d) the determination of supervisory examination programmes based on a risk assessment of 

the CCP; 

(e) the improvement of efficiency of supervision by removing unnecessary duplication of 

supervisory requirements; 

(f) consistency in the application of supervisory practices; 

(g) the determination of procedures and contingency plans to address emergency situations, 

as referred to in Article 22. 

3. The establishment and functioning of the college shall be based on a written agreement 

between all its members. 

That agreement shall determine the practical arrangements for the functioning of the college 

and may determine tasks to be entrusted to the competent authority of the Member State of 

establishment of a CCP or another member of the college. 

Article 15 

Joint opinion 

1. The competent authority of the Member State where the CCP is established shall conduct a 

risk assessment of the CCP and submit a report to the college. 

The college shall reach a joint opinion on that report within two months of receiving it. 
EN 32 EN 

2. ESMA shall facilitate the adoption of a joint opinion in accordance with its settlement of 

disagreement powers under Article 11 of Regulation .../... [ESMA Regulation] and its general 

coordination function under Article 16 of the same Regulation. It shall have no voting rights 

on joint opinions of the college. 

Article 16 

Withdrawal of authorisation 

1. The competent authority shall withdraw the authorisation in any of the following 

circumstances: 

(a) where the CCP has not made use of the authorisation within 12 months, expressly 

renounces the authorisation or has provided no services or performed no activity for the 

preceding six months; 

(b) where the CCP has obtained the authorisation by making false statements or by any 

other irregular means; 

(c) where the CCP is no longer in compliance with the conditions under which authorisation 

was granted; 

(d) has seriously and systematically infringed the requirements set out in this Regulation; 

2. ESMA and any other member of the college may, at any time, request that the competent 

authority of the Member State where the CCP is established examine whether the CCP is still 

in compliance with the conditions under which the authorisation is granted. 

3. The competent authority may limit the withdrawal to a particular service, activity, or financial 

instrument. 

Article 17 

Review and evaluation 

The competent authorities shall, at least on an annual basis, review the arrangements, strategies, 

processes and mechanisms implemented by a CCP with respect to compliance with this Regulation and 

evaluate the market, operational and liquidity risks to which the CCP is, or might be, exposed. 

The review and evaluation shall have regard to the size, systemic importance, nature, scale and 

complexity of the activities of the CCP. 
EN 33 EN 

Chapter 2 

Supervision and oversight of CCPs 

Article 18 

Competent authorities 

1. Each Member State shall designate the competent authority responsible for carrying out the 

duties resulting from this Regulation for the authorisation, supervision and oversight of CCPs 

established in its territory and shall inform the Commission and ESMA thereof. 

Where a Member State designates more than one competent authority, it shall clearly 

determine the respective roles and shall designate a single authority to be responsible for coordinating co-operation and the exchange of information with the Commission, ESMA and 

other Member States’ competent authorities in accordance with Articles 19 to 22. 

2. Each Member State shall ensure that the competent authorities have the supervisory and 

investigatory powers necessary for the exercise of their functions. 

3. Each Member State shall ensure that appropriate administrative measures, in conformity with 

national law, can be taken or imposed against the natural or legal persons responsible where 

the provisions in this Regulation have not been complied with. 

Those measures shall be effective, proportionate and dissuasive. 

4. ESMA shall publish a list of the competent authorities designated in accordance with 

paragraph 1 on its website. 

Chapter 3 

Cooperation 

Article 19 

Cooperation between authorities 

1. Competent authorities shall cooperate closely with each other and with ESMA. 

2. The competent authorities shall, in the exercise of their general duties, duly consider the 

potential impact of their decisions on the stability of the financial system in all other Member 

States concerned, in particular the emergency situations referred to in Article 22, based on the 

available information at the time. 
EN 34 EN 

Article 20 

Professional secrecy 

1. The obligation of professional secrecy shall apply to all persons working or who have worked 

for the competent authorities designated in accordance with Article 18, ESMA, or auditors and 

experts instructed by the competent authorities or ESMA. 

No confidential information they may receive in the course of their duties may be divulged to 

any person or authority whatsoever, except in summary or aggregate form such that an 

individual CCP, trade repository or any other person cannot be identified, without prejudice to 

cases covered by criminal law or the other provisions of this Regulation. 

2. Where a CCP has been declared bankrupt or is being compulsorily wound up, confidential 

information which does not concern third parties may be divulged in civil or commercial 

proceedings where necessary for carrying out the proceeding. 

3. Without prejudice to cases covered by criminal law, the competent authorities, ESMA, bodies 

or natural or legal persons other than competent authorities which receive confidential 

information pursuant to this Regulation may use it only in the performance of their duties and 

for the exercise of their functions, in the case of the competent authorities, within the scope of 

this Regulation or, in the case of other authorities, bodies or natural or legal persons, for the 

purpose for which such information was provided to them or in the context of administrative 

or judicial proceedings specifically related to the exercise of those functions, or both. Where 

ESMA, the competent authority or other authority, body or person communicating information 

consents thereto, the authority receiving the information may use it for other purposes. 

4. Any confidential information received, exchanged or transmitted pursuant to this Regulation 

shall be subject to the conditions of professional secrecy laid down in paragraphs 1, 2 and 3. 

However, those conditions shall not prevent ESMA, the competent authorities and the relevant 

central banks from exchanging or transmitting confidential information in accordance with 

this Regulation and with other legislation applicable to investment firms, credit institutions, 

pension funds, undertakings for collective investment in transferable securities("UCITS"), 

alternative investment fund managers ("AIFM"), insurance and reinsurance intermediaries, 

insurance undertakings, regulated markets or market operators or otherwise with the consent 

of the competent authority or other authority or body or natural or legal person that 

communicated the information. 

5. Paragraphs 1, 2 and 3 shall not prevent the competent authorities from exchanging or 

transmitting confidential information, in accordance with national law, that has not been 

received from a competent authority of another Member State. 

Article 21 

Exchange of information 

1. Competent authorities shall provide ESMA and one another with the information required for 

the purposes of carrying out their duties under this Regulation. 
EN 35 EN 

2. Competent authorities and other bodies or natural and legal persons receiving confidential 

information in the exercise of their duties under this Regulation shall only use it in the course 

of their duties. 

3. ESMA shall transmit confidential information relevant to the performance of their tasks to the 

competent authorities responsible for the supervision of the CCPs. Competent authorities and 

other relevant authorities shall communicate the necessary information for the exercise of their 

duties set out in this Regulation to ESMA and other competent authorities. 

4. Competent authorities shall communicate information to the central banks of the ESCB where 

such information is relevant for the exercise of their duties. 

Article 22 

Emergency situations 

The competent authority or any other authority shall inform ESMA, the college and other 

relevant authorities without undue delay of any emergency situation relating to a CCP, 

including developments in financial markets, which may have an adverse effect on market 

liquidity and the stability of the financial system in any of the Member States where the CCP 

or one of its clearing members are established. 

Chapter 4 

Relations with third countries

Article 23 

Third countries 

1. A CCP established in a third country may provide clearing services to entities established in 

the Union only where that CCP is recognised by ESMA. 

2. ESMA shall recognise a CCP from a third country, where the following conditions are met: 

(a) the Commission has adopted a Decision in accordance with paragraph 3; 

(b) the CCP is authorised in, and is subject to, effective supervision in that third country; 

(c) co-operation arrangements have been established in paragraph 4. 

3. The Commission may adopt a Decision in accordance with the procedure referred to in Article 

69(2), determining that the legal and supervisory arrangements of a third country ensure that 

CCPs authorised in that third country comply with legally binding requirements which are 

equivalent to the requirements resulting from this Regulation and that these CCPs are subject 

to effective supervision and enforcement in that third country on an ongoing basis. 

4. ESMA shall establish cooperation arrangements with the relevant competent authorities of 

third countries whose legal and supervisory frameworks have been recognised as equivalent to 

this Regulation in accordance with paragraph 3. Such arrangements shall specify at least: 
EN 36 EN 

(a) the mechanism for the exchange of information between ESMA and the competent 

authorities of third countries concerned; 

(b) the procedures concerning the coordination of supervisory activities. 

Title IV 

Requirements for CCPs 

Chapter 1 

Organisational Requirements

Article 24 

General provisions 

1. A CCP shall have robust governance arrangements, which include a clear organisational 

structure with well-defined, transparent and consistent lines of responsibility, effective 

processes to identify, manage, monitor and report the risks to which it is or might be exposed, 

and adequate internal control mechanisms, including sound administrative and accounting 

procedures. 

2. A CCP shall adopt policies and procedures which are sufficiently effective so as to ensure 

compliance with this Regulation, including compliance of its managers and employees with all 

the provisions of this Regulation. 

3. A CCP shall maintain and operate an organisational structure that ensures continuity and 

orderly functioning in the performance of its services and activities. It shall employ 

appropriate and proportionate systems, resources and procedures. 

4. A CCP shall maintain a clear separation between the reporting lines for risk management and 

those for the other operations of the CCP. 

5. A CCP shall adopt, implement and maintain a remuneration policy which promotes sound and 

effective risk management and which does not create incentives to relax risk standards. 

6. A CCP shall maintain information technology systems adequate to deal with the complexity, 

variety and type of services and activities performed so as to ensure high standards of security 

and the integrity and confidentiality of the information maintained. 

7. A CCP shall make its governance arrangements and the rules governing the CCP available to 

the public. 

8. The CCP shall be subject to frequent and independent audits. The results of these audits shall 

be communicated to the board and made available to the competent authority. 

9. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

minimum content of the rules and governance arrangements referred to in paragraphs (1) to 

(8). 
EN 37 EN 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory technical standards to the Commission by 30 

June 2012. 

Article 25 

Senior Management and the Board 

1. The senior management shall be of sufficiently good repute and experience so as to ensure the 

sound and prudent management of the CCP. 

2. A CCP shall have a board of which at least one third, but no less than two, of its members are 

independent. The compensation of the independent and other non-executive members of the 

board shall not be linked to the business performance of the CCP. 

The members of the board, including its independent members, shall be of sufficiently good 

repute and have sufficient expertise in financial services, risk management and clearing 

services. 

3. A CCP shall clearly determine the roles and responsibilities of the board and shall make the 

minutes of the board meetings available to the competent authority. 

Article 26 

Risk committee 

1. A CCP shall establish a risk committee, which shall be composed of representatives of its 

clearing members and independent members of the board. The risk committee may invite 

employees of the CCP to attend risk committee meetings in a non-voting capacity. The advice 

of the risk committee shall be independent from any direct influence by the management of 

the CCP. 

2. A CCP shall clearly determine the mandate, the governance arrangements to ensure its 

independence, the operational procedures, the admission criteria and the election mechanism 

for risk committee members. The governance arrangements shall be publicly available and 

shall, at least, determine that the risk committee is chaired by an independent member of the 

board, reports directly to the board and holds regular meetings. 

3. The risk committee shall advise the board on any arrangements that may impact the risk 

management of the CCP, such as, but not limited to, a significant change in its risk model, the 

default procedures, the criteria for accepting clearing members or the clearing of new classes 

of instruments. The advice of the risk committee is not required for the daily operations of the 

CCP or in emergency situations. 

4. Without prejudice to the right of competent authorities to be duly informed, the members of 

the risk committee shall be bound by confidentiality. Where the chairman of the risk 

committee determines that a member has an actual or potential conflict of interest on a 

particular matter, that member shall not be allowed to vote on that matter. 
EN 38 EN 

5. A CCP shall promptly inform the competent authority of any decision in which the board 

decides not to follow the advice of the risk committee. 

6. A CCP shall allow the clients of clearing members to be members of the risk committee or, 

alternatively, it shall establish appropriate consultation mechanisms that ensure that the 

interests of the clients of clearing members are adequately represented. 

Article 27 

Record keeping 

1. A CCP shall maintain, for a period of at least ten years, all the records on the services and 

activity provided so as to enable the competent authority to monitor the compliance with the 

requirements under this Regulation.

2. A CCP shall maintain, for a period of at least ten years following the termination of a contract, 

all information on all contracts it has processed. That information shall at a minimum enable 

the identification of the original terms of a transaction before clearing by that CCP. 

3. A CCP shall make the records and information referred to in paragraphs 1 and 2 and all 

information on the positions of cleared contracts, irrespective of the venue where the 

transactions was executed, available upon request to the competent authority and to ESMA. 

4. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

details of the records and information to be retained as referred to in paragraphs 1 and 2. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory technical standards to the Commission by 30 

June 2012. 

5. In order to ensure uniform conditions of application of paragraph 1 and 2, powers are 

conferred to the Commission to determine the format of the records and information to be 

retained. 

The implementing technical standards referred to in the first subparagraph shall be adopted in 

accordance with [Article 7e] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts on those implementing technical standards to the Commission by 

30 June 2012. 

Article 28 

Shareholders and members with qualifying holdings 

1. The competent authority shall not authorise a CCP until it has been informed of the identities 

of the shareholders or members, whether direct or indirect, natural or legal persons, that have 

qualifying holdings and the amounts of those holdings. 
EN 39 EN 

2. The competent authority shall refuse authorisation to a CCP where, it is not satisfied as to the 

suitability of the shareholders or members that have qualifying holdings in the CCP, taking 

into account the need to ensure the sound and prudent management of a CCP. 

3. Where close links exist between the CCP and other natural or legal persons, the competent 

authority shall grant authorisation only where those links do not prevent the effective exercise 

of the supervisory functions of the competent authority. 

4. Where the persons referred to in paragraph 1 exercise an influence which is likely to be 

prejudicial to the sound and prudent management of the CCP, the competent authority shall 

take appropriate measures to terminate that situation. 

5. The competent authority shall refuse authorisation where the laws, regulations or 

administrative provisions of a third country governing one or more natural or legal persons 

with which the CCP has close links, or difficulties involved in their enforcement, prevent the 

effective exercise of the supervisory functions of the competent authority. 

Article 29 

Information to competent authorities 

1. A CCP shall notify the competent authority of any changes to its management, and shall 

provide the competent authority of all the information necessary to assess whether the board 

members are of sufficiently good repute and sufficiently experienced. 

Where the conduct of a member of the board is likely to be prejudicial to the sound and 

prudent management of the CCP, the competent authority shall take appropriate measures, 

including removing that member from the board. 

2. Any natural or legal person or such persons acting in concert (hereinafter referred to as “the 

proposed acquirer’), who have taken a decision either to acquire, directly or indirectly, a 

qualifying holding in a CCP or to further increase, directly or indirectly, such a qualifying 

holding in a CCP as a result of which the proportion of the voting rights or of the capital held 

would reach or exceed 10%, 20%, 30% or 50% or so that the CCP would become its 

subsidiary (hereinafter referred to as the proposed acquisition), shall first notify in writing the 

competent authorities of the CCP in which they are seeking to acquire or increase a qualifying 

holding, indicating the size of the intended holding and relevant information, as referred to in 

Article 30(4).

Any natural or legal person who has taken a decision to dispose, directly or indirectly, of a 

qualifying holding in a CCP shall first notify the competent authority in writing thereof, 

indicating the size of the intended holding. Such a person shall likewise notify the competent 

authority where he has taken a decision to reduce his qualifying holding so that the proportion 

of the voting rights or of the capital held would fall below 10%, 20 %, 30 % or 50 % or so that 

the CCP would cease to be his subsidiary. 

The competent authority shall, promptly and in any event within two working days following 

receipt of the notification as referred to in paragraph 2, as well as following receipt of the 

information referred to in paragraph 3, acknowledge receipt in writing thereof to the proposed 

acquirer or vendor. 
EN 40 EN 

The competent authority shall have a maximum of sixty working days as from the date of the 

written acknowledgement of receipt of the notification and all documents required to be 

attached to the notification on the basis of the list referred to in Article 30(4) (hereinafter 

referred to as the assessment period), to carry out the assessment provided for in Article 30(1) 

(hereinafter referred to as 'the assessment'). 

The competent authority shall inform the proposed acquirer or vendor of the date of the expiry 

of the assessment period at the time of acknowledging receipt. 

3. The competent authority may, during the assessment period, where necessary, and no later 

than on the 50th working day of the assessment period, request any further information that is 

necessary to complete the assessment. Such request shall be made in writing and shall specify 

the additional information needed. 

For the period between the date of request for information by the competent authority and the 

receipt of a response thereto by the proposed acquirer, the assessment period shall be 

interrupted. The interruption shall not exceed 20 working days. Any further requests by the 

competent authority for completion or clarification of the information shall be at its discretion 

but may not result in an interruption of the assessment period. 

4. The competent authority may extend the interruption referred to in the second subparagraph of 

paragraph 3 up to thirty working days where the proposed acquirer or vendor is either of the 

following: 

(a) situated or regulated outside the Union; 

(b) a natural or legal person not subject to supervision under this Regulation or Directives 

73/239/EEC, 85/611/EEC, 92/49/EEC, 2002/83/EC, 2003/41/EC, 2004/39/EC, 

2005/68/EC, 2006/48/EC, 2009/65/EC or 2010/.../EU (AIFM). 

5. Where the competent authority, upon completion of the assessment, decides to oppose the 

proposed acquisition, it shall, within two working days, and not exceeding the assessment 

period, inform the proposed acquirer in writing and provide the reasons for that decision. 

Subject to national law, an appropriate statement of the reasons for the decision may be made 

accessible to the public at the request of the proposed acquirer. However, Member States may 

allow a competent authority to make such disclosure in the absence of a request by the 

proposed acquirer. 

6. Where the competent authority does not oppose the proposed acquisition within the 

assessment period, it shall be deemed to be approved. 

7. The competent authority may fix a maximum period for concluding the proposed acquisition 

and extend it where appropriate. 

8. Member States shall not impose requirements for notification to, and approval by, the 

competent authority of direct or indirect acquisitions of voting rights or capital that are more 

stringent than those set out in this Regulation. 
EN 41 EN 

 

Article 30 

Assessment 

1. Where assessing the notification provided for in Article 29(2) and the information referred to 

in Article 29(3), the competent authority shall, in order to ensure the sound and prudent 

management of the CCP in which an acquisition is proposed, and having regard to the likely 

influence of the proposed acquirer on the CCP, appraise the suitability of the proposed 

acquirer and the financial soundness of the proposed acquisition against all of the following 

criteria: 

(a) the reputation and financial soundness of the proposed acquirer; 

(b) the reputation and experience of any person who will direct the business of the CCP as a 

result of the proposed acquisition; 

(c) whether the CCP will be able to comply and continue to comply with the provisions set 

out in this Regulation; 

(d) whether there are reasonable grounds to suspect that, in connection with the proposed 

acquisition, money laundering or terrorist financing within the meaning of Article 1 of 

Directive 2005/60/EC36 is being or has been committed or attempted, or that the 

proposed acquisition could increase the risk thereof. 

Where assessing the financial soundness of the proposed acquirer, the competent authority 

shall pay particular attention to the type of business pursued and envisaged in the CCP in 

which the acquisition is proposed. 

Where assessing the ability to comply with this Regulation, the competent authority shall pay 

particular attention to whether the group of which it will become a part has a structure that 

makes it possible to exercise effective supervision, effectively exchange information among 

the competent authorities and determine the allocation of responsibilities among the competent 

authorities. 

2. The competent authorities may oppose the proposed acquisition only where there are 

reasonable grounds for doing so on the basis of the criteria set out in paragraph 1 or where the 

information provided by the proposed acquirer is incomplete. 

3. Member States shall neither impose any prior conditions in respect of the level of holding that 

must be acquired nor allow their competent authorities to examine the proposed acquisition in 

terms of the economic needs of the market. 

4. Member States shall make publicly available a list specifying the information that is necessary 

to carry out the assessment and that must be provided to the competent authorities at the time 

of notification referred to in Article 29(2). The information required shall be proportionate and 

adapted to the nature of the proposed acquirer and the proposed acquisition. Member States 

shall not require information that is not relevant for a prudential assessment. 

36 OJ L 309, 25.11.2005, p.15. 
EN 42 EN 

5. Notwithstanding Article 29(2), (3) and (4), where two or more proposals to acquire or increase 

qualifying holdings in the same CCP have been notified to the competent authority, the latter 

shall treat the proposed acquirers in a non-discriminatory manner. 

6. The relevant competent authorities shall work in full consultation with each other when 

carrying out the assessment where the proposed acquirer is one of the following: 

(a) a credit institution, assurance undertaking, insurance undertaking, reinsurance 

undertaking, investment firm, market operator, an operator of a security settlement 

system, a UCITS management company or an AIFM authorised in another Member 

State; 

(b) the parent undertaking of a credit institution, assurance undertaking, insurance 

undertaking, reinsurance undertaking, investment firm, market operator, an operator of a 

security settlement system, a UCITS management company or an AIFM authorised in 

another Member State; 

(c) a natural or legal person controlling a credit institution, assurance undertaking, insurance 

undertaking, reinsurance undertaking, investment firm, market operator, an operator of a 

security settlement system, a UCITS management company or an AIFM authorised in 

another Member State. 

7. The competent authorities shall, without undue delay, provide each other with any information 

which is essential or relevant for the assessment. The competent authorities shall, upon 

request, communicate all relevant information to each other and shall communicate all 

essential information at their own initiative. A decision by the competent authority that has 

authorised the CCP in which the acquisition is proposed shall indicate any views or 

reservations expressed by the competent authority responsible for the proposed acquirer. 

Article 31 

Conflicts of interest 

1. A CCP shall maintain and operate effective written organisational and administrative 

arrangements to identify and manage any potential conflicts of interest between itself, 

including its managers, employees, or any person directly or indirectly linked to them by 

control or close links and its clearing members or their clients or between them. It shall 

maintain and implement adequate resolution procedures whenever possible conflicts of 

interest occur. 

2. Where the organisational or administrative arrangements of a CCP to manage conflicts of 

interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the 

interests of a clearing member or client will be prevented, it shall clearly disclose the general 

nature or sources of conflicts of interest to the clearing member before accepting new 

transactions from that clearing member. Where the client is not known to the CCP, the CCP 

shall inform the clearing member whose client is concerned. 

3. Where the CCP is a parent undertaking or a subsidiary, the written arrangements must also 

take into account any circumstances, of which the CCP is or should be aware, which may give 
EN 43 EN 

rise to a conflict of interest arising as a result of the structure and business activities of other 

undertakings with which it has a parent undertaking or a subsidiary relationship. 

4. The written arrangements established in accordance with paragraph 1 shall include the 

following: 

(a) the circumstances which constitute or may give rise to a conflict of interest entailing a 

material risk of damage to the interests of one or more clearing members or clients; 

(b) procedures to be followed and measures to be adopted in order to manage such conflicts. 

5. A CCP shall take all reasonable steps to prevent any misuse of the information maintained in 

its systems and shall prevent the use of that information held for other business activities. 

Sensitive information recorded in one CCP shall not be used for commercial use by any other 

natural or legal person that has a parent undertaking or a subsidiary relationship with the CCP. 

Article 32 

Business continuity

1. A CCP shall establish, implement and maintain an adequate business continuity policy and 

disaster recovery plan aiming at ensuring the preservation of its functions, the timely recovery 

of operations and the fulfilment of the CCP's obligations. Such a plan shall at a minimum 

allow for the recovery of all transactions at the time of disruption to allow the CCP to continue 

to operate with certainty and to complete settlement on the scheduled date. 

2. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

minimum content of the business continuity plan and the minimum level of services that the 

disaster recovery plan shall guarantee. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory technical standards to the Commission by 30 

June 2012. 

Article 33 

Outsourcing 

1. Where a CCP outsources operational functions, services or activities, it shall remain fully 

responsible for discharging all of its obligations under this Regulation and shall comply at all 

times with the following conditions: 

(a) outsourcing does not result in the delegation of its responsibility; 

(b) the relationship and obligations of the CCP towards its clearing members or where 

relevant their clients are not altered; 

(c) the conditions for the authorisation of the CCP do not effectively change; 
EN 44 EN 

(d) outsourcing does not prevent the exercise of supervisory and oversight functions; 

(e) outsourcing does not result in depriving the CCP from the necessary systems and 

controls to manage the risks it faces; 

(f) the CCP retains the necessary expertise to evaluate the quality of the services provided, 

the organisational and capital adequacy of the service provider; and to supervise the 

outsourced functions effectively and manage the risks associated with the outsourcing 

and must constantly supervise those functions and manage those risks; 

(g) the CCP has direct access to the relevant information of the outsourced functions; 

(h) the service provider cooperates with the competent authority in connection with the 

outsourced activities; 

(i) the service provider protects any sensitive and confidential information relating to the 

CCP and its clearing members and clients. 

2. The competent authority shall require the CCP to clearly allocate and set out its rights and 

obligations, and those of the service provider, in a written agreement. 

3. A CCP shall make all information necessary to enable the competent authority to assess the 

compliance of the performance of the outsourced activities with the requirements of this 

Regulation available on request. 

Chapter 2 

Conduct of Business Rules

Article 34 

General provisions 

1. When providing services to its clearing members, and where relevant, to their clients, a CCP 

shall act fairly and professionally in accordance with the best interests of the clearing members 

and clients and sound risk management. 

2. A CCP shall have transparent rules for the handling of complaints. 

Article 35 

Participation requirements 

1. A CCP shall establish the categories of admissible clearing members and the admission 

criteria. Such criteria shall be non-discriminatory, transparent and objective so as to ensure fair 

and open access to the CCP and shall ensure that clearing members have sufficient financial 

resources and operational capacity to meet the obligations arising from participation in a CCP. 

Criteria that restrict access shall only be permitted to the extent that their objective is to 

control the risk for the CCP. 
EN 45 EN 

2. A CCP shall ensure that the application of the criteria referred to in paragraph 1 is met on an 

on-going basis and shall have timely access to the information relevant for the assessment. A 

CCP shall conduct, at least once a year, a comprehensive review of the compliance with the 

provisions in this article by its clearing members. 

3. Clearing members that clear transactions on behalf of their clients shall have the necessary 

additional financial resources and operational capacity to perform this activity. Clearing 

members shall, upon request, inform the CCP about the criteria and arrangements they adopt 

to allow their clients to access the services of the CCP. 

4. A CCP shall have objective and transparent procedures for the suspension and orderly exit of 

clearing members that no longer meet the criteria referred to in paragraph 1. 

5. A CCP may only deny access to clearing members meeting the criteria referred to in 

paragraph 1 where it is duly justified in writing and based on a comprehensive risk analysis. 

6. A CCP may impose specific additional obligations on clearing members, such as, but not 

limited to, the participation in auctions of a defaulting clearing member's position. Such 

additional obligations shall be proportional to the risk brought by the clearing member and 

shall not restrict participation to certain categories of clearing members. 

Article 36 

Transparency 

1. A CCP shall publicly disclose the prices and fees associated with services provided. It shall 

disclose the prices and fees of single services and functions provided separately, including 

discounts and rebates and the conditions to benefit from those reductions. It shall allow its 

clearing members and, where relevant, their clients, separate access to specific services. 

2. A CCP shall disclose to clearing members and clients the risks associated with the services 

provided. 

3. A CCP shall publicly disclose the price information used to calculate its end of day exposures 

with its clearing members and the volumes of the cleared transactions for each class of 

instruments. 

Article 37 

Segregation and portability 

1. A CCP shall keep records and accounts that shall enable it, at any time and without delay, to 

identify and segregate the assets and positions of one clearing member from the assets and 

positions of any other clearing member and from its own assets. 

2. A CCP shall require each clearing member to distinguish and segregate in accounts with the 

CCP the assets and positions of that clearing member from those of its clients. A CCP shall 

allow clients to have a more detailed segregation of their assets and positions. The CCP shall 

publicly disclose the risks and costs associated with the different levels of segregation. 
EN 46 EN 

3. Depending on the level of segregation chosen by a client, the CCP shall ensure that it is able to 

transfer on request at a pre-defined trigger event, without the consent of the clearing member 

and within a pre-defined transfer period its assets and positions to another clearing member. 

That other clearing member shall only be obliged where it has previously entered into a 

contractual relationship for that purpose. 

4. Provided that the client is not exposed to the default of the clearing member through which it 

has access to the CCP or of any other clients, Annex III, Part 2, point 6 of Directive 

2006/48/EC shall apply. 

5. The requirements set out in paragraphs 1 to 4 shall prevail over any conflicting laws, 

regulations and administrative provisions of the Member States that prevent the parties from 

fulfilling them. 

Chapter 3 

Prudential Requirements

Article 38 

Exposure management 

A CCP shall measure and assess its liquidity and credit exposures to each clearing member and, where 

relevant, to another CCP with whom it has concluded an interoperable arrangement, on a near to real 

time basis. A CCP shall have access in a timely manner and on a non discriminatory basis to the 

relevant pricing sources to effectively measure its exposures. 

Article 39 

Margin requirements 

1. A CCP shall impose, call and collect margins to limit its credit exposures from its clearing 

members, and where relevant, from CCPs which have interoperable arrangements. Such 

margins shall be sufficient to cover potential exposures that the CCP estimates will occur until 

the liquidation of the relevant positions. They shall be sufficient to cover losses that result 

from at least 99 per cent of the exposures movements over an appropriate time horizon and 

they shall ensure that a CCP fully collateralises its exposures with all its clearing members, 

and where relevant with CCPs which have interoperable arrangements, at least on a daily 

basis. 

2. A CCP shall adopt models and parameters in setting its margin requirements that capture the 

risk characteristics of the products cleared and take into account the interval between margin 

collections, market liquidity and the possibility of changes over the duration of the transaction. 

The models and parameters shall be validated by the competent authority and subject to a joint 

opinion of the college referred to in Article 15. 

3. A CCP shall call and collect margins on an intraday basis, at minimum when pre-defined 

thresholds are breached. 
EN 47 EN 

4. A CCP shall segregate the margins posted by each clearing member and, where relevant, by 

CCPs that have interoperable arrangements and shall ensure the protection of the margins 

posted against the default of other clearing members, the institution where they are deposited, 

or of the CCP itself and from any other loss the CCP may experience. 

5. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

appropriate percentage and time horizon, as referred to in paragraph 1, to be considered for the 

different classes of financial instruments. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA, in consultation with EBA, shall submit drafts for those regulatory technical standards 

to the Commission by 30 June 2012. 

Article 40 

Default fund 

1. A CCP shall maintain a default fund to cover losses arising from the default, including the 

opening of an insolvency procedure of one or more clearing members. 

2. A CCP shall establish the minimum size of contributions to the default fund and the criteria to 

calculate the contributions of the single clearing members. The contributions shall be 

proportional to the exposures of each clearing member, in order to ensure that the 

contributions to the default fund at least enable the CCP to withstand the default of the 

clearing member to which it has the largest exposures or of the second and third largest 

clearing members, if the sum of their exposures is larger. 

3. A CCP may establish more than one default fund for the different classes of instruments it 

clears. 

Article 41 

Other risk controls 

1. In addition to the capital required in Article 12, a CCP shall maintain sufficient available 

financial resources to cover potential losses that exceed the losses to be covered by margin 

requirements and the default fund. Such resources may include any other clearing fund 

provided by clearing members or other parties, loss sharing arrangements, insurance 

arrangements, the own funds of a CCP, parental guarantees or similar provisions. Such 

resources shall be freely available to the CCP and shall not be used to cover the operating 

losses. 

2. A CCP shall develop scenarios of extreme but plausible market conditions, which include the 

most volatile periods that have been experienced by the markets for which the CCP provides 

its services. The default fund referred to in Article 40 and the other financial resources referred 

to in paragraph 1 shall at all times enable the CCP to withstand the default of the two clearing 

members to which it has the largest exposures and shall enable the CCP to withstand sudden 

sales of financial resources and rapid reductions in market liquidity. 
EN 48 EN 

3. A CCP shall obtain the necessary credit lines or similar arrangements to cover its liquidity 

needs in case the financial resources at its disposal are not immediately available. Each 

clearing member, parent undertaking or subsidiary of the clearing member may not provide 

more than 25 per cent of the credit lines needed by the CCP. 

4. A CCP may require non-defaulting clearing members to provide additional funds in the event 

of a default of another clearing member. The clearing members of a CCP shall have limited 

exposures toward the CCP. 

5. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

extreme conditions referred to in paragraph 2 that the CCP shall withstand. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles 7 to 7d of Regulation .../... [ESMA Regulation]. 

ESMA, in consultation with EBA, shall submit drafts for those regulatory technical standards 

to the Commission by 30 June 2012. 

Article 42 

Default waterfall 

1. A CCP shall use the margins posted by a defaulting clearing member prior to other financial 

resources in covering losses. 

2. Where the margins posted by the defaulting clearing member are not sufficient to cover the 

losses incurred by the CCP, the CCP shall use the default fund contribution of the defaulting 

member to cover these losses. 

3. A CCP shall use contributions to the default fund and other contributions of non-defaulting 

clearing members only after having exhausted the contributions of the defaulting clearing 

member and, where relevant, the CCP's own funds referred to in Article 41(1). 

4. A CCP shall not be allowed to use the margins posted by non-defaulting clearing members to 

cover the losses resulting from the default of another clearing member. 

Article 43 

Collateral requirements 

1. A CCP shall only accept highly liquid collateral with minimal credit and market risk to cover 

its exposure to its clearing members. It shall apply adequate haircuts to asset values that reflect 

the potential for their value to decline over the interval between their last revaluation and the 

time by which they can reasonably be assumed to be liquidated. It shall take into account the 

liquidity risk following the default of a market participant and the concentration risk on certain 

assets that may result in establishing the acceptable collateral and the relevant haircuts. 

2. A CCP may accept, where appropriate and sufficiently prudent the underlying of the 

derivative contract or the financial instrument that originate the CCP exposure as collateral to 

cover its margin requirements. 
EN 49 EN 

3. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

type of collateral that can be considered highly liquid and the haircuts referred to in paragraph 

1. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA, in consultation with the ESCB and EBA, shall submit drafts on those regulatory 

technical standards to the Commission by 30 June 2012. 

Article 44 

Investment policy

1. A CCP shall only invest its financial resources in highly liquid financial instruments with 

minimal market and credit risk. The investments shall be capable of being liquidated rapidly 

with minimal adverse price effect. 

2. Financial instruments posted as margins shall be deposited with operators of securities 

settlement systems that ensure non-discriminatory access to CCPs and the full protection of 

those instruments. A CCP shall have prompt access to the financial instruments when 

required. 

3. A CCP shall not invest its capital or the sums arising from the requirements referred to in 

Articles 39, 40 and 41 in its own securities or those of its parent or subsidiary undertaking. 

4. A CCP shall take into account its overall credit risk exposures to individual obligors in making 

its investment decision and shall ensure that its overall risk exposure to any individual obligor 

remains within acceptable concentration limits. 

5. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

highly liquid financial instruments referred to in paragraph 1 and the concentration limits 

referred to in paragraph 4. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA, in consultation with EBA, shall submit drafts on those regulatory technical standards 

to the Commission by 30 June 2012. 

Article 45 

Default procedures 

1. A CCP shall have procedures in place to be followed where a clearing member does not 

comply with the requirements laid down in Article 35 within the time limit and according to 

the procedures established by the CCP. The CCP shall outline the procedures to be followed in 

the event the insolvency of a clearing member is not established by the CCP. 

2. A CCP shall take prompt action to contain losses and liquidity pressures resulting from 

defaults and shall ensure that the closing out of any clearing member's positions does not 
EN 50 EN 

disrupt its operations or expose the non-defaulting clearing members to losses that they cannot 

anticipate or control. 

3. The CCP shall promptly inform the competent authority. That competent authority shall 

immediately inform the authority responsible for the supervision of the defaulting clearing 

member where the CCP considers that the clearing member will not be able to meet its future 

obligations and when the CCP intends to declare its default. 

4. A CCP shall establish that its default procedures are enforceable. It shall take all the 

reasonable steps to ensure that it has the legal powers to liquidate the proprietary positions of 

the defaulting clearing member and to transfer or liquidate the client's positions of the 

defaulting clearing member. 

Article 46 

Review of models, stress testing and back testing 

1. A CCP shall regularly review the models and parameters adopted to calculate its margin 

requirements, default fund contributions, collateral requirements and other risk control 

mechanisms. It shall subject the models to rigorous and frequent stress tests to assess their 

resilience in extreme but plausible market conditions and shall perform back tests to assess the 

reliability of the methodology adopted. The CCP shall inform the competent authority of the 

results of the tests performed and shall obtain its validation before adopting any change to the 

models and parameters. 

2. A CCP shall regularly test the key aspects of its default procedures and take all the reasonable 

steps to ensure that all clearing members understand them and have appropriate arrangements 

in place to respond to a default event. 

3. A CCP shall publicly disclose key information on its risk management model and assumptions 

adopted to perform the stress tests referred to in paragraph 1. 

4. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

following: 

(a) the type of tests to be undertaken for different classes of financial instruments and 

portfolios; 

(b) the involvement of clearing members or other parties in the tests; 

(c) the frequency of tests; 

(d) the time horizons of tests; 

(e) the key information referred to in paragraph 3. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA, in consultation with EBA, shall submit drafts on those regulatory technical standards 

to the Commission by 30 June 2012. 
EN 51 EN 

Article 47 

Settlement 

1. A CCP shall, where available, use central bank money to settle its transactions. Where central 

bank money is not accessible, steps shall be taken to strictly limit credit and liquidity risks. 

2. A CCP shall clearly state its obligations with respect to deliveries of financial instruments, 

including whether it has an obligation to make or receive delivery of a financial instrument or 

whether it indemnifies participants for losses incurred in the delivery process. 

3. Where a CCP has an obligation to make or receive deliveries of financial instruments, the CCP 

shall eliminate principal risk through the use of delivery-versus-payment mechanisms to the 

extent possible. 

Title V 

Interoperability arrangements 

Article 48 

Interoperability Arrangements 

1. A CCP may enter into an interoperability arrangement with another CCP, where the 

requirements under Articles 49 and 50 are fulfilled. 

2. When establishing an interoperability arrangement with another CCP for the purpose of 

providing services to a particular trading venue, the CCP shall have non discriminatory access 

to the data that it needs for the performance of its functions from that particular trading venue 

and to the relevant settlement system. 

3. Entering into an interoperability arrangement or accessing a data feed or a settlement system 

referred to in paragraphs 1 and 2, shall only be restricted, directly or indirectly, to control any 

risk arising from that arrangement or access. 

. 

Article 49 

Risk management 

1. CCPs that enter into an interoperability arrangement shall: 

(a) put in place adequate policies, procedures and systems to effectively identify, monitor 

and manage the additional risks arising from the arrangement so that they can meet their 

obligations in a timely manner; 

(b) agree on their respective rights and obligations, including the applicable law governing 

their relationships.; 

(c) identify, monitor and effectively manage credit and liquidity risks so that a default of a 

clearing member of one CCP does not affect an interoperable CCP; 
EN 52 EN 

(d) identify, monitor and address potential interdependences and correlations that arise from 

an interoperability arrangement that may affect credit and liquidity risks related to 

clearing member concentrations, and pooled financial resources. 

For the purposes of point (b), CCPs shall use the same rules concerning moment of entry of 

transfer orders into their respective systems and the moment of irrevocability, as set out in 

Directive 98/26/EC where relevant. 

For the purposes of point (c), the terms of the arrangement shall outline the process for 

managing the consequences of the default where one of the CCPs with which an 

interoperability arrangement has been concluded is in default. 

For the purposes of point (d), CCPs shall have robust controls over the re-hypothecation of 

clearing members' collateral under the arrangement, if permitted by their competent 

authorities. The arrangement shall outline how these risks have been addressed taking into 

account sufficient coverage and need to limit contagion. 

2. Where the risk management models used by the CCPs to cover their exposure to their clearing 

members as well as their reciprocal exposures are different, the CCPs shall identify those 

differences, assess risks that may arise there from and take measures, including securing 

additional financial resources, that limit their impact on the interoperability arrangement as 

well as their potential consequences in terms of contagion risks and ensure that these 

differences do not affect each CCP's ability to manage the consequences of the default of a 

clearing member. 

Article 50 

Approval of interoperability arrangement 

1. An interoperability arrangement shall be subject to the prior approval of the competent 

authorities of the CCPs involved. The procedure under Article 13 shall apply. 

2. The competent authorities shall only grant approval of the interoperability arrangement, where 

the requirements set out in Article 49 are met and the technical conditions for clearing 

transactions under the terms of the arrangement allow for a smooth and orderly functioning of 

financial markets and that the arrangement does not undermine the effectiveness of 

supervision. 

3. Where a competent authority considers that the requirements set out in paragraph 2 are not 

met, it shall provide explanations in writing regarding its risk considerations to the other 

competent authorities and the CCPs involved. It shall also notify ESMA, which shall issue an 

opinion on the effective validity of the risk considerations as grounds for denial of an 

interoperability arrangement. ESMA's opinion shall be made available to all the CCPs 

involved. Where ESMA's assessment differs from the assessment of the relevant competent 

authority, this authority shall reconsider its position, taking into account the opinion of ESMA. 

4. By 30 June 2012, ESMA shall issue guidelines or recommendations with a view to 

establishing consistent, efficient and effective assessments of interoperability arrangements, in 

accordance with the procedure laid down in Article 8 of Regulation .../... [ESMA Regulation] 
EN 53 EN 

Title VI 

Registration and surveillance of trade repositories 

Chapter 1 

Conditions and Procedures for Registration of a Trade Repository

Article 51 

Registration of a Trade Repository 

1. A trade repository shall register with ESMA for the purposes of Article 6. 

2. In order to be registered, a trade repository shall be a legal person established in the Union and 

meet the requirements of Title VII. 

3. The registration of a trade repository shall be effective for the entire territory of the Union. 

4. A registered trade repository shall comply at all times with the initial conditions for 

registration. A trade repository shall, without undue delay, notify ESMA of any material 

changes to the conditions for registration. 

Article 52 

Application for registration 

1. A trade repository shall submit an application for registration to ESMA. 

2. ESMA shall assess whether the application is complete within ten working days of receipt of 

the application. 

Where the application is not complete, ESMA shall set a deadline by which the trade 

repository is to provide additional information. 

After assessing an application as complete, ESMA shall notify the trade repository 

accordingly. 

3. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

details of the application for registration to ESMA referred to in paragraph 1. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory technical standards to the Commission by 30 

June 2012. 

4. In order to ensure uniform application of paragraph 1, powers are conferred to the 

Commission to adopt implementing standards determining the format of the application for 

registration to ESMA. 
EN 54 EN 

The implementing standards referred to in the first subparagraph shall be adopted in 

accordance with Article 7e of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those standards to the Commission by 30 June 2012. 

Article 53 

Examination of the application 

1. ESMA shall, within forty working days from the notification referred to in the third 

subparagraph of Article 52(2) examine the application for registration based on the 

compliance of the trade repository with the requirements set out in Articles 64 to 67 and adopt 

a fully reasoned Decision for registration or refusal. 

2. The Decision issued by ESMA pursuant to paragraph 1 shall take effect on the fifth working 

day following its adoption. 

Article 54 

Notification of the Decision 

1. Where ESMA adopts a Decision to register, refuse registration or withdraw registration, it 

shall notify the trade repository within 5 working days with a fully reasoned explanation of its 

Decision. 

2. ESMA shall communicate any Decision referred to in paragraph 1 to the Commission. 

3. ESMA shall publish on its website a list of trade repositories registered in accordance with this 

Regulation. That list shall be updated within 5 working days following the adoption of a 

Decision referred to in paragraph 1. 

Article 55 

Fines 

1. At the request of ESMA, the Commission may by decision impose on a trade repository a fine 

where, intentionally or negligently, the trade repository has infringed Articles 63(1), 64, 65, 66 

and 67 paragraphs 1 and 2 of this Regulation. 

2. The fines referred to in paragraph 1 shall be dissuasive and proportionate to the nature and 

seriousness of the breach, the duration of the breach and the economic capacity of the trade 

repository concerned. The amount of the fine shall not exceed 20 per cent of the annual 

income or turnover of the trade repository of the preceding business year. 

3. Notwithstanding paragraph 2, where the trade repository has directly or indirectly gained a 

quantifiable financial benefit from the breach, the amount of the fine has to be at least equal to 

that benefit. 

4. Powers are delegated to the Commission to adopt regulatory technical standards concerning: 

(a) detailed criteria for establishing the amount of the fine; 
EN 55 EN 

(b) the procedures for enquiries, associated measures and reporting, as well as rules of 

procedure for decision-making, including provisions on rights of defence, access to the 

file, legal representation, confidentiality and temporal provisions and the quantification 

and collection of the fines. 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d] of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory technical standards to the Commission by 30 

June 2012 at the latest. 

Article 56 

Periodic penalty payments 

1. At the request of ESMA, the Commission may, by decision, impose periodic penalty payments 

on any persons employed by or for a trade repository or related to it, in order to compel them: 

(a) to put an end to an infringement; 

(b) to supply complete and correct information which ESMA has been requested pursuant to 

Article 61(2); 

(c) to submit to an investigation and in particular to produce complete records, data, 

procedures or any other material required and to complete and correct other information 

provided in an investigation launched by ESMA pursuant to Article 61(2); 

(d) to submit to an on-site inspection ordered by ESMA pursuant to Article 61(2). 

2. The periodic penalty payments provided for shall be effective and proportionate. The amount 

of the periodic penalty payments shall be imposed for each day of delay. It shall not exceed 

5% of the average daily turnover in the preceding business year and shall be calculated from 

the date stipulated in the decision. 

Article 57 

Hearing of the persons concerned 

1. Before taking a decision on a fine or periodic penalty payment as provided for in Articles 55 

and 56, the Commission shall give the persons concerned the opportunity to be heard on the 

matters to which the Commission has taken objection. 

The Commission shall base its decisions only on objections on which the persons concerned 

have been able to comment. 

2. The rights of defence of the persons concerned shall be fully respected in the proceedings. 

Those persons shall be entitled to have access to the Commission's file, subject to the 

legitimate interest of other persons in the protection of their business secrets. The right of 

access to the file shall not extend to confidential information and internal documents of the 

Commission. 
EN 56 EN 

Article 58 

Provisions common to fines and periodic penalty payments 

1. The Commission shall disclose to the public every fine and periodic penalty payment that has 

been imposed in accordance with Articles 55 and 56. 

2. Fines and periodic penalty payments imposed pursuant to Articles 55 and 56 are of an 

administrative nature.

Article 59 

Review by the Court of Justice 

The Court of Justice shall have unlimited jurisdiction to review decisions whereby the Commission has 

imposed a fine or a periodic penalty payment. The Court of Justice may annul, reduce or increase the 

fine or periodic penalty payment imposed. 

Article 60 

Withdrawal of registration 

1. ESMA shall withdraw the registration of a trade repository in any of the following 

circumstances: 

(a) the trade repository expressly renounces the registration or has provided no services for 

the preceding six months; 

(b) the trade repository has obtained the registration by making false statements or by any 

other irregular means; 

(c) the trade repository no longer meets the conditions under which it was registered; 

(d) the trade repository has seriously or repeatedly infringed the provisions of this 

Regulation. 

2. The competent authority of a Member State in which the trade repository services performs its 

services and activities and which considers that one of the conditions referred to in 

paragraph 1 has been met, may request ESMA to examine whether the conditions for 

withdrawal of registration are met. Where ESMA decides not to withdraw the registration of 

the trade repository concerned, it shall provide full reasons. 

Article 61 

Surveillance of Trade Repositories 

1. ESMA shall monitor the application of Articles 64 to 67. 

2. In order to carry out the duties set out in Articles 51 to 60, 62 and 63, ESMA shall have the 

following powers: 

(a) to access any document in any form and to receive or take a copy thereof; 
EN 57 EN 

(b) demand information from any person and, if necessary, to summon and question a 

person with a view to obtaining information; 

(c) to carry out on-site inspections with or without announcement; 

(d) to require records of telephone and data traffic. 

Chapter 2 

Relations with third countries

Article 62 

International agreements 

The Commission shall, where appropriate, submit proposals to the Council for the negotiation of 

international agreements with one or more third countries regarding mutual access to, and exchange of 

information on, OTC derivative contracts held in trade repositories which are established in third 

countries, where that information is relevant for the exercise of the duties of competent authorities 

under this Regulation. 

Article 63 

Equivalence and recognition 

1. A trade repository established in a third country may provide its services and activities to 

entities established in the Union for the purposes of Article 6 only where that trade repository 

is recognised by ESMA. 

2. ESMA shall recognise a trade repository from a third country, where the following conditions 

are met: 

(a) the trade repository is authorised in and is subject to effective surveillance in that third 

country; 

(b) the Commission has adopted a Decision in accordance with paragraph 3; 

(c) the Union has entered into an international agreement with that third country, as referred 

to in Article 62; 

(d) co-operation arrangements have been established pursuant to paragraph 4 to ensure that 

Union authorities have immediate and continuous access to all the necessary 

information. 

3. The Commission may adopt a Decision in accordance with the procedure referred to in Article 

69(2), determining that the legal and supervisory arrangements of a third country ensure that 

trade repositories authorised in that third country comply with legally binding requirements 

which are equivalent to the requirements set out in this Regulation and that these trade 

repositories are subject to effective supervision and enforcement in that third country on an 

ongoing basis. 
EN 58 EN 

4. ESMA shall establish cooperation arrangements with the relevant competent authorities of 

third countries whose legal and supervisory frameworks have been considered equivalent to 

this Regulation in accordance with paragraph 3. Such arrangements shall ensure that Union 

authorities have immediate and continuous access to all the information needed for the 

exercise of their duties. Those arrangements shall specify at least: 

(a) the mechanism for the exchange of information between ESMA, any other Union 

authorities that exercise responsibilities in accordance with this Regulation and the 

competent authorities of third countries concerned; 

(b) the procedures concerning the coordination of supervisory activities. 

Title VII 

Requirements for trade repositories 

Article 64 

General requirements 

1. A trade repository shall have robust governance arrangements, which include a clear 

organisational structure with well defined, transparent and consistent lines of responsibility 

and adequate internal control mechanisms, including sound administrative and accounting 

procedures, which prevent the disclosure of confidential information. 

2. A trade repository shall establish adequate policies and procedures sufficient to ensure its 

compliance, including of its managers and employees with all the provisions of this 

Regulation. 

3. A trade repository shall maintain and operate an adequate organisational structure to ensure 

continuity and orderly functioning of the trade repository in the performance of its services 

and activities. It shall employ appropriate and proportionate systems, resources and 

procedures. 

4. The senior management and members of the board of a trade repository shall be of sufficiently 

good repute and experience so as to ensure the sound and prudent management of the trade 

repository. 

5. A trade repository shall have objective, non-discriminatory and publicly disclosed 

requirements for access and participation. Criteria that restrict access shall only be permitted 

to the extent that their objective is to control the risk to the data maintained by a trade 

repository. 

6. A trade repository shall publicly disclose the prices and fees associated with services provided. 

It shall disclose the prices and fees of single services and functions provided separately, 

including discounts and rebates and the conditions to benefit from those reductions. It shall 

allow reporting entities to access specific services separately. The prices and fees charged by a 

trade repository shall be cost-related. 
EN 59 EN 

Article 65 

Operational reliability 

1. A trade repository shall identify sources of operational risk and minimise them through the 

development of appropriate systems, controls and procedures. Such systems shall be reliable 

and secure, and have adequate capacity to handle the information received. 

2. A trade repository shall establish, implement and maintain an adequate business continuity 

policy and disaster recovery plan aiming at ensuring the preservation of its functions, the 

timely recovery of operations and the fulfilment of the trade repository's obligations. Such a 

plan shall at at least provide for the establishment of backup facilities. 

Article 66 

Safeguarding and recording 

1. A trade repository shall ensure the confidentiality, integrity and protection of the information 

received under Article 6. 

2. A trade repository shall promptly record the information received under Article 6 and shall 

maintain it for at least ten years following the termination of the relevant contracts. It shall 

employ timely and efficient record keeping procedures to document changes to recorded 

information. 

3. A trade repository shall calculate the positions by class of derivatives and by reporting entity 

based on the details of the derivative contracts reported in accordance with Article 6. 

4. A trade repository shall allow the parties to a contract to access and correct the information on 

that contract at all times. 

5. A trade repository shall take all reasonable steps to prevent any misuse of the information 

maintained in its systems and shall prevent the use of that information held for other business 

activities. 

Confidential information recorded in one trade repository shall not be used for commercial use 

by any other natural or legal person that has a parent undertaking or a subsidiary relationship 

with the trade repository. 

Article 67 

Transparency and data availability 

1. A trade repository shall publish aggregate positions by class of derivatives on the contracts 

reported to it. 

2. A trade repository shall make the necessary information available to the following entities: 

(a) ESMA; 

(b) the competent authorities supervising undertakings subject to the reporting obligation 

under Article 6; 
EN 60 EN 

(c) the competent authority supervising CCPs accessing the trade repository; 

(d) the relevant central banks of the ESCB. 

3. ESMA shall share the information necessary for the exercise of their duties with other relevant 

authorities. 

4. Powers are delegated to the Commission to adopt regulatory technical standards specifying the 

details of the information referred to in paragraphs (1) and (2). 

The regulatory technical standards referred to in the first subparagraph shall be adopted in 

accordance with Articles [7 to 7d]of Regulation .../... [ESMA Regulation]. 

ESMA shall submit drafts for those regulatory technical standards to the Commission by 30 

June 2012 at the latest. 

Title VIII 

Transitional and final provisions 

Article 68 

Reports and Review 

1. By 31 December 2013 at the latest, the Commission shall review and report on the 

institutional and supervisory arrangements under Title III and in particular the role and 

responsibilities of ESMA. The Commission shall submit the report to the European Parliament 

and the Council, together with any appropriate proposals. 

By the same date, the Commission shall, in coordination with ESMA and the relevant sectoral 

authorities, assess the systemic importance of the transactions of non-financial firms in OTC 

derivatives. 

2. ESMA shall submit reports to the Commission on the application of the clearing obligation 

under Title II and on the extension of the scope of interoperability arrangements under Title V 

to other transactions in classes of financial instruments than transferable securities and moneymarket instruments. 

Those reports shall be communicated to the Commission by 30 September 2014 at the latest. 

3. The Commission shall, in cooperation with the Member States and ESMA, and after 

requesting the assessment of the ESCB, draw up an annual report assessing any possible 

systemic risk and cost implications of interoperability arrangements. 

The report shall focus at least on the number and complexity of such arrangements, and the 

adequacy of risk management systems and models. The Commission shall submit the report to 

the European Parliament and the Council, together with any appropriate proposals. 

The ESCB shall provide the Commission with its assessment of any possible systemic risk and 

cost implications of interoperability arrangements 
EN 61 EN 

 

Article 69 

Committee procedure 

1. The Commission shall be assisted by the European Securities Committee established by 

Commission Decision 2001/528/EC37. 

2. Where reference is made to this paragraph, Article 5 and Article 7 of Decision 1999/468/EC 

shall apply, having regard to the provisions of Article 8 thereof. 

3. The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months. 

Article 70 

Amendment to Directive 98/26/EC 

In Article 9(1), the following subparagraph is added: 

"Where a system operator has provided collateral security to another system operator in 

connection with an interoperable system, the rights of the providing system operator to that 

collateral security shall not be affected by insolvency proceedings against the receiving system 

operator." 

Article 71 

Transitional provisions 

1. A CCP that has been authorised in its Member State of establishment to provide services 

before the date of entry into force of this Regulation shall seek authorisation for the purposes 

of this Regulation by [2 years after entry into force] at the latest. 

2. Derivative contracts that have been concluded prior to the date of application of this regulation 

registration of a trade repository for that particular type of contract shall be reported to that 

trade repository within 120 days of the date of registration of that trade repository by ESMA. 

Article 72 

Entry into Force 

This Regulation shall enter into force on the twentieth day following that of its publication in the 

Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

37 OJ L 191, 13.7.2001, p.45. 
EN 62 EN 

Done at [...], 

For the European Parliament For the Council 

The President The President