Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority) and amending Regulation (EU) No 648/2012 as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs
Date: 2017-09-20
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU office or agency, European System of Central Banks, capital market, central bank, financial control, financial instrument, financial legislation, financial transaction, market supervision, third country

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   EUROPEAN COMMISSION  Brussels, 20.9.2017  COM(2017) 331 final/2 2017/0136 (COD)   Modified Commission proposal following the adoption of COM(2017)539 of 20.9.2017. Consolidated version  to be read together with the explanatory memorandum contained in COM(2017)539. The text should read as follows: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority) and amending Regulation (EU) No 648/2012 as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs   
 
 
EXPLANATORY MEMORANDUM 

CONTEXT OF THE PROPOSAL 

1.1. 

Reasons for and objectives of the proposal 

Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, 
whether they are related to changes in interest rates, currency fluctuations or the default of a 
business  counterpart.  However,  opaque  derivatives  markets  also  acted  as  an  unwelcome 
contagion channel. Derivatives markets must therefore be regulated and supervised effectively 
to safeguard financial stability. 

Given  the  global  nature  of  derivatives  markets  and  in  accordance  with  the  2009  G20 
Pittsburgh agreement1 to reduce the systemic risk linked to extensive use of derivatives, the 
EU adopted the European Market Infrastructure Regulation (EMIR) in 2012.2 As a key pillar 
of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a 
Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and 
enhances  financial  stability  by  standing  between  the  two  counterparties  to  a  derivatives 
contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing 
the risk for both. EMIR also introduced strict prudential, organisational and business conduct 
requirements  for  CCPs  and  established  arrangements  for  their  prudential  supervision  to 
minimise any risk to users of a CCP and underpin systemic stability. 

Since 2012 when EMIR was adopted, central clearing has been  significantly expanding and 
CCPs  have  become  increasingly  concentrated  and  integrated  across  the  EU  and  with  third 
countries. 

The  present  proposal  ensures  that  supervisory  arrangements  keep  pace  with  these 
developments.  It  is  proposed  that  the  EU  equips  its  Capital  Markets  Union  with  a  more 
effective  and  consistent  supervisory  system  for  CCPs,  in  the  interest  of  further  market 
integration, financial stability and a level-playing field. 

CCPs have grown in importance since the adoption of EMIR and will expand further in the 
coming years 

In  the  five  years  since  the  adoption  of  EMIR,  the  volume  of  CCP  activity  –  in  the  EU  and 
globally  -  has  grown  rapidly  both  in  scale  and  in  scope.  This  is  a  sign  that  the  legislation 
works and is fulfilling its purpose.  

As of end of June 2016, around 62% of the global value of all OTC derivatives contracts and 
asset  classes  (interest  rates,  credit  default,  foreign  exchange,  etc.)  were  centrally  cleared  by 
CCPs3, which is equivalent to $337 trillion. About 97% ($328 trillion) of all centrally-cleared 
derivatives contracts are interest-rate derivatives.  

At  the  end  of  2015,  about  60%  of  all  OTC  interest-rate  derivatives  were  centrally  cleared, 
while the corresponding figure by the end of 2009 was 36%4. Central clearing has similarly 
gained in importance in the credit derivatives (so-called CDS) market, with the proportion of 
outstanding  CDSs  cleared  through  CCPs  increasing  steadily  since  these  data  were  first 

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http://www.g20.utoronto.ca/2009/2009communique0925.html  
Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives,  central  counterparties  and  trade  repositories.  Available  at  http://eur-lex.europa.eu/legal-
content/EN/TXT/PDF/?uri=CELEX:02012R0648-20170103&qid=1492599335405&from=EN  
BIS, Statistical release, OTC derivatives statistics at end-June 2016, November 2016. 
See http://europa.eu/rapid/press-release_MEMO-16-3990_en.htm, November 2016. 

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reported, i.e. 37% at the end of June 2016 while the corresponding figure was 10% at the end 
of June 20105.  

The  rapidly  expanding  role  of  CCPs  in  the  global  financial  system  not  only  reflects  the 
introduction of central clearing obligations  across different asset classes6, but also increased 
voluntary use of central clearing amid growing awareness of the benefits of central clearing 
among market participants (clearing obligations have applied only since June 2016)7. EMIR 
requires certain interest-rate derivatives and CDSs to be centrally cleared in line with similar 
requirements  in  other  G20  countries8.  Bank  capital  rules  have  been  changed  to  incentivise 
central clearing and make bilateral clearing a costlier option in relative terms9, while bilateral 
transactions are subject to additional collateral requirements since March 201710. 

The  expansion  in  CCP  activity  is  set  to  continue  in  the  coming  years.  Mandatory  clearing 
obligations  are  likely  for  additional  asset  classes11  and  the  incentives  to  mitigate  risks  and 
costs  are  likely  to  lead  to  even  more  voluntary  clearing.  The  May  2017  proposal  to  amend 
EMIR  in  a  targeted  manner,  to  improve  its  effectiveness  and  proportionality,  will  reinforce 
this trend,  by  creating  further  incentives  for  CCPs  to  offer  central  clearing  of  derivatives  to 
counterparties.12 Finally, deeper and more integrated capital markets as a result of the Capital 
Markets Union (CMU) will further increase the need for cross-border clearing in the EU, thus 
increasing the importance and the interconnectedness of CCPs within the financial system. 

Expanding  role  of  CCPs  raises  concerns  about  the  need  to  upgrade  supervisory 
arrangements under EMIR, also in light of the establishment of the Capital Markets Union  

The growing importance of CCPs in the financial system and the associated concentration of 
credit  risk  in  these  infrastructures  have  drawn  the  attention  of  governments,  regulators, 
supervisors, central banks and market participants.  

While the scale and scope of centrally-cleared transactions has expanded, the number of CCPs 
has  remained  relatively  limited.  There  are  currently  17  CCPs  established  in  the  EU,  all  of 

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BIS, Statistical release, OTC derivatives statistics at end-June 2016, November 2016. 
FSB, OTC Derivatives Market Reforms, Eleventh progress report on implementation, August 2016. See 
in particular section 3.2.1 on central clearing of standardised transactions, as well as Appendixes C and 
I for further details. 
https://www.kfw.de/KfW-Group/Newsroom/Aktuelles/Pressemitteilungen/Pressemitteilungen-
Details_407936.html  
In  accordance  with  EMIR,  the  European  Securities  and  Market  Authority  (ESMA)  is  tasked  with 
developing  technical  standards  specifying  the  class  of  OTC  derivatives  that  should  be  subject  to  the 
clearing obligation. ESMA also maintains a public register on the clearing obligation. See p. 8-10 of the 
public register for further details on the clearing obligations: 
https://www.esma.europa.eu/sites/default/files/library/public_register_for_the_clearing_obligation_und
er_emir.pdf  
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 
575/2013  as  regards  the  leverage  ratio,  the  net  stable  funding  ratio,  requirements  for  own  funds  and 
eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to 
collective  investment  undertakings,  large  exposures,  reporting  and  disclosure  requirements  and 
amending Regulation (EU) No 648/2012. 
Commission Delegated Regulation (EU) 2016/2251 of 4 October 2016, OJ L 340, 15.12.2016, p. 9–46. 
ESMA  has  analysed  several  classes  of  interest  rate,  credit,  equity  and  foreign-exchange  OTC 
derivatives and proposed some of them for the clearing obligation. As indicated in the following table, 
ESMA  could  consider  further  clearing  obligations  in  the  future,  including  for  instance  "Equity 
Lookalike/Flexible equity derivatives and CFD" and "ForEx Non-deliverable Forward (NDF)". 
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 
648/2012  as  regards  the  clearing  obligation,  the  suspension  of  the  clearing  obligation,  the  reporting 
requirements,  the  risk-mitigation  techniques  for  OTC  derivatives  contracts  not  cleared  by  a  central 
counterparty,  the  registration  and  supervision  of  trade  repositories  and  the  requirements  for  trade 
repositories. 

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which are authorised under EMIR to offer their services within the Union  - although not all 
CCPs are authorised to clear all asset classes (e.g. only 2 CCPs clear credit derivatives, only 2 
CCPs  clear  inflation  derivatives13).14  An  additional  28  third-country  CCPs  have  been 
recognised under EMIR's equivalence provisions, allowing them to offer their services in the 
EU.15 Accordingly, clearing markets are integrated across the EU and are highly concentrated 
in certain asset classes. They are also highly interconnected.16  

While  increased  clearing  via  properly  regulated  and  supervised  CCPs  reinforces  systemic 
stability  overall,  the  concentration  of  risk  makes  the  failure  of  a  CCP  a  low-probability  but 
potentially extremely high-impact event. Given the centrality of CCPs to the financial system, 
the  increasing  systemic  importance  of  CCPs  gives  rise  to  concerns.  CCPs  have  themselves 
become a source of macro-prudential risk, as their failure could cause significant disruption to 
the financial system and would have systemic effects. For instance, large scale, uncontrolled 
termination and close-out of contracts cleared by CCPs could lead to liquidity and collateral 
strains  across  the  market,  causing  instability  in  the  underlying  asset  market  and  the  wider 
financial  system.  Like  some  other  financial  intermediaries,  CCPs  are  also  potentially 
susceptible  to  “runs”  due  to  clearing  members  losing  confidence  in  the  solvency  of  a  CCP. 
This could create a liquidity shock for the CCP as it attempts to meet its obligations to return 
the  principal  collateral  (i.e.  initial  margin).  The  impact  of  a  CCP  failure  due  to  increased 
concentration  of  risk  would  be  amplified  by  a  growing  interconnectedness  between  CCPs 
both directly and indirectly via their members (usually large global banks) and clients.  
In response, and in line with the G20 consensus17, the Commission adopted a proposal for a 
Regulation  on  CCP  Recovery  and  Resolution  in  November  201618.  The  objective  of  the 
proposal  is  to  ensure  that  authorities  are  appropriately  prepared  to  address  a  failing  CCP, 
safeguarding  financial  stability  and  limiting  taxpayer  costs.  The  CCP  Recovery  and 
Resolution  proposal  refocused  attention  on  the  supervisory  arrangements  for  EU  and  third-
country  CCPs  included  in  EMIR  and  the  extent  to  which  these  arrangements  can  be  made 
more  effective  five  years  after  adoption  of  EMIR.  This  proposal  is  currently  under 
negotiations in the European Parliament and the Council. That ongoing work-stream needs to 
be coordinated and consistent with the current proposal. 

Supervisory arrangements for EU CCPs 

Under  EMIR,  EU  CCPs  are  supervised  by  colleges  of  national  supervisors,  the  European 
Securities  and  Markets  Authority  (ESMA),  relevant  members  of  the  European  System  of 
Central Banks (ESCB), and other relevant authorities (e.g. supervisors of the largest clearing 
members,  supervisors  of  certain  trading  venues  and  central  securities  depositories).  These 

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See  ESMA,  Report  EU-wide  CCP  Stress  test  2015,  29  April  2016,  2016/658  and  related  graph  in 
section 3.1 of the impact assessment accompanying this proposal 
See  full  list  of  CCPs  established  in  the  Union  in  Table  3  in  section  2.3  of  the  impact  assessment 
accompanying this proposal. 
In accordance with EMIR, ESMA provides a list of the third-country CCPs that have been recognised to 
offer  services  and  activities  in  the  Union.  The  third-country  CCPs  are  established  in  15  countries 
covered by CCP equivalence decisions adopted by the Commission, including Australia, Hong Kong, 
Singapore, Japan, Canada, Switzerland, South Korea, Mexico, South Africa and the US CFTC, Brazil, 
UAE, Dubai International Financial Centre (DIFC), India and New Zealand. 
See section 2.3 of the impact assessment accompanying this proposal. 
At  the  Cannes  summit  of  November  2011;  the  G20  Heads  of  States  and  Government  endorsed  the 
FSB's"Key Attributes of Effective Resolution Regimes for Financial Institutions"(the ‘Key Attributes’ 
KA) as “a new international standard for resolution regimes". See Communiqué G20 Leaders Summit – 
Cannes – 3-4 November 2011, Section 13. 
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  a  framework  for  the 
recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) 
No 648/2012, and (EU) 2015/2365. COM(2016) 856 final. 

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colleges can include as many as 20 member authorities and they rely on coordination by the 
home-country authority. These arrangements raise certain concerns in light of the current state 
of integration in the market that needs to be reflected in the supervisory arrangements. This is 
also important in order to advance the Capital Markets Union.  

First,  the  growing  concentration  of  clearing  services  in  a  limited  number  of  CCPs,  and  the 
consequential  increase  in  cross-border  activity,  implies  that  CCPs  in  a  small  number  of 
individual  Member  States  are  increasingly  relevant  for  the  EU  financial  system  as  a  whole. 
Against this trend, the current supervisory arrangements relying mainly on the home-country 
authority  (e.g.  the  home-country  authority  is  ultimately  responsible  for  important  decisions 
such as the extension of the authorisation or the approval of outsourcing and interoperability 
arrangements) need to be reconsidered. 

Second, diverging supervisory practices for CCPs (e.g. different conditions for authorisation 
or  model validation  processes) across  the EU can create risks of regulatory  and supervisory 
arbitrage for CCPs and indirectly for their clearing members or clients. The Commission has 
drawn attention to these emerging risks and the need for more supervisory convergence in its 
Communication  on  CMU  of  September  201619  and  in  the  public  consultation  on  the 
operations of the European Supervisory Authorities (ESAs)20, both of which highlighted the 
challenges posed by heterogeneous supervisory practices. 

Third, the role of central banks - as issuers of currency - is not adequately reflected in CCP 
colleges. While the mandates of central banks and supervisors may overlap (in particular in 
areas such as interoperability, liquidity-risk controls etc.), there is a potential for misalignment 
when supervisory actions impact on key responsibilities of central banks in areas such as price 
stability, monetary policy and the payment systems. In  crisis situations, their misalignments 
can  amplify  the  risks  to  financial  stability  if  the  assignment  of  responsibilities  between 
authorities remains unclear. 

Supervisory arrangements for third-country CCPs 

Today,  a  significant  amount  of  financial  instruments  denominated  in  the  currencies  of  the 
Member  States  are  cleared  by  recognised  third-country  CCPs.  For  example,  the  notional 
amount outstanding at Chicago Mercantile Exchange (CME) in the US is EUR 1.8 trillion for 
euro-denominated  interest-rate  derivatives,  and  SEK  348  billion  for  SEK  denominated 
interest-rate derivatives. This also raises a series of concerns. 

First, the implementation of EMIR’s system of equivalence and recognition has shown certain 
shortcomings in particular regarding ongoing supervision. In particular, after a third-country 
CCP has been recognised, ESMA has encountered difficulties in accessing information from 
the  CCP,  in  conducting  on-site  inspections  of  the  CCP  and  in  sharing  information  with  the 
relevant  EU  regulators, supervisors and  central banks.  As  a  result, there  is  a  risk  that  third-
country CCP practices and/or adjustments to risk management models go undetected and/or 
unaddressed, which may have important financial-stability implications for the EU entities. 

Second,  the  potential  for  misalignments  between  supervisory  and  central-bank  objectives 
within colleges acquires an additional dimension in the context of third-country CCPs where 
non-EU authorities are involved.  

Third,  there  is  a  risk that  changes  to  the  CCP  rules  and/or regulatory  framework  in  a  third-
country  could  negatively  affect  regulatory  or  supervisory  outcomes,  leading  to  an  un-level 

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Communication on the "State of the Union 2016: Completing the Capital Market Union – Commission 
accelerates reform"; 14 September 2016; IP/16/3001. 
Public  consultation  on  the  operations  of  the  European  Supervisory  Authorities";  21/03/2017  – 
16/05/2017. 

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playing  field  between  EU  and  third-country  CCPs  and  creating  scope  for  regulatory  or 
supervisory  arbitrage.  There  is  currently  no  mechanism  to  ensure  that  the  EU  is  informed 
automatically of such changes and can take appropriate measures. 

Such concerns are likely to become more significant in the coming years because the global 
nature of capital markets means that the role played by third-country CCPs is set to expand. In 
addition to the 28 third-country CCPs already recognised by ESMA, a further 12 CCPs from 
10 jurisdictions have applied for recognition21 and are awaiting a decision of the Commission 
for the equivalence of their regulatory and supervisory regimes. 

Moreover,  a  substantial  volume  of  euro-denominated  derivatives  transactions  (and  other 
transactions subject to the EU clearing obligation) is currently cleared in CCPs located in the 
United Kingdom. When the United Kingdom exits the EU, there will therefore be a distinct 
shift  in  the  proportion  of  such  transactions  being  cleared  in  CCPs  outside  the  EU's 
jurisdiction, exacerbating the concerns outlined above. This implies significant challenges for 
safeguarding financial stability in the EU that need to be addressed. 

In light of these considerations, the Commission adopted a Communication on 4 May 2017 on 
responding  to  challenges  for  critical  financial  market  infrastructures  and  further  developing 
the Capital Markets Union22. The Communication indicated that "further changes [to EMIR] 
will  be  necessary  to  improve  the  current  framework  that  ensures  financial  stability  and 
supports the further development and deepening of the Capital Markets Union (CMU)". 

Need to improve current supervisory arrangements 

As the EU clearing landscape continues to evolve, the arrangements for crisis prevention and 
management of CCPs must be as effective as possible. EMIR and the Commission proposal 
for  a  Regulation  on  CCP  Recovery  and  Resolution  are  important  steps  in  this  regard. 
However,  five  years  after  the  adoption  of  EMIR,  the  growing  size,  complexity  and  cross-
border  dimension  of  clearing  in  the  EU  and  globally  have  highlighted  shortcomings  in  the 
supervisory arrangements for EU and third-country CCPs. The present proposal therefore sets 
out specific amendments to EMIR and the ESMA Regulation23, in particular to establish clear 
and coherent supervisory arrangements both for EU and third-country CCPs.  

The impact assessment report accompanying this proposal considers the costs and benefits of 
these amendments. It sets out a number of options in order to enhance supervision of CCPs at 
EU level, involve further the central banks of issue in the supervision of CCPs, and strengthen 
the ability of the EU to monitor, identify and mitigate third-country CCP risks. 

The  impact  assessment  provides  comprehensive  evidence  that  the  proposed  amendments 
contribute effectively to reinforce the overall stability of the EU financial system and to lower 
further the already low probability (but extremely high-impact) risk of a CCP failure, while 
keeping  costs  at  a  minimum  for  market  participants.  The  proposed  amendments  also 
contribute  to  the  further  development  and  deepening  of  the  CMU,  in  line  with  the  political 
priorities of the Commission.  

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In  accordance  with  ESMA's  indicative  list  of  third-country  CCPs  that  have  applied  for  recognition 
under Article 25 of EMIR.  
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  and  the  European 
Central  Bank  on  Responding  to  challenges  for  critical  financial  market  infrastructures  and  further 
developing the Capital Markets Union, Brussels, 4.5.2017, COM(2017) 225 final.  
Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision No 716/2009/EC and repealing Commission Decision 2009/77/EC, OJ L 331, 15.12.2010, p. 
84–119. 

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1.2. 

Consistency with existing policy provisions in the policy area 

This proposal is related to, and consistent with, a number of other EU policies and ongoing 
initiatives that  aim  to:  (i)  address  the  systemic  importance  of  CCPs;  (ii)  promote  the  use  of 
central  clearing,  and  (iii)  enhance  the  efficiency  and  effectiveness  of  EU-level  supervision, 
both within and outside the EU.  
First,  this  proposal  is  consistent  the  Commission's  proposal24  for  a  Regulation  on  CCP 
Recovery and Resolution adopted in November 2016. That proposal seeks to ensure that EU 
and  national  authorities  are  appropriately  prepared  to  address  a  failing  CCP,  maintain 
financial stability and avoid that costs associated with the restructuring and the resolution of 
failing CCPs fall on taxpayers. The Commission's proposal aims to ensure that, in the unlikely 
scenario  where  CCPs  face  severe  distress  or  failure,  the  critical  functions  of  CCPs  are 
preserved while maintaining financial stability and helping to avoid that costs associated with 
the restructuring and the resolution of failing CCPs fall on taxpayers. The crisis-management 
arrangements for recovery and resolution of CCPs included in that proposal are based on the 
existence of the highest quality arrangements for crisis prevention (i.e. for CCP regulation and 
supervision)  under  EMIR.  By  further  enhancing  the  supervision  of  CCPs  under  EMIR,  the 
likelihood, however small, of needing to resort to recovery and resolution measures should be 
further  diminished.  The  adjustments  and  enhancements  of  supervision  brought  by  this 
proposal  will  also  need  to  be  appropriately  reflected  in  the  pending  legislative  proposal  on 
CCP Recovery and Resolution. Targeted modifications may be necessary to take into account 
the new role of the CCP Executive Session in colleges under EMIR and subsequently in the 
resolution colleges. 

Second,  this  proposal  is  related  to  the  Commission's  proposal25  for  an  amendment  to  the 
Capital Requirements Regulation (CRR)26 adopted in November 2016. The proposal seeks to 
exclude from the calculation of the leverage ratio thresholds the initial margins for centrally-
cleared  derivative  transactions  received  by  clearing  members  in  cash  from  their  clients  that 
are passed on to CCPs. It will, therefore, ease access to clearing – as the capital requirements 
to offer client or indirect clearing services will diminish – again reinforcing the importance of 
CCPs within the financial system.  

Third,  this  proposal  complements  the  Commission's  proposal  for  targeted  amendments  to 
EMIR27,  adopted  in  May  2017.  The  proposal  seeks  to  simplify  certain  EMIR  requirements 
and make them more proportionate in order to reduce excessive costs for market participants, 
without  compromising  financial  stability.  This  proposal  should  therefore  provide  further 
incentives for market participants to use central clearing – again reinforcing the importance of 
CCPs within the financial system.  

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26 

27 

Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  a  framework  for  the 
recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) 
No 648/2012, and (EU) 2015/2365. 
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 
575/2013  as  regards  the  leverage  ratio,  the  net  stable  funding  ratio,  requirements  for  own  funds  and 
eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures to 
collective  investment  undertakings,  large  exposures,  reporting  and  disclosure  requirements  and 
amending Regulation (EU) No 648/2012. 
Regulation  (EU)  no  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms. 
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 
648/2012  as  regards  the  clearing  obligation,  the  suspension  of  the  clearing  obligation,  the  reporting 
requirements,  the  risk-mitigation  techniques  for  OTC  derivatives  contracts  not  cleared  by  a  central 
counterparty,  the  registration  and  supervision  of  trade  repositories  and  the  requirements  for  trade 
repositories. 

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Fourth,  this  proposal  is  consistent  with  the  March  2017  consultation  launched  by  the 
Commission on the operations of the European Supervisory Authorities (ESAs)28, with a view 
to strengthening and improving the effectiveness and efficiency of the ESAs. 

Fifth,  it  is  consistent  with  experiences  with  the  implementation  and  enforcement  of  third-
country  provisions  in  EU  financial legislation, as  set  out  in  its  Staff  Working  Document  on 
equivalence29. The Staff Working Document provides a factual overview of the equivalence 
process with third countries in EU financial services legislation. It sets out the experience with 
the implementation and enforcement of third-country provisions in EU financial legislation. It 
also presents the key aspects of equivalence (e.g. exercise of empowerments, assessment, ex-
post monitoring) and provides more clarity on how these tasks are approached in practice. 

Sixth, this proposal is consistent with work ongoing at an international level in the framework 
of the Financial Stability Board (FSB) aiming to, among others: (i) promote the use of central 
clearing  and  cross-border  arrangements  between  jurisdictions  to  enhance  the  stability  of  the 
OTC  derivatives  market;  (ii)  achieve  a  consistent  application  of  the  Principles  for  Financial 
Markets  Infrastructure  (PFMIs)  developed  by  the  Committee  on  Payments  and  Markets 
Infrastructure  (CPMI)  and  the  International  Organisation  of  Securities  Commissions 
(IOSCO); (iii) monitor the implementation of the G20 derivatives markets reforms  (through 
the  FSB  OTC  Derivatives  Working  Group);  and  (iv)  develop  further  guidelines  on  CCPs 
resolution (FSB Resolution Group). 

1.3. 

Consistency with other Union policies 

This  proposal  also  relates  to,  and  is  consistent  with,  the  Commission's  ongoing  efforts  to 
further develop the CMU. The need to develop and integrate further EU capital markets was 
stressed  in  the  Communication  on  the  CMU  of  September  2016.30  Further  supervisory 
convergence of CCPs at EU level can support the development of deeper and better integrated 
capital  markets,  as  more  efficient  and  resilient  CCPs  are  essential  elements  for  the  well-
functioning  of  CMU.  In  order  to  do  so,  the  Communication  on  the  mid-term  review  of  the 
CMU31, which the Commission adopted on 8 June 2017, calls for strengthening the powers of 
ESMA  to  promote  the  effectiveness  of  consistent  supervision  across  the  EU  and  beyond. 
Conversely, as a result, the emergence of larger and more liquid financial markets implied by 
the  CMU  will  result  in  even  more  transactions  being  cleared  via  CCPs,  and  increase  their 
systemic  relevance.  Given  the  potential  for  increased  volumes  as  well  as  the  current 
opportunities  for  regulatory  and  supervisory  arbitrage,  further  enhancements  of  the 
supervisory framework are required in order to ensure a strong and stable CMU. 

In  addition,  the  proposal  is  consistent  with  the  Commission's  Reflection  paper  on  the 
deepening  of  the  Economic  and  Monetary  Union,  adopted  on  31  May  201732.  In  particular, 

28 

29 

30 

31 

32 

"Public consultation on the operations of the European Supervisory Authorities", 21.03.2017, available 
at https://ec.europa.eu/info/finance-consultations-2017-esas-operations_en  
"EU  equivalence  decisions  in  financial  services  policy:  an  assessment",  27.02.2017,  SWD(2017)  102 
final, available at  
https://ec.europa.eu/info/sites/info/files/eu-equivalence-decisions-assessment-27022017_en.pdf  
"Capital Markets Union - Accelerating Reform", 14.9.2016, COM(2016) 601 final, available at  
https://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/1-2016-601-EN-F1-1.PDF 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  the  European 
Economic  and  Social  Committee  and  the  Committee  of  the  Regions  on  the  Mid-Term  Review  of  the 
Capital  Markets  Union  Action  Plan,  COM(2017)  292  final,  8  June  2017,  available  at: 
https://ec.europa.eu/info/sites/info/files/communication-cmu-mid-term-review-june2017_en.pdf   
Reflection Paper on the Deepening of the Economic and Monetary Union, European Commission, 31 
May  2017,  available  at:  https://ec.europa.eu/commission/sites/beta-political/files/reflection-paper-
emu_en_2.pdf 

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the reflection paper outlines that the completion of a genuine financial Union is essential for 
an effective and stable Economic and Monetary Union. According to the paper, this includes 
moving  ahead  with  elements  that  are  already  on  the  table,  including  by  delivering  on  the 
CMU. The proposal will help support the development of deeper integrated capital markets by 
ensuring further supervisory convergence of CCPs at EU level. 

By tackling emerging threats to the smooth functioning of the financial system, the proposal 
also  ensures  that  financial  markets  can  continue  to  play  their  role  in  contributing  to 
sustainable,  long-term  growth  to  further  deepen  the  internal  market  in  the  interests  of 
consumers and businesses, as part of the Commission's efforts to support Investments, Growth 
and Jobs.  

2. 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

2.1. 

Legal basis 

The legal basis for this proposal is Article 114 TFEU, which is the legal basis for EMIR and 
the  ESMA  Regulation.  The  analysis  carried  out  as  part  of  the  impact  assessment  report 
identifies the elements of EMIR that need to be amended to reinforce the overall stability of 
the EU financial system and to lower further the already low probability (but extremely high-
impact) risk of a CCP failure, while keeping costs at a minimum for market participants. Only 
the  co-legislators  have  the  competence  to  make  the  necessary  amendments.  Changes  to  the 
ESMA Regulation are necessary to create the CCP Executive Session which is entrusted with 
important tasks under EMIR. 

2.2. 

Subsidiarity (for non-exclusive competence)  

EMIR  is  a  regulation  that  is  binding  in  its  entirety  and  directly  applicable  in  all  Member 
States. EMIR sets out the supervisory framework applying both to CCPs established in the EU 
and  to  third-country  CCPs  that  provide  clearing  services  to  clearing  members  or  trading 
venues  established in the EU. Under EMIR, the Member State of establishment of the CCP 
plays  a  major  role  in  the  supervisory  arrangements.  However,  Member  States  and  national 
supervisors  unilaterally  cannot  solve  the  systemic  risks  posed  by  highly  integrated  and 
interconnected  CCPs,  which  operate  on  a  cross-border  basis  beyond  the  scope  of  national 
jurisdictions.  In  addition,  Member  States  cannot  mitigate  on  their  own  risks  arising  from 
diverging  national  supervisory  practices.  Member  States  and  national  authorities  cannot 
address  on  their  own  the  systemic  risks  that  third-country  CCPs  can  pose  to  the  financial 
stability of the EU as a whole. 

The  objectives  of  EMIR  to  increase  the  safety  and  efficiency  of  CCPs  by  laying  down 
uniform requirements for the performance their activities cannot be sufficiently achieved by 
the Member States individually and can therefore, by reason of the scale of actions, be better 
achieved at EU level in accordance with the principle of subsidiarity as set out in Article 5 of 
the TFEU.  

2.3. 

Proportionality 

The proposal aims to ensure that the supervisory arrangements of EMIR meet the objective of 
reducing systemic risk in derivatives markets in a more proportionate and effective manner, at 
a  minimum  cost for market participants.  The proposal sets out  a streamlined framework for 
the supervision of CCPs authorised at EU level, with clarified roles and responsibilities for all 
the  various  national  and  EU  authorities  and  institutions  involved.  By  recalibrating  the 
supervisory arrangements, the proposal contributes to addressing the increasing cross-border 

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systemic nature of CCPs, while preserving the fiscal responsibilities of the authorities of the 
Member State of  establishment. In  addition, the proposal introduces an approach  permitting 
third-country  CCPs  to  comply  with  EMIR's  requirements  by  complying  with  their  own 
national comparable rules which allows for a proportionate approach focused on the systemic 
relevance of third-country CCPs for EU markets. At the same time, the proposal does not go 
beyond what is necessary to achieve the EMIR objective of reducing systemic risk, through 
the establishment of transparent and objective criteria to identify, monitor and mitigate third-
country CCP risks to the EU's financial stability. The proposal therefore contributes directly 
to making the supervisory arrangements of EMIR more proportionate overall. Likewise, the 
proposal  introduces  only  targeted  amendments  to  the  ESMA  Regulation,  that  do  not  go 
beyond what is necessary to enable ESMA to carry out the tasks enshrined in EMIR. 

2.4. 

Choice of the instrument 

EMIR  and  the  legal  act  establishing  ESMA  are  both  Regulations  and  therefore  need  to  be 
amended by a legal instrument of the same nature.  

3. 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

3.1. 

Ex-post evaluations/fitness checks of existing legislation 

The impact assessment report accompanying this proposal provides an analysis of the extent 
to which the existing EMIR supervisory arrangements for CCPs established inside and outside 
the  EU  have  met  their  objective  of  ensuring  a  level-playing  field  for  the  provision  of  CCP 
services in an effective and efficient way, while at the same time being coherent, relevant and 
providing EU added-value. The analysis also reflects the outcome of two peer reviews on the 
functioning  of  the  supervisory  colleges  under  EMIR  conducted  by  ESMA  in  201533  and 
201634. In addition, the analysis builds on input by ESMA assessing the current EMIR third-
country equivalence and recognition regime as part of a report prepared for the Commission 
in the context of the review of EMIR35.   

Regarding  the  effectiveness  of  the  EMIR  supervisory  arrangements  applicable  to  CCPs 
established  in  the  EU,  practical  experience  shows  that  the cooperation between  members  of 
the colleges in their current structure has allowed the views of supervisors of different actors 
involved  in  central  clearing  to  be  represented,  thereby  contributing  to  the  objectives  of 
supervisory  convergence  and  a  level  playing  field  amongst  CCPs  established  in  the  EU. 
However, there are concerns about the consistency of CCP supervision across Member States, 
suggesting room for a more effective approach to cross-border CCP supervision. In particular 
the degree of cooperation between members of the colleges varies significantly depending on 
the role of the college in the decision-making process. While during the authorisation process, 
"ESMA  observed  that  in  general  the  CCP  colleges  facilitated  two-way  cooperation:  on  the 
one hand, the chairing national competent authorities (NCAs) received good and constructive 

33 

34 

35 

ESMA review of CCP colleges under EMIR, January 2015 
https://www.esma.europa.eu/sites/default/files/library/2015/11/2015-20-
_report_on_esma_review_of_ccp_colleges.pdf  
ESMA,  Peer  Review  under  EMIR  Art.  21  Supervisory  activities  on  CCPs’  Margin  and  Collateral 
requirements, 22 December 2016, ESMA/2016/1683 (ESMA peer review 2016) 
https://www.esma.europa.eu/sites/default/files/library/2016-1683_ccp_peer_review_report.pdf 
ESMA, EMIR review report no. 4, ESMA input as part of the Commission consultation on the EMIR 
Review, 13 August 2015, ESMA/2015/1254 
https://www.esma.europa.eu/sites/default/files/library/2015/11/esma-2015-1254_-
_emir_review_report_no.4_on_other_issues.pdf 

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input  from  the  college  members  which  fed  into  their  risk  assessments;  while  on  the  other 
hand,  college  members  received  the  information  they  required  in  order  to  vote  on  the 
adoption of the joint opinion."36, a reduced level of cooperation occurs where there is no need 
for such an opinion. Thus, ESMA sees a "risk that following authorisation CCP colleges may 
become  simply  a  mechanism  for  the  exchange  of  information,  rather  than  an  effective 
supervisory  tool."  In  addition,  preliminary  observations  suggest  that:  (i)  different  college 
members  participate  to  different  degrees  in  college  discussions;  and  (ii)  the  supervisory 
approaches of NCAs vary to a significant extent even in cases involving comparable CCPs. 
Common  templates  provided  by  ESMA  to  support  supervisory  convergence  between  NCAs 
have failed to solve that problem, because NCAs exercise their discretion differently. There is 
therefore room for improvement to help strengthen the consistency of CCP supervision at EU 
level,  improve  the  level  playing  field  in  the  EU  and  achieve  more  effective  supervisory 
convergence.  

On  the  effectiveness  of  supervision  of  third-country  CCPs,  the  current  arrangements  have 
allowed  ESMA  to  recognise  28  third-country  CCPs  to  provide  clearing  services  to  EU 
counterparties. This is in line with the G20's objectives to promote cross-border arrangements. 
At  the  same  time,  most  respondents  to  the  EMIR  consultation  (mainly  companies  from  the 
financial sector and industry associations) considered that the EMIR equivalence  regime for 
third-country  CCPs  has  de  facto  created  a  situation  where  the  requirements  for  CCPs 
established in the EU are possibly stricter than for third-country CCPs, leading to an un-level 
playing  field  which  is  detrimental  to  the  former.  ESMA  also  highlighted  that  the  EMIR 
approach  vis-à-vis  third-country  CCPs  is  extremely  flexible,  with  full  reliance  on  third-
country rules and supervisory arrangements, while the majority of third-country jurisdictions 
consider third-country CCPs as systemically relevant infrastructures and apply them to closer 
scrutiny. ESMA argued that, although the current EMIR approach could be a model in terms 
of  mutual  reliance,  if  the  EU  remains  the  only  jurisdiction  relying  extensively  on  third-
country rules and authorities, this might put it at risk and does not benefit CCPs established in 
the EU.    

Regarding  efficiency,  a  majority  of  respondents  to  the  EMIR  consultation  supported  the 
objective of ensuring a level playing field between CCPs established in the EU by promoting 
a  homogeneous  application  of  EMIR.  At  the  same  time,  they  pointed  to  the  length  of  the 
approval  processes,  underlining  that,  in  certain  cases,  the  timeline  for  approval  could  be 
postponed indefinitely by the NCA, giving rise to legal uncertainty. Certain respondents also 
pointed to the need for greater transparency in the functioning of colleges, not only for CCPs 
for the authorisation and extension of services processes but also for users of CCPs in order to 
allow them to get more visibility of the authorisation process and its consequences. Moreover, 
several  authorities  and  industry  participants,  and  market  infrastructure  operators  asked  for 
more  clarity  in  the  process  and  timeframe  for  the  authorisation  and  extension  of  services 
provided  by  CCPs.  Respondents  suggested  that  EMIR  should  clarify  the  modalities  for  the 
college  process,  in  particular  the  roles  and  responsibilities  of  different  college  members. 
There is therefore room for improvement, in particular for a more streamlined supervision of 
CCPs established in the EU. This could contribute to a more efficient collaboration between 
national  and  EU  supervisors,  thereby  avoiding  the  duplication  of  supervisory  tasks  and 
reducing the corresponding allocation of time and resources.  

Regarding  the  current  supervisory  regime  for  third-country CCPs,  industry  associations  that 
responded to the EMIR consultation indicated that the Commission takes too long to complete 

36 

ESMA peer review 2015, p. 16, para. 30. 

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its equivalence assessments. ESMA also raised a series of concerns about the efficiency of the 
process  of  recognition  of  third-country  CCPs.  First,  it  argued  that  the  process  is  rigid  and 
burdensome, as demonstrated by the limited number of recognition decisions taken in 2015. 
Second,  it  pointed  out  that  the  recognition  of  third-country  CCPs  imposes  a  significant 
administrative burden on ESMA.  

Regarding relevance, the supervisory arrangements of EMIR remain integral to international 
efforts to increase the stability of the global OTC derivatives market, while facilitating cross-
border deference arrangements between jurisdictions. EMIR's supervisory arrangements also 
ensure that financial markets continue to play their role in contributing to sustainable, long-
term  growth  to  further  deepen  the  internal  market  in  the  interests  of  consumers  and 
businesses, as part of the Commission's efforts to support investments, growth and jobs. 

As described in Section 2.4 of the impact assessment report accompanying this proposal, the 
supervisory arrangements of EMIR are coherent with other pieces of EU legislation that aim 
to:  (i)  address  the  systemic  importance  of  CCPs;  (ii)  promote  further  the  use  of  central 
clearing,  and  (iii)  enhance  the  efficiency  and  effectiveness  of  EU-level  supervision,  both 
within and outside the EU.  

Finally,  in terms of the  EU added  value, the  supervisory arrangements of EMIR covered a 
gap  by  introducing  a  new  mechanism  facilitating  supervisory  convergence  at  EU  level  in 
order to address the systemic risks of CCPs offering clearing services to EU counterparties. 

3.2. 

Stakeholder consultations 

This proposal builds on several public consultations.  

First,  it  takes  into  account  views  from  stakeholders  and  public  authorities  following  the 
publication  of  the  Commission's  Communication  on  responding  to  challenges  for  critical 
financial  market  infrastructures  and  further  developing  the  CMU  of  4  May  201737.  The 
Communication considered that, in view of the challenges in the area of derivatives clearing, 
further changes would be necessary to ensure financial stability and the safety and soundness 
of CCPs that are of systemic relevance for financial markets across the EU and to support the 
further development of the CMU. 

Second, the proposal relies on comments specific to EMIR and CCP supervision as part of the 
consultation  on  the  operations  of  the  ESAs  that  was  open  from  21  March  to  17  May  2017. 
The  consultation  sought  to  build  a  clearer  overview  of  areas  where  the  effectiveness  and 
efficiency of the ESAs can be strengthened and improved38.  

Third,  the  proposal  considers  comments  focused  on  supervisory  convergence  as  part  of  the 
consultation  on  the  CMU  mid-term  review,  which  was  open  from  20  January  2017  to  17 
March  201739.  The  consultation  sought  the  views  of  stakeholders  on  how  the  current  CMU 
programme can be updated and completed so that it represents a strong policy framework for 
the development of capital markets. The consultation generated 178 responses. 

37 

38 

39 

Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  and  the  European 
Central  Bank  on  Responding  to  challenges  for  critical  financial  market  infrastructures  and  further 
developing the Capital Markets Union, Brussels, 4.5.2017, COM(2017) 225 final.  
The consultation and the related feedback statement can be found at:  
https://ec.europa.eu/info/finance-consultations-2017-esas-operations_en 
The  consultation  can  be  found  at:  https://ec.europa.eu/info/finance-consultations-2017-cmu-mid-term-
review_en  

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Fourth,  the  proposal  takes  into  account  contributions  specific  to  EMIR's  supervisory 
arrangements  as  part  of  the  EMIR  review  consultation  that  was  open  between  May  and 
August 2015. The consultation generated more than 170 contributions from a broad range of 
stakeholders and public authorities40.  

Generally, respondents indicated that EMIR's current supervisory arrangements help increase 
the  safety  and  soundness  of  CCPs  established  in  the  EU,  with  general  support  for  the  role 
performed  by  colleges  of  supervisors.  Respondents  also  highlighted  that  most  of  the 
requirements  of  EMIR  have  started  to  apply  only  recently,  and  that  it  would  therefore  be 
premature  to  consider  a  complete  overhaul  of  the  existing  supervisory  architecture. 
Respondents, and in particular public authorities, underlined that, given the various types of 
CCPs currently operating (local vs. cross-border), national competent authorities should still 
be  actively  involved  in  supervision.  However,  many  respondents  also  underlined  that  the 
operations  of  CCPs  are  of  cross-border  systemic  relevance,  highlighting  the  need  to  avoid 
supervision  being  conducted  only  at  national  level.  The  majority  of  respondents  expressed 
support  for  increased  supervisory  convergence  at  EU  level  over  the  supervision  of  CCPs, 
indicating  that  the  current  regime  is  fragmented  and  inefficient.  Increased  cross-border 
activity, systemic importance of CCPs and access to liquidity in the Euro area were cited by 
respondents as factors why supervisory powers at EU level should be extended. Nevertheless, 
when considering any extension of direct supervisory powers at EU level over EU and third-
country CCPs, respondents warned that such an extension should be in line with the principles 
of  subsidiarity  and  proportionality,  particularly  as  no  EU  structure  would  have  sufficient 
resources  to  cater  for  a  failing  CCP,  no  matter  how  limited  the  risk  of  such  an  event  is. 
Finally,  a  number  of  respondents,  including  ESMA41,  underlined  the  need  to  improve  the 
current framework as regards third-country CCPs. 

3.3. 

Impact assessment 

The  Commission  conducted  an  impact  assessment  of  relevant  policy  alternatives.  Policy 
options were assessed against the key objectives of safeguarding the safety and efficiency of 
CCPs  that  are  of  systemic  relevance  to  EU  markets  and  enhancing  financial  stability  in  the 
EU, without undue fragmentation of the global system.  

The Impact Assessment (IA) report was approved by the Regulatory Scrutiny Board (RSB) on 
2  June  2017.  It  was  submitted  to  the  RSB  on  22  May,  and  the  RSB  made  a  number  of 
recommendations for improvements via a written procedure. Thus, the IA was resubmitted on 
30  May  to  the  RSB.  The  changes  introduced  in  the  IA  to  take  into  consideration  the 
recommendations by the RSB were the following: 

1.  Specific systemic  risks  linked  to  the  United Kingdom's  withdrawal from  the  EU:  Further 
description of the changes relating to the withdrawal of the United Kingdom from the EU in 
the section on the baseline scenario as part of the chapter on policy options.  

40 

41 

EN 

the 

and 

summary 

consultation 

responses 
The 
http://ec.europa.eu/finance/consultations/2015/emir-revision/index_en.htm 
See  EMIR  Review  Report  no.4  of  13  August  2015,  as  part  of  the  Commission  consultation  on  the 
EMIR Review, pp. 19-21, available at: 
 https://www.esma.europa.eu/sites/default/files/library/2015/11/esma-2015-1254_-
_emir_review_report_no.4_on_other_issues.pdf  

found 

can 

the 

be 

of 

at 

13 

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2. Preferred policy option for mitigation of third-country CCP risks: More detailed description 
of how option 3 relating to supervision based on criteria or thresholds would work in practice 
for third-country CCPs, depending on the risks that they would pose to the EU. 

3. Impact of the preferred policy options on systemic risks: More detailed description of the 
role  of  CBIs  regarding  EU  and  non-EU  CCPs.  Clarification  that  the  trade-off  between 
supervisory  burden  and  financial  stability  would  be  proportionate  to  the  EU's  exposure  to 
third-country CCP risks. Explanation that a targeted location policy would  reduce costs to a 
minimum. 

4. Other issues: (i) clarification of how the decision-making process in the Executive Session 
would work compared to that of the current colleges; (ii) definition of operational objectives 
in the chapter on monitoring and evaluation; and (iii) further explanation of why there is no 
formal evaluation of EU CCPs as an Annex to the impact assessment report. 

The  options  considered  in  the  IA  concern  targeted  amendments  of  the  supervisory 
arrangements  of  EMIR  applying  both  to  CCPs  established  in  the  EU  and  to  third-country 
CCPs offering or willing to offer their services to EU counterparties. To achieve the desired 
objectives, a number of preferred policy options were identified:  

 

 

 

In  order  to  enhance  the  supervision  of  CCPs  established  in  the  EU,  the  current 
supervisory arrangements should be streamlined and further centralised through the 
establishment  of  a  European  supervisory  mechanism,  ensuring 
the  proper 
involvement  of  national  authorities,  central  banks  of  issue  and  ESMA  within  the 
scope of their  responsibilities. This will help improve  the coherence of supervisory 
arrangements  for  CCPs  established  in  the  EU,  by  promoting  a  level  playing  field 
amongst  the  European  CCPs  as  well  as  homogeneity  in  the  application  of  EMIR 
across  the  EU,  while  ensuring  that  specific  areas  of  supervisory  responsibility  and 
related national fiscal responsibility remain adequately aligned.  This will contribute 
to  lower  costs  both  at  an  institutional  level,  by  avoiding  supervisory  overlaps 
between  authorities,  and  for  CCPs,  by  simplifying  their  supervisory  framework 
simplified and by limiting the risk of supervisory duplication. 

In order to enhance supervisory arrangements within the EU designed to mitigate the 
risks related to third-country CCPs, the impact assessment report considers that third-
country  CCPs  could  be  subject  to  a  ‘sliding  scale’  of  additional  supervisory 
requirements by ESMA and relevant CBIs based on objective criteria or thresholds. 
The degree and intensity of EU supervision would be proportionate and depend  on 
the  risks  posed  by  third-country  CCPs  to  the  EU.  Different  criteria  or  thresholds 
could  be  set:  low-impact  CCPs  (Tier  1  CCPs)  would  be  subject  to  essentially  a 
continued  implementation  of  the  EMIR  equivalence  and  recognition  regime,  while 
medium to  high-impact CCPs (Tier 2 CCPs)  would be subject to  a  sliding  scale of 
additional  supervisory  requirements,  including  at  the  end  of  the  spectrum  an  EU 
authorisation and establishment requirement for any third-country CCPs that would 
pose substantial exposure risk to the EU and the stability of its financial system.  

This gradual sliding scale of supervisory requirements will allow for a proportionate 
and  balanced  supervision  of  third-country  CCPs  and  adequate  mitigation  of  any 
associated  systemic  risk,  without  undue  fragmentation  of  the  global  system  and 
excessive  costs  for  market  participants.  This  will  help enhance  the  mechanisms  for 
EU supervisors and CBIs to address third-country CCP risks while ensuring a level-
playing  field  between  CCPs  established  in  the  EU  and  third-country  CCPs  and 

EN 

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providing  for  better  ongoing  enforcement  and  compliance  of  third-country  CCPs. 
While  this  option  may  trigger  certain  additional  costs  at  institutional  level  and  for 
third-country  CCPs,  and  ultimately  for  market  participants,  such  costs  have  to  be 
weighed  against  the  gains  in  systemic  risk  mitigation,  although  the  exact  monetary 
benefits of a reduction of systemic risk are difficult to quantify in advance. 

The  package  of  proposed  options  aims  to  establish  clear  and  coherent  supervisory 
arrangements for CCPs established in the EU and in third countries.  

The  impact  assessment  report  also  considers  the  overall  costs  and  benefits  of  the  preferred 
options,  with  a  view  to  assessing  compliance  costs  and  the  burden  imposed  on  market 
participants. The next section presents the expected impact of the proposed measures.  

3.4. 

Regulatory fitness and simplification 

While  EMIR  pursues  the  general  objective  of  reducing  the  systemic  risk  by  increasing  the 
safety and efficiency of CCPs, the present initiative aims to render the supervision of  CCPs 
more effective and efficient and, by following a proportionate approach based on a thorough 
risk assessment, to reduce the regulatory and compliance burden for market participants. This 
is in line with the Commission's Better Regulation Agenda. 

This  initiative  will  strengthen  supervisory  arrangements  for  CCPs  established  in  the  EU 
(responding  to  their  growing  size,  integration,  concentration  and  interconnectedness)  and 
enable EU authorities to better monitor and mitigate risk related to the EU's exposure to third-
country  CCPs.  This  will  help  to  decrease  even  further  the  already  low  probability  (but 
extremely  high-impact)  risk  of  a  CCP  failure  and  reinforce  the  overall  stability  of  the  EU 
financial  system  as  a  whole.  The  enhanced  supervisory  framework  will  improve  legal  and 
economic  certainty  as  a  whole.  While  there  may  be  upfront  economic  costs  associated  with 
the  framework,  the  2007-8  financial  crisis  provides  extensive  empirical  evidence  of  the 
benefit of crisis prevention via the most effective possible arrangements for supervision. 

Estimating  costs  related  to  the  preferred  options  presents  limitations  as  both  problems  deal 
with the supervision of CCPs. While the additional costs or the restructuring of costs for EU 
and national authorities (e.g. additional resources and tasks) can be quantified, the impact for 
market participants is less straightforward and would be based on hypotheses rendering them 
questionable.  Furthermore,  since  the  preferred  option  for  third-country  CCPs  is  based  on  a 
sliding scale of supervisory requirements, the related costs would be CCP-specific and depend 
on the impact on the EU of the activities of the CCPs supervised or recognised. However it is 
possible to identify the source of potential costs or efficiencies for market participants. 

Potential for regulatory simplification and cost reduction 

The aim of this initiative is to streamline the supervision framework for CCPs established in 
the EU and to strengthen the supervision of third-country CCPs. By centralising at EU level 
the  supervisory  work  inside  a  European  supervisory  mechanism,  this  initiative  removes  the 
duplication of tasks between national authorities. This should create economies of scale at EU 
level and diminish the need for dedicated resources at national level. 

As far as market participants are concerned, CCPs should mainly benefit from a reduction in 
the administrative burden with a single point of entry for cross-border supervision at EU level. 

Impact on market participants (including SMEs) 

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Concerning  the  supervision  of  CCPs  established  in  the  EU,  under  the  preferred  option,  the 
changes  proposed  are  not  expected  to  have  a  significant  impact  on  the  cost  of  clearing, 
whether  for  clearing  members  or  their  clients  and  indirect  clients.  In  order  to  fund  the 
European mechanism, CCPs may be required to pay supervisory fees. These would however 
be  proportionate  to  their  activity  and  would  only  represent  a  negligible  fraction  of  their 
turnover. While these costs may be passed on to the market, these would represent minimal 
adjustment costs. 

Concerning  the  supervision  of  third-country  CCPs,  under  the  preferred  option,  the  costs 
would  mostly  materialise  in  case  EU  authorisation  and  establishment  is  triggered  as  part  of 
the sliding scale of supervisory requirements. With the exception of the location requirement, 
for Tier 1 CCPs and Tier 2 CCPs, the situation would be close to that of CCPs established in 
the  EU,  with  limited  supervisory  fees  to  fund  the  European  mechanism.  This  would  trigger 
only limited additional costs to market participants.   

A  core  number  of  staff  will  be  required  in  order  to  set  up  and  operationalise  the  European 
supervisory mechanism to conduct the daily business of supervision of the 17 CCPs currently 
established in the EU. Assuming all third-country CCPs requesting recognition are recognised 
eventually,  that  would  mean  around  40  third-country  CCPs  under  the  Executive  Session's 
competence  –  either  indirectly  through  monitoring  and  information  exchange  (i.e.  Tier  1 
CCPs)  or,  in  addition  to  that,  through  more  direct  supervision  of  Tier  2  CCPs  that  present 
potentially more significant risks. 

Thus, taking account of the number of third-country CCPs to be supervised either indirectly or 
directly, type and complexity of tasks to be fulfilled for Tier 1 and Tier 2 CCPs respectively, 
the number of full time equivalents needed is estimated at roughly 49. Overall the additional 
costs related to the preferred options for CCP supervision should amount to approximately €7 
million per year. 

Beyond  supervision-related  costs,  most  of  the  costs  that  clearing  counterparties  (clearing 
members and their clients) would face would relate to the introduction of an EU authorisation 
and establishment requirement for substantially systemic Tier 2 CCPs. These costs would be 
driven by legal and operational considerations as well as, if not properly calibrated, by market 
fragmentation and the related consequences for market liquidity and execution prices. Positive 
or negative adjustments in margin efficiencies would largely depend on the ability of market 
participants to substitute third-country CCPs with CCPs established in the EU. The drivers of 
these costs are detailed under Section 5.3 of the impact assessment report accompanying this 
proposal. 

In  addition,  a  location  policy  that  would  not  be  tailored  to  the  systemic  risk  of  the  third-
country  CCP,  defined  according  to  objective  criteria,  could  have  an  impact  on  the  costs  of 
clearing,  the  access  to  indirect  clearing  for  clients  of  clearing  members  (including  non-
financial  counterparties  and  small  financial  counterparties)  and  therefore  generally  in  the 
ability to hedge risks for EU counterparties. 

Nevertheless,  this  has  to  be  weighed  against  the  benefits  associated  with  better  crisis 
prevention. Overall, businesses, SMEs and micro-entreprises will benefit from the increased 
stability of CCPs and the continuity of their key critical functions should a crisis occur in the 
future which would lead to their distress or failure. The probability of such a crisis occurring 
should be further reduced through the enhanced ability of the relevant authorities in the EU to 
prevent  the  build-up  of  systemic  risk  within  EU  CCPs  and  to  mitigate  the  transmission  of 

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harmful financial distress through third-country CCPs. As a result, the potential for negative 
knock-on  effects  of  a  crisis  affecting  the  financial  sector  –  e.g.  reduced  readiness  and/or 
capacity of the banking sector to provide financing to the real economy, recessions etc. – that 
tends to heavily impact SMEs and their ability to secure funding would also be reduced.  

In addition, by clarifying supervisory arrangements both for EU and third-country CCPs, and 
in  combination  with  the  Commission's  recent  EMIR  REFIT  initiative  on  the  reduction  of 
excessive costs for smaller counterparties, the proposal should help to promote further the use 
of central clearing and facilitate the ability of SMEs to access financial instruments, either to 
hedge their transactions or to invest. The proposal will therefore facilitate further cross-border 
transactions within the EU and promote an efficient and competitive EU CCP market, thereby 
contributing to the objectives of the CMU. 

Impact on the EU budget 

Overall, the changes envisaged for the supervision of EU CCPs would have no impact on the 
budget of the EU, as any additional costs such as extra resources for the European mechanism 
would be covered by supervisory fees collected from CCPs. Such changes should, however, 
eventually benefit all market participants and member states as they should  result  in a safer 
clearing market within the EU. Further consideration on the financial impact of strengthening 
supervision for CCPs established inside the EU are discussed in the sections below. 

Similarly,  the  changes  envisaged  to  mitigate  the  risks  posed  by  third-country  CCPs  would 
also  have  no  impact  on  the  budget  of  the  EU,  as  any  additional  resources  for  the  European 
mechanism  would  also  be  funded  through  the  collection  of  supervisory  fees  from  third-
country CCPs. This would however be beneficial to the EU as it would reduce the probability 
of  importing  financial  stability  risks  inside  the  EU  and  ensure  that  EU  counterparties 
transacting with third-country CCPs operate in a safe environment, thereby promoting strong 
and stable global markets. 

3.5. 

Fundamental rights 

The EU is committed to high standards of protection of fundamental rights and is signatory to 
a broad set of conventions on human rights. In this context, the proposal is not likely to have a 
direct  impact  on  these  rights,  as  listed  in  the  main  UN  conventions  on  human  rights,  the 
Charter  of  Fundamental  Rights  of  the  European  Union  which  is  an  integral  part  of  the  EU 
Treaties, and the European Convention on Human Rights (ECHR). 

4. 

BUDGETARY IMPLICATIONS 

The changes envisaged to enhance the supervision of EU CCPs and to mitigate the risks posed 
by third-country CCPs are not expected to have an impact on the budget of the EU. 

Possible additional tasks arising for ESMA, such as the processing of the registration of third-
country CCPs and their ongoing supervision, could lead to a need for an increase of ESMA’s 
planned resources. However, any additional costs for the EU budget would be alleviated by 
mechanisms to increase the financing of the European mechanism, such as the collection of 
fees from the EU-based and third-country CCPs that it would directly supervise.  

The  financial  and  budgetary  impact  of  the  proposal  is  indicated  in  the  legislative  financial 
statement annexed to this proposal.    

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5. 

OTHER ELEMENTS 

5.1. 

Implementation plans and monitoring, evaluation and reporting arrangements 

The proposal includes a requirement stating that an evaluation of EMIR in its entirety should 
be  carried  out,  with  a  particular  focus  on  the  effectiveness  and  efficiency  of  the  proposed 
supervisory arrangements in meeting EMIR's original objective to increase financial stability. 
The evaluation should thus consider all aspects of EMIR, but in particular the following: 

 

 

 

 

 

 

Number of CCPs that have entered into recovery or resolution; 

Number  of  times  the  dispute  resolution  mechanism  has  been  used  by  national 
competent authorities; 

Number of on-site inspections of third-country CCPs; 

Number of recognised third-country CCPs; 

Number  of  infringements  of  equivalence  and/or  recognition  conditions  by  third-
country CCPs; 

Estimated costs to EU counterparties. 

In  principle,  this  evaluation  should  take  place  at  least  5  years  after  the  application  of  these 
amendments. 

The  evaluation  should  seek  to  collect  input  from  all  relevant  stakeholders,  but  in  particular 
from  CCPs,  clearing  members,  non-financial  counterparties,  small  financial  counterparties 
and in general clients and indirect clients of clearing members. Input would also be required 
from ESMA as well as national authorities and central banks. Statistical data for the analysis 
should be sought from ESMA. 

5.2. 

Detailed explanation of the specific provisions of the proposal 

5.2.1.  Creation of the CCP Executive Session within ESMA's Board of Supervisors  

Amendments to specify the relation between the CCP Executive Session and the ESMA 
Board of Supervisors (ESMA Regulation, 4, 6, 40, 42, 43) 

Article 1(1) introduces new paragraph (4) in Article 4 of the ESMA Regulation to provide a 
definition of a CCP aligned with that of EMIR. 

Article 1(2) inserts new point (1a) in Article 6 of the ESMA Regulation to establish a Board 
of  Supervisors  in  Executive  Session  (CCP  Executive  Session)  within  ESMA  in  the  field  of 
supervision of Union and third-country CCPs. 

Article 1(4) inserts new point (f) in Article 40(1) of the ESMA Regulation so that to establish 
that  the  Head  and  the  two  Directors  of  the  CCP  Executive  Session  shall  be  non-voting 
members of the Board of Supervisors of ESMA. 

Article 1(5) amends the first subparagraph of Article 42 of the ESMA Regulation to provide 
that the Chairperson, the voting members of the Board of Supervisors, the Head and the two 
Directors of the CCP Executive Session shall act independently and objectively in the interest 
of the Union. 

Article  1(6)  amends  paragraph  (1)  of  Article  43  of  the  ESMA  Regulation  to  establish  the 
distinction between the tasks of the Board of Supervisors and the tasks of the CCP Executive 
Session. Article 1(6) also replaces paragraph (8) of Article 43 of the ESMA Regulation to add 
that  the  Board  of  Supervisors  shall  exercise  authority  over  the  Executive  Director  in 
agreement with the CCP Executive Session. 

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Amendments with a view to establishing the organisation of the CCP Executive Session 
(ESMA Regulation, new Articles 44a to 44c) 

In  order  to  establish  how  the  Board  of  Supervisors  in  Executive  Session  (CCP  Executive 
Session) will be organised within ESMA, Article 1(7) inserts new Articles 44a, 44b, and 44c 
as  part  of  new  Section  1A  in  Chapter  III  of  the  ESMA  Regulation.  New  Section  1A 
establishes the composition of the CCP Executive Session, its tasks and its decision-making 
powers  to  ensure  a  coherent  supervisory  approach  across  the  EU,  an  appropriate  level  of 
expertise  as  well  as  a  swift  and  effective  decision-making  process  in  relation  to  CCP 
supervision.  

New Article 44a provides that the Board of Supervisors in its CCP Executive Session shall be 
composed of: (i) permanent members, including an independent Head and two Directors, who 
shall be voting, and a representative of the ECB and of the Commission, who shall be non-
voting;  and  (ii)  members  specific  to  each  CCP,  including  a  representative  of  the  competent 
authority  of  the  Member  State  where  the  CCP  is  established,  who  shall  be  voting,  and  a 
representative  of  the  relevant  central  bank(s)  of  issue,  who  shall  be  non-voting.  The 
permanent  members  should  participate  in  all  meetings  of  the  CCP  Executive  Session.  CCP 
specific  members  should  participate  where  necessary  and  appropriate  for  CCPs'  under  their 
supervision.  The  Head  may  also  invite  other  members  of  the  current  college  of  supervisors 
under Article 18 of EMIR and representatives of authorities of third-country CCPs recognised 
by  ESMA  as  observers  to  ensure  that  the  views  of  the  other  relevant  authorities  are 
sufficiently taken  into  account  by  the  CCP  Executive  Session.  The  presence  of independent 
permanent members and CCP-specific members will ensure that decisions made in the CCP 
Executive Session are both consistent, appropriate and proportionate across the EU and that 
the relevant national competent authorities, central banks of issue and observers are involved 
in  the  decision-making  on  issues  concerning  a  CCP  established  in  a  Member  State.  When 
deciding on a third-country CCP, only the permanent members of the CCP Executive Session 
and the relevant central banks of issue of Union currencies should participate in the decision-
making process. 

New Article 44b provides that the CCP Executive Session shall perform a list of specific tasks 
assigned to it pursuant to EMIR to ensure the proper functioning of the internal market as well 
as  the  financial  stability  of  the  Union  and  the  Member  States.  References  to  ESMA  in  the 
amendments  to  EMIR  in  this  proposal  therefore  refer  to  the  CCP  Executive  Session  unless 
otherwise stated.  It  also  provides  that  the  CCP  Executive  Session  shall have  dedicated  staff 
and  adequate  resources  in  order  to  guarantee  its  autonomy,  independence  and  adequate 
functioning.  

New Article 44c establishes that, in order to guarantee a swift and effective decision-making 
process,  the  CCP  Executive  Session  shall  take  its  decisions  by  a  simple  majority  of  its 
members in accordance with the voting rights established under new Article 44a(1), and that 
the Head shall have a casting vote in case of a tie.  

Amendments  to  establish  the  accountability  and  independence  of  the  members  of  the 
CCP Executive Session (ESMA Regulation, new Article 48a, Articles 49 and 50) 

Article 1(8) replaces the title of Section 3 of Chapter III of the ESMA Regulation to establish 
the requirements that apply to the Head and the two Directors of the CCP Executive Session.   

Article 1(9) inserts new Article 48a to provide for the appointment and the tasks of the Head 
and Directors of the CCP Executive Session. Article 48a(2) establishes that the Head and the 
two  Directors  shall  be  appointed  on  the  basis  of  merit,  skills,  knowledge  of  clearing,  post-
trading and financial matters, and of experience relevant to CCP supervision and regulation in 

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order to ensure an appropriate level of expertise, on the basis of an open selection procedure. 
Article  48a(4)  specifies  that  the  Commission  will  make  a  proposal  for  the  appointment  of 
candidates  to  the  European  Parliament  for  approval.  Following  the  European  Parliament's 
approval,  the  Council  will  adopt  an  implementing  decision  appointing  Head  and  the  two 
Directors.  The  involvement  of  the  co-legislators  in  the  appointment  procedure  will  ensure 
transparency and democratic control. In addition, Article 48a(5) establishes that the Council 
may,  on  a  proposal  from  the  Commission  approved  by  the  European  Parliament,  adopt  an 
implementing  act  to  remove  the  Head  or  the  Directors  under  certain  conditions,  in  order  to 
make  them  accountable  to  the  European  Parliament  and  the  Council  and  to  safeguard  the 
rights of the Union institutions.   

Article 1(10) amends Article 49 of the ESMA Regulation to establish that the Head and the 
Directors of the CCP Executive Session shall act independently and objectively in the Union 
interest. 

Article 1(11) amends Article 50 of the ESMA Regulation to provide that, in order to ensure 
democratic accountability, the European Parliament and the Council may invite the Head of 
the CCP Executive Session to make a statement, whenever requested. In addition, the Head of 
the CCP Executive Session is required to report in writing on the main activities of the CCP 
Executive  Session  to  the  European  Parliament  where  requested  and  to  report  any  relevant 
information requested by the European Parliament on an ad hoc basis. 

Amendments  to  specify  the  interactions  between  the  CCP  Executive  Session  and  the 
tasks  of  the  Executive  Director  of  ESMA,  the  establishment  of  the  budget  and 
professional secrecy (ESMA Regulation, Articles 53, 63 and 70) 

Article 1(12) amends Article 53 of the ESMA Regulation to establish the interaction between 
the  CCP  Executive  Session  and  the  tasks  of  the  Executive  Director  of  ESMA.  Point  (a)  of 
Article 1(12) amends paragraph (2) of Article 53 to specify that the Executive Director shall 
take  into  account  the  guidance  of  the  CCP  Executive  Session  for  implementing  the  annual 
work programme of ESMA, under the control of the Management Board. Point (b) of Article 
1(12) amends paragraph (4) of Article 53 to establish that the Executive Director shall obtain 
the  endorsement  of  the  CCP  Executive  Session  for  the  tasks  under  its  responsibility  when 
preparing the multi-annual work programme, prior to forwarding it to the Management Board. 
Point (c) of Article 1(12) amends paragraph (7) of Article 53 to require the Executive Director 
to obtain the endorsement of the CCP Executive Session for the tasks under its responsibility 
when  preparing  the  draft  report  on  the  activities  of  ESMA,  prior  to  forwarding  it  to  the 
Management Board. 

Article 1(13) inserts new paragraph (1a)  in  Article  63 of the ESMA  Regulation to  establish 
that the expenditure and the fees related to the tasks of the CCP Executive Session shall be 
separately  identifiable  within  ESMA's  statement  of  estimates.  The  CCP  Executive  Session 
shall  approve  the  draft  prepared  by  the  Executive  Director  relating  to  such  expenditure  and 
fees prior to the adoption of the statement of estimates. 

Article  1(14)  amends  paragraph  (1)  of  Article  70  in  the  ESMA  Regulation  to  provide  that 
members of the CCP Executive Session shall be subject to the requirements  of professional 
secrecy pursuant to Article 339 TFEU and the relevant provisions in Union legislation, even 
after their duties have ceased. 

Amendments  with  a  view  to  enhancing  ESMA's  ability  to  collect  information  (ESMA 
Regulation, Article 35) 

Article  1(3)  replaces  the  sixth  paragraph  of  Article  35  of  the  ESMA  Regulation  to  provide 
that,  where  complete  information  is  not  available  from  the  competent  authorities  or  other 

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entities in the Member State, ESMA may request information directly from an authorised or 
recognised CCP, an authorised central securities depository and an authorised trading venue. 
ESMA shall inform the competent authorities of such requests. 

5.2.2. 

Supervision of CCPs established in the Union 

Amendments  to  the  conditions  and  procedures  for  the  authorisation  of  a  CCP 
established in the EU (EMIR Articles 17, 18, 19, 20 and 21)  

Procedure for granting and refusing authorisation 

Article  2(2)  amends  paragraph  (3)  of  Article  17  of  EMIR  so  that  the  assessment  by  a 
competent authority of the completeness of a CCP's application is undertaken in consultation 
with  ESMA and that ESMA and the college are informed of any additional information the 
competent authority has received regarding an application.   

Chair and composition of the college  

Article 2(3) amends Article 18 of EMIR to clarify the assignment of responsibilities between 
authorities within the college. New Article 18(1) provides that the college shall be chaired and 
managed by the Head of the CCP Executive Session. New point (a) in Article 18(2) of EMIR 
establishes that the college the permanent members of the CCP Executive Session shall attend 
the college instead of ESMA. New point (c) in Article 18(2) of EMIR adds, where relevant, 
the  ECB  in  accordance  with  Council  Regulation  (EU)  No  1024/2013,  to  the  competent 
authorities  responsible  for  the  supervision  of  the  clearing  members  of  the  CCP  that  are 
established in the three Member States with the largest contributions to the default fund of the 
CCP referred to in Article 42 on an aggregate basis over a one-year period.  

Opinion of the college 

Article  2(4)  amends  Article  19(3)  of  EMIR  regarding  the  voting  rights  of  members  of  the 
college to establish that the permanent members of the CCP Executive Session shall have one 
vote  each,  with  the  exception  of  the  representative  of  the  Commission,  who  shall  be  non-
voting. 

Withdrawal of authorisation 

Article 2(5) amends Article 20(6) of EMIR to provide that a CCP's competent authority shall 
send ESMA and the members of the college its fully reasoned draft decision of the withdrawal 
of authorisation. 

Review and evaluation 

Points (a) and (b) of Article 2(6) replace paragraphs (1) and (3) of Article 21 of EMIR relating 
to the review and evaluation of authorised CCPs. New Article 21(1) provides that the review 
and evaluation by a competent authority of a CCP's compliance with EMIR is undertaken in 
cooperation  with  ESMA.  New  Article  21(3)  establishes  that  ESMA  will  establish  the 
frequency and depth of such a review and evaluation, and provides that ESMA staff should be 
invited  to  participate  in  any  on-site  inspections.  It  also  requires  the  competent  authority  to 
forward  to  ESMA  any  information  that  it  receives  from  a  CCP  and  that  the  competent 
authority  requests  any  information  sought  by  ESMA  which  it  cannot  provide  from  the 
relevant CCP. 

Amendments  relating  to  the  authorisation  and  supervision  of  CCPs  established  in  the 
EU (EMIR, new Articles 21a, 21b and 21c) 

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Article 2(7) inserts new Articles 21a, 21b and 21c in EMIR to establish the role of the CCP 
Executive Session in relation to the authorisation and supervision of CCPs and to clarify the 
assignment of responsibilities between authorities.  

While  national  competent  authorities  continue  to  exercise  their  current  supervisory 
responsibilities  under  EMIR,  the  prior  consent  of  ESMA,  and  where  appropriate,  of  the 
relevant  central  bank(s)  of  issue,  is  required  for  certain  decisions  in  order  to  promote  CCP 
supervisory  convergence  throughout  the  Union.  New  Article  21a  provides  that  competent 
authorities will prepare final draft decisions and submit them to the prior consent of ESMA 
for decisions relating to access to a CCP, access to a trading venue, authorisation of a CCP, 
extension  of  activities  and  services  of  a  CCP,  capital  requirements,  withdrawal  of 
authorisation,  review  and  evaluation,  shareholders  and  members  with  qualifying  holdings, 
information  to  competent  authorities,  review  of  models,  stress  testing  and  back  testing,  and 
approval  of  interoperability  arrangements.  Any  other  decision  relating  to  the  application  of 
Article  22  in  connection  with  the  requirements  set  out  for  CCPs  and  interoperability 
arrangements  in  Titles  IV  and  V  of  EMIR  will  also  be  subject  to  ESMA's  prior  consent.  If 
ESMA  proposes  amendments  to  certain  final  draft  decisions  of  a  competent  authority,  such 
decisions  shall  be  adopted  only  once  they  have  been  amended  as  requested  by  ESMA.  If 
ESMA objects to certain final draft decisions of a competent authority, those decisions shall 
not  be  adopted.  New  Article  21a  also  introduces  a  dispute-resolution  mechanism  in  case  of 
disagreement between ESMA and the national competent authorities. If a competent authority 
disagrees with the amendments or the objections by ESMA against certain of the competent 
authority's final draft decisions, the matter shall be referred for a final decision to the Board of 
Supervisors of ESMA. Finally, new Article 21a provides that ESMA may adopt an individual 
decision  on  financial  market  participant  where  national  competent  authorities  deny  the 
opinion or requests from ESMA. 

Similarly,  the  prior  consent  of  the  relevant  central  banks  of  issue  is  required  for  certain 
decisions  envisaged  by  national  competent  authorities,  due  to  the  potential  risks  that  the 
malfunctioning  of  a  CCP  could  pose  to  the  definition  and  implementation  of  the  monetary 
policy of the Union and the promotion of the smooth operation of payment systems. While the 
mandates  of  central  banks  and  supervisors  may  overlap,  there  is  potential  for  misalignment 
when supervisory actions impact on key responsibilities of central banks in areas such as price 
stability, monetary policy and the payment systems. New Article 21b provides for the tasks of 
the  relevant  central  bank  of  issue  in  order  to  establish  the  assignment  of  responsibilities 
between  authorities,  in  particular  when  it  relates  to  a  CCP's  payment  and  settlement 
arrangements  and  related  liquidity  risk.  Management  procedures  for  the  transactions 
denominated in that central bank of issue's currency. New Article 21b provides that competent 
authorities shall obtain the consent of the relevant central banks of issue for decisions relating 
to  authorisation  of  a  CCP,  extension  of  activities  and  services  of  a  CCP,  withdrawal  of 
authorisation, margin requirements, liquidity risk controls, collateral requirements, settlement 
and approval of interoperability arrangements.  

In  case  the  relevant  central  bank  of  issue  objects  to  the  draft  decisions  of  a  competent 
authority in these areas, those decisions shall not be adopted. In case the relevant central bank 
of issue proposes amendments to the draft decisions of a competent authority in these areas, 
those decisions shall be adopted only as amended.   

New Article 21c provides that both CCPs established in the Member States and third-country 
CCPs shall pay fees for ESMA's supervisory and administrative tasks for (i) applications for 
authorisation referred to in Article 17, (ii) applications for recognition under Article 25, and 
(iii) annual fees associated with the tasks under ESMA's responsibility. The Commission will 
specify  further  in  a  delegated  act  the  types  of  fees,  the  matters  for  which  fees  are  due,  the 

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amount of the fees and the manner in which they are to be paid by authorised and applicant 
Union  CCPs,  recognised  third-country  CCPs  that  are  not  systemically  important  (Tier  1 
CCPs) and recognised CCPs that are, or are likely to become, systemically important for the 
financial stability of the Union or for one or more of its Member States (Tier 2 CCPs). These 
supervisory  fees  will  enable  to  finance  the  tasks  of  the  CCP  Executive  Session  and  enable 
ESMA to fulfil its responsibilities. 

Amendments relating to cooperation between authorities (EMIR, Article 24) 

Article 2(8) amends Article 24 of EMIR to add potential adverse effects to the transmission of 
monetary policy and the smooth operation of payment systems to situations of emergency for 
which the CCP’s competent authority or any other authority shall inform ESMA, the college, 
the relevant members of the ESCB and other relevant authorities without undue delay.  

5.2.3.  Third-country CCPs 

In  the  five  years  since  the  adoption  of  EMIR,  the  volume  of  CCP  activity  –  in  the  EU  and 
globally - has grown rapidly in scale and in scope. Central clearing has gained in importance 
for  interest  rate  and  credit  derivatives  The  rapidly  expanding  role  of  CCPs  in  the  global 
financial  system  reflects  not  only  the  introduction  of  central  clearing  obligations  across 
different  asset  classes,  but  also  increased  voluntary  use  of  central  clearing  amid  growing 
awareness  of  the  benefits  of  central  clearing  among  market  participants.  EMIR  already 
requires certain interest-rate derivatives and credit default swaps to be centrally cleared in line 
with similar requirements in other G20 countries. Bank capital rules have also been changed 
to incentivise central clearing and make bilateral clearing a costlier option in relative terms, 
while bilateral transactions are subject to additional collateral requirements since March 2017. 
As a result, clearing has increased, but is now concentrated in a relatively limited number of 
global CCPs. 

Currently, 28 third-country CCPs have been recognised under EMIR's equivalence provisions. 
A  further  12  CCPs  from  10  jurisdictions  have  applied  for  recognition  and  are  awaiting  a 
decision  of  the  Commission  as  regards  the  equivalence  of  their  regulatory  and  supervisory 
regimes. 

Amendments with a view to enhancing the implementation of the equivalence of third-
country CCP regimes (EMIR, Article 25(6)) 

The  Commission  will  continue  to  determine  by  way  of  equivalence  decisions  that  the  legal 
and  supervisory  frameworks  of  third  countries  fulfil  the  requirements  under  EMIR  for  the 
purpose  of  enabling  the  recognition  of  CCPs  based  in  those  third  countries.  This  proposal 
confirms  that  the  Commission  may  subject  an  equivalence  determination  to  further 
conditions.  Point  (e)  of  Article  2(9)  inserts  new  paragraphs  (6a)  and  (6b)  so  that  the 
Commission may, if necessary, specify by way of a Delegated Act the criteria to be used in its 
assessment  for  granting  equivalence  to  third-country  CCP  regimes.  New  paragraph  (6b)  in 
Article  25(6)  of  EMIR  tasks  ESMA  with  the  monitoring  of  regulatory  and  supervisory 
developments  in  third-country  CCP  regimes  that  have  been  deemed  equivalent  by  the 
Commission. 

Amendments  regarding  the  recognition  of  third-country  CCPs  (EMIR,  Article  6, 
paragraphs (2), new (2a), new (2b) and new (2c) in Article 25, and new Article 25a) 

Increased transparency  

To  improve  transparency  to  stakeholders  and  the  public  as  a  whole,  EMIR  is  amended  to 
clarify the registration of CCPs by providing more details in ESMA's public register (Article 
2(1) amends point (b) in Article 6(2)). 

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No additional requirements have been introduced in the proposal for recognised third-country 
CCPs. 

Classification  of  non-systemically  important  third-country  CCPs  (Tier  1)  and  systemically 
important third-country CCPs (Tier 2) 

In  view  of  the  global  increase  in  clearing  and  concentration  of  risk  in  a  limited  number  of 
global  CCPs,  a  differentiation  needs  to  be  introduced  according  to  the  type  of  third-
country CCP recognised under EMIR.This proposal therefore requires that, when considering 
an  application  for  recognition,  ESMA  will  need  to  consider  the  degree  of  systemic  risk 
presented by a third-country CCP. In order to achieve this, and to introduce a proportionate 
application of the requirements, a distinction needs to be made between lower risk CCPs and 
those that are, or will be, systemically important for the Union or one or more of its Member 
States. This reflects the fact that not all third-country CCPs are of equal systemic importance. 
This will depend on their scope and type of transactions cleared as well as the volume of their 
clearing activity. For example, a relatively small third-country CCP that clears only a limited 
number of contracts that are, for example, denominated in local currency will objectively pose 
fewer  concerns  and  less  risk  to  the  Union's  financial  system  than  a  third-country  CCP  that 
clears significant volumes of contracts that are denominated in a Union currency. 

It is therefore proposed that ESMA has the power to distinguish between CCPs that are, or are 
likely  to  become  systemically  important  and  those  that  are  not.  Third-country  CCPs  that 
ESMA has determined as non-systemically important or not likely to become systematically 
important for the Union and the Member States are referred to as 'Tier 1' (Point (a) of Article 
2(9) inserts point (e) in Article 25(2) of EMIR). These Tier 1 CCPs will continue to be subject 
to the current arrangements and conditions for third-country equivalence decisions adopted by 
the Commission, and which allow ESMA to recognise individual third-country CCPs. ESMA 
will  also  be  tasked  with  new  responsibilities  in  relation  to  the  supervision  over  these 
recognised Tier 1 CCPs. 

In contrast to Tier 1 CCPs, ESMA will also be able to determine a different category of third-
country  CCPs  which  are  deemed  to  be  systemically  important  or  likely  to  become 
systemically important in the near future for the financial and economic stability of the Union 
and of the Member States (so called 'Tier 2 CCPs').This is provided for in point (c) of Article 
2(9) which inserts a new paragraph (2a) in Article 25 of EMIR.  

In order for ESMA to determine whether a third-country CCP is a 'Tier 2' CCP, four objective 
criteria are provided for (new Article 25(2a)): 

(i) the nature, size and complexity of the third-country CCP's business; 

(ii)  the  effect  that  the  failure  of,  or  a  disruption  to,  the  third-country  CCP  would  have  on 
critical  markets,  financial  institutions,  or  the  broader  financial  system  and  on  the  financial 
stability of the EU;  

(iii) the third-country CCP's clearing membership structure, and 

(iv)  the  third-country  CCP's  relationship,  interdependencies,  or  other  interactions  with  other 
financial market infrastructures. 

These criteria will need to be further specified by the Commission in a delegated act (second 
subparagraph of Article 25(2a)) within six months of the adoption of the Regulation.  

The consequence of ESMA determining a third-country CCP to be a Tier 2 CCP is that that 
CCP  can  only  be  recognised  and  permitted  to  provide  clearing  services  or  activities  in  the 
Union if it meets further conditions. These conditions are necessary to reflect the additional 
concerns  that  arise  for  the  financial  stability  to  the  Union  and  one  or  more  of  the  Member 

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States. CCPs that have already been recognised under the current EMIR regime will continue 
to  be  recognised  as  'Tier  1'  CCPs  until  ESMA  has  determined  whether  such  third-country 
CCPs are 'Tier 2' CCPs. 

Proportionate requirements for systemically important Tier 2 third-country CCPs 

The  additional  requirements  that  systemically  important  third-country  CCPs  must  fulfil  are 
fourfold (See point (b) of Article 2(9)): 

(i) ongoing compliance with the relevant and necessary prudential requirements for EU-CCPs. 
These  requirements  concern  capital  requirements,  requirements  for  the  internal  organisation 
management,  conduct  of  business,  margins,  default  fund,  financial  resources,  liquidity, 
investments, stress tests, settlement and interoperability. They are currently set out in Article 
16 and in Titles IV and V of EMIR; 

(ii) written confirmation – within 180 days – from the relevant EU central banks of issue that 
the third-country CCP complies with any requirements imposed by those central banks. Those 
additional  requirements  would  be  imposed  by  the  central  banks  in  the  exercise  of  their 
monetary  policy  tasks.  By  way  of  example,  they  could  include  additional  requirements  to 
address  risks  for  liquidity,  payment  or  settlement  arrangements  in  the  Union  or  Member 
States. In more particularity they could concern the availability and specific type of collateral 
held  within  a  CCP,  the  level  of  any  'haircuts'  applied  to  collateral,  investment  policy  or 
collateral  segregation,  the  availability  of  liquidity  arrangements  between  central  banks 
involved, the potential impact of the CCP's operations and the implications of their possible 
disruption or failure for the financial system and stability of the Union. 

(iii)  to  enable  ESMA  to  exercise  its  new  supervisory  responsibilities  there  must  also  be 
written consent by the third-country CCP that ESMA may access any information held by the 
CCP  and  may  access  any  of  its  business  premises  upon  request.  Naturally,  this  needs  to  be 
able to be enforced in the third country, and a legal opinion should be available confirming 
that this is the case; 

(iv) the third-country CCP should have all the necessary procedures and measures to be able 
to comply with the first and third condition above.  

As  the  requirements  above  need  to  be  applied  in  a  proportionate  manner,  the  proposal 
introduces a system according to which a third-country CCP may continue to rely on the rules 
and  requirements  in  its  own  country.  This  new  system  of  comparable  compliance  –  which 
complies  with  FSB  standards  and  reflects  a  similar  system  applied  by  the  US  authorities  – 
relies  on  a  simple  procedure  under  which  the  third-country  CCP  can  request  ESMA  to 
compare EMIR's requirements and EU supervisory standards for CCPs with those of the third 
country. Where comparable, ESMA may determine that the application of some or all of the 
requirements  in  place  as  well  as  the  corresponding  supervisory  enforcement  in  that  third 
country provides a comparable outcome to the application of EMIR and waive the application 
of  corresponding  EMIR  provision.  This  approach  will  significantly  reduce  any  burdens 
resulting from dual application of rules and requirements. The Commission will be required to 
adopt a delegated act to specify the details of assessment that ESMA carries out (new Article 
25a). 

However,  in  view  of  the  growing  concentration  of  clearing  services  in  a  limited  number  of 
global CCPs, and the increased risk which that concentration entails, some CCPs may be of 
specifically  substantial  systemic  significance  for  the  EU  financial  system.  Therefore,  when 
making its determination whether a third-country CCP is, or is likely to become, systemically 
important, ESMA may also determine, in agreement with the relevant EU central bank(s), that 
the  risks  posed  by  that  entity  to  the  Union's  financial  stability  or  to  one  or  more  of  the 

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Member States are of such magnitude that even a system of full application of EMIR to this 
third-country CCP is not enough to sufficiently mitigate such risks and that it should therefore 
not  be  recognised.  Where  such  determination  that  the  challenges  for  safeguarding  financial 
stability in the EU that cannot be addressed through the recognition process of third-country 
CCPs is  made,  it is proposed  that ESMA, in  agreement with  the relevant EU central  banks, 
has the power to recommend to the Commission, that that CCP should not be recognised. On 
that  basis,  the  Commission  is  empowered  to  take  a  decision  that  that  CCP  should  not  be 
recognised and if it wishes to provide clearing services in the Union, it should be authorised 
and established in one of the Member States (new paragraph (2c) of Article 25).  

Amendments  to  enhance  the  ongoing  supervision  of  third-country  CCPs  post-
recognition (EMIR Articles 25(5), 25(6), 25(7), new Articles 25b to 25m) 

ESMA supervision over third-country CCPs 

In  order  to  respond  to  the  shortcomings  in  the  implementation  of  EMIR’s  system  of 
equivalence and recognition for the supervision of third-country CCPs, the powers of ESMA 
are  proposed  to  be  enhanced.  This  will  ensure  that  difficulties  for  ESMA  in  accessing 
information from a CCP, conducting on-site inspections of the CCP and sharing information 
with  the  relevant  EU  regulators,  supervisors  and  central  banks  will  be  addressed.  This  will 
minimise  the  risk  that  CCP  practices  and/or  adjustments  to  risk  management  models  go 
undetected,  with  important  financial-stability  implications  for  the  EU  entities.  Second,  this 
will respond to potential for misalignments between supervisory and central-bank objectives 
within colleges in the context of third-country CCPs where non-EU authorities are involved. 
Finally, the risk that changes to the CCP rules and/or regulatory framework in a third-country 
which  could  negatively  affect  the  regulatory  or  supervisory  outcomes  is  addressed.  This 
means  that  level-playing  fields  will  be  ensured  between  EU  and  third-country  CCPs,  and 
scope for regulatory or supervisory arbitrage will be removed. ESMA's new responsibilities to 
exercise  supervision  over  recognised  Tier  1  and  Tier  2  CCPs  are  provided  for  in  the  new 
Article 25b (see below). 

Enhanced implementation of the current recognition regime 

Point (c) of Article 2(9) replaces Article 25(5) of EMIR to specify that ESMA must review at 
least  once  every  two  years  the  recognition  of  a  third-country  CCP  that  has  extended  its 
activities and services in the Union. Provisions relating to the withdrawal of the recognition of 
a third-country CCP have been moved to new Articles 25m and 25n (see below). 

Point (f) of Article 2(9) replaces the first sentence of Article 25(7) of EMIR to provide that 
the  cooperation  arrangements  between  ESMA  and  the  relevant  competent  authorities  of 
equivalent CCP third-country regimes must be effective in practice. 

Point  (g)  of  Article  2(9)  amends  point  (d)  in  Article  25(7)  to  specify  that  the  procedures 
concerning  the  coordination  of  supervisory  activities  should  include  the  agreement  of  third-
country authorities to allow investigations and on-site inspections in accordance with Article 
25d  and  25e  of  this  proposal.  Point  (g)  also  inserts  a  new  point  (e)  in  Article  25(7) 
establishing  that  the  cooperation  arrangements  between  ESMA  and  the  relevant  competent 
authorities of equivalent CCP third-country regimes must specify the procedures necessary for 
the effective monitoring of regulatory and supervisory developments in a third country.42 

New role for ESMA and the relevant central bank(s) of issue in the supervision of recognised 
third-country CCPs 

42 

See  also  the  Commission  staff  working  document  "EU  equivalence  decisions  in  financial  services 
policy: an assessment", SWD(2017) 102 final of 27 February 2017. 

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Article  2(10)  inserts  new  Articles  25b  to  25n  in  EMIR  to  grant  ESMA  new  powers  to 
supervise recognised Tier 1 and Tier 2 third-country CCPs to strengthen the monitoring and 
enforcement  of  the  ongoing  compliance  of  third-country  CCPs  with  EMIR  requirements.  It 
also provides for the involvement of the relevant central banks of issue in the recognition and 
supervision of third-country CCPs in relation to financial instruments denominated in Union 
currencies that are cleared to a significant extent in CCPs located outside the Union, in order 
to mitigate risks for the Union internal market and the financial stability of the Union  or for 
one or more of its Member States. 

New Article 25b provides ESMA with new powers to ensure the ongoing compliance of Tier 
1 and Tier 2 third-country CCPs.  

Paragraph  (1)  of  new  Article  25b  provides  that  ESMA  shall  be  responsible  for  the  ongoing 
supervision of the continued compliance of Tier 2 CCPs with the prudential requirements set 
out in Article 16 and Titles IV and V of EMIR. In addition, ESMA will require confirmation 
from  each  Tier  2  CCP  that  it  fulfils  all  the  other  additional  supervisory  requirements 
established  in  Article  25(2b)  at  least  on  a  yearly  basis,  in  accordance  with  the  second 
subparagraph  of  Article  25b(1).  The  relevant  central  bank(s)  of  issue  will  also  immediately 
notify  ESMA  if  it  deems  that  a  Tier  2  CCP  no  longer  fulfils  the  conditions  established  in 
Article 25(2b)(b). 

Paragraph (2) of new Article 25b provides that ESMA shall obtain the consent of the relevant 
central  bank(s)  of  issue  prior  to  the  adoption  of  decisions  relating  to  margin  requirements, 
liquidity  risk  controls,  collateral  requirements,  settlement  and  approval  of  interoperability 
arrangements. In case the relevant central bank(s) of issue objects to the draft decision, ESMA 
shall  not  adopt  it.  In  case  the  relevant  central  bank(s)  of  issue  proposes  amendments  to  the 
draft decision, ESMA may only adopt it as amended.   

Paragraph  (3)  of  new  Article  25b  provides  that  ESMA  shall  carry  out  its  assessment  of  the 
resilience of recognised CCPs to adverse market conditions in accordance with the common 
methodologies established in Article 32(2) of the ESMA Regulation. 

New Article 25c establishes that a request or a decision by ESMA may require a third-country 
CCP and related third parties to provide all necessary information to allow ESMA to carry out 
its duties under EMIR. 

New Article 25d establishes that a decision by ESMA may require a Tier 2 third-country CCP 
to submit to general investigations.  

New Article 25e establishes that a decision by ESMA may require a Tier 2 third-country CCP 
to submit to on-site inspections. ESMA should give notice of its intention to carry out an on-
site  inspection  to  the  competent  authorities  of  the  third  country.  Those  authorities  may  also 
participate in the inspection. The central bank(s) of issue shall be invited to participate in such 
on-site inspections. 

New Articles 25f and 25i establish procedural rules, including respect of the rights of defence, 
in the event of serious indications of possible infringements by third-country CCPs to provide 
all  necessary  information  or  to  submit  to  general  investigations  and  on-site  inspections. 
Paragraph  (13)  of  Article  2  inserts  a  new  Annex  III  in  EMIR  providing  a  list  of  possible 
infringements  by  a  third-country  CCP,  including:  (i)  infringements  relating  to  capital 
requirements;  (ii)  infringements  relating  to  organisational  requirements  or  conflicts  of 
interest; (iii) infringements relating to operational requirements; (iv) infringements relating to 
transparency and the availability of information; and (v) infringements relating to obstacles to 
the supervisory activities.  

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New  Article  25g  provides  for  fines  in  case  of  established  infringements  by  third-country 
CCPs.  Paragraph  (13)  of  Article  2  inserts  a  new  Annex  IV  in  EMIR  providing  a  list  of 
aggravating and mitigating factors of certain possible infringements by a third-country CCP. 

New  Article  25h  provides  for  effective  and  proportionate  periodic  penalty  payments  to  be 
imposed by a decision of ESMA on third-country CCPs in certain situations. Penalties can be 
imposed to end infringements, supply information or submit to investigations or inspections. 

New Article 25j provides that ESMA shall disclose to the public, subject to certain conditions, 
each instance where fines or periodic penalty payments have been imposed on third-country 
CCPs.  

New Article 25k provides for review by the Court of Justice of any ESMA decision imposing 
fines or periodic penalty payments on third-country CCPs. 

New Article 25l empowers the Commission to adopt delegated acts in order to take account of 
developments in financial markets concerning measures to amend Annex IV of EMIR.  

New Article 25m in EMIR establishes that ESMA shall withdraw partially or in its entirety a 
decision recognising a third-country CCP if certain conditions are met.  

New Article 25n establishes that ESMA shall take one or more decisions when it finds that a 
Tier  2  third-country  CCP  has  committed  an  infringement,  including  a  requirement  that  the 
CCP brings the infringement to an end, fines, public notices, and the withdrawal of that CCP's 
recognition.  

5.2.4.  Prudential requirements applicable to CCPs 

Amendments related to model and parameter validation (EMIR Article 49) 

Up to now, Article 49 required, in addition to an independent validation to be obtained by the 
CCP, two separate validations by the NCA and ESMA of significant changes to the models 
and  parameters  adopted  to  calculate  the  CCP's  margin  requirements,  default  fund 
contributions, collateral requirements, and other risk-control mechanisms. Point (b) of Article 
2(11)  inserts  new  paragraphs  (1a),  (1b),  (1c),  (1d),  (1e)  and  (1f)  in  Article  49  of  EMIR  to 
clarify the conditions under which a CCP may obtain the validation of significant changes to 
its  adopted  models  and  parameters.  According  to  paragraph  (1a)  the  NCA's  validation  is 
sufficient, because Article 2(7) introduces a new Article 21a in EMIR which requires ESMA's 
prior  consent  to  the  NCA's  validation  decision  under  Article  49  of  EMIR.  Thus,  a  separate 
validation  by  ESMA  is  not  necessary  anymore.  When  a  CCP  plans to  adopt  any  significant 
change to the models and parameters, it shall apply to the competent authority for validation 
of  that  change.  The  competent  authority,  in  consultation  with  ESMA,  shall  conduct  a  risk 
assessment of the CCP and submit a report to the college, which shall then adopt  a majority 
opinion.  After  adoption  of  such  an  opinion,  the  competent  authority  shall  inform  the  CCP 
whether validation has been granted or refused. In addition, the new paragraphs provide for a 
legal  basis  for  the  preliminary  adoption  of  a  significant  change  to  models  or  parameters  in 
case of need. 

Point  (a)  of  Article  2(11)  amends  Article  49(1)  of  EMIR  accordingly  and  abolishes  the 
requirement of two validations. The adopted models and parameters stay subject to an opinion 
of the college in accordance with a process defined in that Article. The last subparagraph of 
the amended Article 49(1) stipulates that ESMA shall relay the information on the results of 
the stress tests not only to the European Supervisory Authorities, but also to the ESCB and the 
Single Resolution Board, to enable them to assess the exposure of financial undertakings to 
the default of CCPs. 

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5.2.5.  Transitional provisions 

Amendments to establish transitional arrangements to enable the review of recognition 
decisions adopted before the entry into force (EMIR, Article 89) 

Paragraph  (12)  of  Article  2  inserts  a  new  paragraph  in  Article  89  establishing  certain 
transitional arrangements to provide that new Articles 25(2)(e) and 25(2a) will apply upon the 
entry into force of the delegated act establishing the criteria for determining a Tier 2 CCP, and 
referred  to  in  the  second  subparagraph  of  Article  25(2a).  Article  2(12)  also  provides  for 
ESMA  to  review  third-country  CCPs  recognition  decisions  adopted  before  this  proposal 
enters into force. The new provision states that this review shall take place within 12 months 
from the entry into force of the delegated act spelling out the criteria for determining whether 
a  third-country  CCP  is,  or  is  likely  to  become,  systemically  important  for  the  financial 
stability of the Union or for one or more of its Member States. 

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2017/0136 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

amending Regulation (EU) No 1095/2010 establishing a European Supervisory 
Authority (European Securities and Markets Authority) and amending Regulation (EU) 
No 648/2012 as regards the procedures and authorities involved for the authorisation of 
CCPs and requirements for the recognition of third-country CCPs  

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 Central Bank43, 
Having regard to the opinion of the European Economic and Social Committee44,  
Acting in accordance with the ordinary legislative procedure45, 

Whereas: 

(1) 

(2) 

43 
44 
45 
46 

Regulation  (EU)  No  648/2012  of  the  European  Parliament  and  of  the  Council46 
requires  standardised  OTC  derivatives  contracts  to  be  cleared  through  a  Central 
Counterparty  (CCP)  in  line  with  similar  requirements  in  other  G20  countries.  That 
Regulation  also  introduced  strict  prudential,  organisational  and  business  conduct 
requirements  for  CCPs  and  established  arrangements  for  their  prudential  supervision 
in order to minimise risks to users of a CCP and underpin financial stability. 

Since  the  adoption  of  Regulation  (EU)  No  648/2012,  the  volume  of  CCP  activity  in 
the Union and globally has grown rapidly in scale and in scope. The expansion in CCP 
activity  is  set  to  continue  in  the  coming  years  with  the  introduction  of  additional 
clearing obligations and the rise in voluntary clearing by counterparties not subject to 
a  clearing  obligation.  The  Commission's  proposal  of  4  May  201747  to  amend 
Regulation (EU) No 648/2012 in a targeted manner, to improve  its effectiveness and 

OJ C […], […], p. […]. 

OJ C , , p. . 

Position of the European Parliament of ... (OJ ...) and decision of the Council of ... 

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC 
derivatives, central counterparties and trade repositories (OJ L201, 27.7.2012, p.1). 

47 
Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 
648/2012 as regards the clearing obligation, the suspension of the clearing obligation, the reporting requirements, 
the  risk-mitigation  techniques  for  OTC  derivatives  contracts  not  cleared  by  a  central  counterparty,  the 
registration  and  supervision  of  trade  repositories  and  the  requirements  for  trade  repositories,  COM/2017/0208 
final. 

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proportionality,  will  create  further  incentives  for  CCPs  to  offer  central  clearing  of 
derivatives  to  counterparties  and  facilitate  access  to  clearing  to  small  financial  and 
non-financial  counterparties.  Deeper  and  more  integrated  capital  markets  resulting 
from the Capital Markets Union (CMU) will further increase the need for cross-border 
clearing 
the 
increasing 
interconnectedness of CCPs within the financial system. 

importance  and 

the  Union, 

further 

thus 

the 

in 

(3) 

(4) 

(5) 

(6) 

The  number  of  CCPs  currently  established  in  the  Union  and  authorised  under 
Regulation (EU) No 648/2012 remains relatively limited, standing at 17 in June 2017. 
28 third-country CCPs have been recognised under the equivalence provisions of that 
Regulation, allowing them also to offer their services to clearing members and trading 
venues  established  in  the  Union48.  Clearing  markets  are  well  integrated  across  the 
Union but highly concentrated in certain asset classes and highly interconnected. The 
concentration  of  risk  makes  the  failure  of  a  CCP  a  low-probability  but  a  potentially 
extremely high-impact event. In line with the G20 consensus, the Commission adopted 
a proposal for a Regulation on CCP Recovery and Resolution49 in November 2016 to 
ensure  that  authorities  are  appropriately  prepared  to  address  a  failing  CCP, 
safeguarding financial stability and limiting taxpayer costs. 

Notwithstanding that legislative proposal and in light of the growing size, complexity 
and  cross-border  dimension  of  clearing  in  the  Union  and  globally,  the  supervisory 
arrangements  for  Union  and  third-country  CCPs  should  be  revisited.  By  addressing 
identified  problems at an  early  stage and  establishing  clear and coherent  supervisory 
arrangements  both  for  Union  and  third-country  CCPs,  the  overall  stability  of  the 
Union  financial  system  would  be  reinforced  and  the  potential  risk  of  a  CCP  failure 
should be lowered even further. 

In light of these considerations, the Commission adopted a Communication on 4 May 
2017  on  responding  to  challenges  for  critical  financial  market  infrastructures  and 
further  developing  the  Capital  Markets  Union50,  stating  that  further  changes  to 
Regulation  (EU)  No  648/2012  are  necessary  to  improve  the  current  framework  that 
ensures financial stability and supports the further development and deepening of the 
CMU. 

The supervisory arrangements under Regulation (EU) No 648/2012 rely mainly on the 
home-country  authority.  CCPs  established  in  the  Union  are  currently  authorised  and 
supervised  by  colleges  of  national  supervisors,  the  European  Securities  and  Markets 
Authority  (ESMA),  relevant  members  of  the  European  System  of  Central  Banks 
(ESCB),  and  other  relevant  authorities.  The  colleges  rely  on  coordination  and 
information-sharing by the national competent authority which bears the responsibility 
to  enforce  the  provisions  laid  out  in  Regulation  (EU)  No  648/2012.  Diverging 

48 
In accordance with Regulation (EU) No 648/2012, ESMA provides a list of the third-country CCPs that 
have been recognised to offer services and activities in the Union. The third-country CCPs are established in 15 
countries covered by CCP equivalence decisions adopted by the Commission, including Australia, Hong Kong, 
Singapore,  Japan,  Canada,  Switzerland,  South  Korea,  Mexico,  South  Africa  and  the  US  CFTC,  Brazil,  UAE, 
Dubai International Financial Centre (DIFC), India and New Zealand.   
49 
Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  a  framework  for  the 
recovery  and  resolution  of  central  counterparties  and  amending  Regulations  (EU)  No  1095/2010,  (EU)  No 
648/2012, and (EU) 2015/2365. COM(2016) 856 final. 
50 
Communication  from  the  Commission  to  the  European  Parliament,  the  Council,  and  the  European 
Central Bank on Responding to challenges for critical financial market infrastructures and further developing the 
Capital Markets Union, Brussels, 4.5.2017, COM(2017) 225 final.  

EN 

31 

   EN 

 
                                                 
supervisory  practices  for  CCPs  across  the  Union  can  create  risks  of  regulatory  and 
supervisory  arbitrage,  jeopardising  financial  stability  and  allowing  for  unhealthy 
competition.  The  Commission  has  drawn  attention  to  these  emerging  risks  and  the 
need  for  greater  supervisory  convergence  in  its  Communication  on  CMU  of 
September  201651  and  in  the  public  consultation  on  the  operations  of  the  European 
Supervisory Authorities (ESAs)52. 

The  basic  tasks  to  be  carried  out  through  the  ESCB  include  the  definition  and 
implementation of the monetary policy of the Union and the promotion of the smooth 
operation  of  payment  systems.  Safe  and  efficient  financial  market  infrastructures,  in 
particular clearing systems, are essential for the fulfilment of these basic tasks, and the 
pursuit  of  the  ESCB’s  primary  objective  of  maintaining  price  stability.  The  relevant 
members  of  the  ESCB,  as  central  banks  of  issue  of  the  currencies  of  the  financial 
instruments  cleared  by  CCPs,  should  be  involved  in  CCP  supervision,  due  to  the 
potential  risks  that  the  malfunctioning  of  a  CCP  could  pose  to  the  pursuit  of  those 
basic  tasks  and  the  primary  objective,  affecting  the  instruments  and  counterparties 
which  are  used  to  transmit  monetary  policy.  As  a  result,  the  central  banks  of  issue 
should be involved in the assessment of a CCP's risk management. In addition, while 
the  mandates  of  central  banks  and  supervisors  may  overlap,  there  is  a  potential  for 
misalignment when supervisory actions impact on key responsibilities of central banks 
in  areas  such  as  price  stability,  monetary  policy  and  the  payment  systems.  In  crisis 
situations,  such  misalignments  can  amplify  the  risks  to  financial  stability  if  the 
assignment of responsibilities between authorities remains unclear. 

The Treaties have established an economic and monetary union whose currency is the 
euro,  and  the  European  Central  Bank  (ECB)  as  an  Institution  of  the  Union  for  this 
purpose. The Treaties also provide that the ESCB shall be governed by the decision-
making  bodies  of  the  ECB,  and  the  ECB  alone  may  authorise  the  issue  of  the  euro. 
The specific role of the ECB within the ESCB as the central bank of issue of the single 
currency of the Union should thus be acknowledged. 

In  view  of  the  global  nature  of  financial  markets  and  of  the  need  to  address 
inconsistencies in the supervision of Union and third-country CCPs, ESMA's ability to 
promote  convergence  in  the  supervision  of  CCPs  should  be  enhanced.  In  order  to 
confer new roles and responsibilities on ESMA, Regulation (EU) No 1095/2010 of the 
European  Parliament  and  of  the  Council  establishing  a  European  Supervisory 
Authority (ESMA)53 should be amended. 

(7) 

(8) 

(9) 

(10)  A specific Executive Session ("CCP Executive Session") should be created within the 
Board  of  Supervisors  of  ESMA  to  handle  tasks  related  to  CCPs  in  general,  and 
supervise Union and third-country CCPs in particular. In order to guarantee a smooth 
establishment of the CCP Executive Session, it is necessary to clarify its interactions 
with  the  Board  of  Supervisors  of  ESMA,  its  organisation  and  the  tasks  it  should 
perform.  

Communication on the "State of the Union 2016: Completing the Capital Market Union – Commission 

51 
accelerates reform"; 14 September 2016. 
52 
16/05/2017. 
53 

Public  consultation  on  the  operations  of  the  European  Supervisory  Authorities";  21/03/2017  – 

Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 
establishing a European Supervisory Authority (European Securities and Markets Authority), amending 
Decision  No  716/2009/EC  and  repealing  Commission  Decision  2009/77/EC  (OJ  L  331,  15.12.2010, 
p.84 

EN 

32 

   EN 

 
                                                 
(11) 

In order to ensure a coherent supervisory approach and to reflect the mandates relevant 
authorities involved in the supervision of CCPs, the CCP Executive Session should be 
composed  of  permanent  and  CCP-specific  members.  Permanent  members  should 
include the Head of the CCP Executive Session and two independent Directors, who 
should act independently and objectively in the interest of the Union as a whole. The 
Commission and the ECB should also appoint permanent members. Members specific 
to  each CCP should include a representative of the competent  national authorities of 
the  Member  States  where  the  CCP  is  established,  designated  in  accordance  with 
Regulation (EU) No 648/2012, and a representative of the relevant central bank(s) of 
issue. The Head of the CCP Executive Session should be able to invite members of the 
supervisory  college,  as  well  as  representatives  of  authorities  of  third-country  CCPs 
recognised  by  ESMA  as  observers  to  ensure  that  the  views  of  the  other  relevant 
authorities are taken into account by the CCP Executive Session. While the permanent 
members  should  participate  in  all  meetings  of  the  CCP  Executive  Session,  CCP 
specific  members  and  observers  should  participate  only  where  necessary  and 
appropriate for CCPs under their supervision. The presence of independent permanent 
members  and  CCP-specific  members  should  ensure  that  decisions  made  in  the  CCP 
Executive Session are consistent, appropriate and proportionate across the Union and 
that  the relevant  national  competent  authorities,  central  banks  of  issue and  observers 
are  involved  in  the  decision-making  on  issues  concerning  a  CCP  established  in  a 
Member State. 

(12)  When  deciding  on  issues  concerning  a  CCP  established  within  a  Member  State,  the 
CCP  Executive  Session  should  convene  and  ensure  that  its  permanent  members  and 
the relevant member(s) representing the competent national authorities designated by 
the  Member  State  in  accordance  with  Regulation  (EU)  No  648/2012  are  involved  in 
the  decision-making  process  as  well  as  observers  appointed  by  the  relevant  central 
banks of issue. When deciding on a third-country CCP, only the permanent members, 
the relevant central bank(s) of issue and any relevant observers of the CCP Executive 
Session should participate in the decision-making process.  

(13) 

In  order  to  ensure  an  appropriate,  effective  and  swift  decision-making  process,  the 
Head, the two Directors of the CCP Executive Session, and the representative of the 
competent  authority  of  the  Member  State  where  the  CCP  is  established  should  have 
voting rights. The representatives of the ECB, of the Commission and of the relevant 
central bank(s), as well as observers, should have no voting rights. The CCP Executive 
Session should take its decisions by a simple majority of its members, and the Head 
should have a casting vote in case of a tie. 

(14)  The  CCP  Executive  Session  should  be  responsible  for  specific  tasks  assigned  to  it 
pursuant  to  Regulation  (EU)  No  648/2012  to  ensure  the  proper  functioning  of  the 
internal market as well as the financial stability of the Union and its Member States. 

(15) 

In  order  to  ensure  effective  supervision,  the  CCP  Executive  Session  should  have  a 
dedicated  staff  and  adequate  resources  to  guarantee  its  autonomy,  independence  and 
adequate  functioning  in  relation  to  its  tasks.  The  budgetary  impact  needs  to  be 
considered in the statement made by ESMA in accordance with Regulation (EU) No 
1095/2010.  

(16)  To provide for an appropriate level of expertise and accountability, the Head and the 
two Directors of the CCP Executive Session should be appointed on the basis of merit, 
skills, knowledge of clearing, post-trading and financial matters, as well as experience 
relevant  to  the  supervision  and  regulation  of  CCPs.  They  should  be  chosen  on  the 

EN 

33 

   EN 

 
basis  of  an  open  selection  procedure.  The  Commission  should  submit  a  proposal  for 
the appointment of candidates to the European Parliament for approval. Following the 
European  Parliament's  approval  of  that  proposal,  the  Council  should  adopt  an 
implementing decision. 

(17) 

In  order  to  ensure  transparency  and  democratic  control,  as  well  as  to  safeguard  the 
rights of the Union institutions, the Head and the two Directors of the CCP Executive 
Session should be accountable to the European Parliament and to the Council for any 
decisions taken on the basis of this Regulation. 

(18)  The  Head  and  the  two  Directors  of  the  CCP  Executive  Session  should  act 
independently  and  objectively  in  the  interest  of  the  Union.  They  should  ensure  that 
appropriate account is taken of the proper functioning of the internal market as well as 
financial stability in each Member State and in the Union. 

(19) 

(20) 

In  order to promote consistency  in the supervision  of Union and third-country CCPs 
across  the  Union,  the  Head  of  the  CCP  Executive  Session  should  chair  and  manage 
colleges,  and  the  permanent  members  of  the  CCP  Executive  Session  should  attend 
them.  The  ECB  should,  where  relevant  and  in  accordance  with  Council  Regulation 
(EU)  No  1024/2013,  also  join  the  colleges  to  be  able  to  exercise  its  mandate  in 
accordance with Article 127 of the TFEU. 

In  order  to  ensure  an  appropriate  and  effective  decision-making  process,  the 
permanent members of the CCP Executive Session should have one vote each in the 
colleges, with the exception of the representative of the Commission, who should be 
non-voting.  The  current  members  of  the  colleges  should  continue  to  exercise  their 
current voting rights. 

(21)  While  national  competent  authorities  continue  to  exercise  their  current  supervisory 
responsibilities  under  Regulation  (EU)  No  648/2012,  the  prior  consent  of  ESMA 
should  be  required  for  certain  decisions  in  order  to  promote  consistency  in  the 
supervision  of  CCPs  throughout  the  Union.  A  specific  mechanism  is  introduced  for 
cases  of  disagreement  between  ESMA  and  the  national  competent  authorities. 
Similarly,  there  is  a  need  to  better  reflect  the  mandates  of  the  central  banks  of  issue 
concerning  their  monetary  policy  responsibilities,  due  to  the  potential  risks  that  the 
malfunctioning of a CCP could pose to the implementation of the monetary policy of 
the Union and the promotion of the smooth operation of payment systems. Therefore, 
the prior consent of the relevant central banks of issue should be required on certain 
decisions envisaged by national competent authorities, in particular when it relates to a 
CCP's  payment  and  settlement  arrangements  and  related  liquidity  risk  management 
procedures for the transactions denominated in that central bank of issue's currency. 

(22) 

In order to enable ESMA to conduct its tasks with regards to CCPs effectively, both 
Union  and  third-country  CCPs  should  pay  supervisory  fees  for  ESMA's  supervisory 
and administrative tasks. These fees should cover for the applications for authorisation 
of Union CCPs, the applications for recognition of third-country CCPs, and the annual 
fees  associated  with  the  tasks  under  ESMA's  responsibility.  The  Commission  should 
specify further in a delegated act the types of fees, the matters for which fees are due, 
the amount of the fees and the manner in which they are to be paid by authorised and 
applicant Union CCPs recognised third-country CCPs. 

(23)  The  supervisory  arrangements  in  this  Regulation  for  third-country  CCPs  offering 
clearing  services  within  the  Union  also  require  revision.  Access  to  information,  the 
ability to conduct on-site inspections and the possibility to share information on third-

EN 

34 

   EN 

 
country  CCPs  between  relevant  Union  and  Member  State  authorities  needs  to  be 
improved to avoid important financial stability implications for Union entities. There 
is also a risk that changes to a third-country CCP rules or to a third-country regulatory 
framework cannot be taken into account and could negatively affect the regulatory or 
supervisory  outcomes,  leading  to  an  unlevel  playing  field  between  Union  and  third-
country CCPs. 

(24)  A  significant  amount  of  financial  instruments  denominated  in  the  currencies  of  the 
Member  States  are  cleared  by  recognised  third-country  CCPs.  This  will  increase 
substantially  when  the  United  Kingdom  withdraws  from  the  Union  and  the  CCPs 
established  there  will  no  longer  be  governed  by  the  requirements  of  this  Regulation. 
Cooperation arrangements agreed in the supervisory colleges will no longer be subject 
to the safeguards and procedures of this Regulation, including the Court of Justice of 
the European Union. This implies significant challenges for Union and Member State 
authorities in safeguarding financial stability. 

(25)  As  part  of  its  commitment  to  integrated  financial  markets,  the  Commission  should 
continue to determine by way of equivalence decisions that the legal and supervisory 
frameworks of third countries fulfil the requirements of Regulation (EU) No 648/2012.  
In order to enhance the implementation of the current equivalence regime in relation to 
CCPs, the Commission should be able to, if necessary, specify further the criteria for 
assessing  the  equivalence  of  third-country  CCP  regimes.  It  is  also  necessary  to 
empower ESMA with the supervision of regulatory and supervisory developments in 
those  third-country  CCP  regimes  that  have  been  deemed  equivalent  by  the 
Commission. This is in order to ensure that the  equivalence criteria and any specific 
conditions set for their use continue to be satisfied by third countries. ESMA should 
report its findings to the Commission on a confidential basis. 

(26)  The Commission is currently able to amend, suspend, review or revoke an equivalence 
decision at any time, in particular where developments occur in a third country which 
materially  affect 
the  equivalence 
the  elements  assessed  in  accordance  with 
requirements  under  this  Regulation.  Where  a  third  country's  relevant  authorities  no 
longer  cooperate  with  ESMA  or  other  Union  supervisors  in  good  faith  or  fail  to 
comply  on  a  continuous  basis  with  the  applicable  equivalence  requirements,  the 
Commission is also able to, inter alia, put an authority of the third country on notice or 
publish  a  specific  recommendation.  Where  the  Commission  decides  at  any  time  to 
revoke a third country's equivalence, it is able to delay the date of application of that 
decision in order to address the risks to financial stability or of market disruptions. In 
addition to those powers currently available, the Commission should also be able to set 
specific conditions to ensure that the equivalence criteria continue to be fulfilled on an 
ongoing  basis  by  the  third  country  to  which  an  equivalence  decision  relates.  The 
Commission  should  also  be  able  to  set  conditions  ensuring  that  ESMA  is  able  to 
effectively  exercise  its  responsibilities  in  relation  to  third-country  CCPs  recognised 
under  this  Regulation  or  in  relation  to  monitoring  of  regulatory  and  supervisory 
developments  in  third  countries  that  are  of  relevance  for  adopted  equivalence 
decisions.  

(27) 

In view of the growing cross-border dimension of CCPs and of the interlinkages in the 
Union financial system, it is necessary to improve the ability of the Union to identify, 
monitor  and  mitigate  the  potential  risks  related  to  third-country  CCPs.  The  role  of 
ESMA should therefore be enhanced to effectively supervise third-country CCPs that 
apply for recognition to provide clearing services in the Union. The involvement of the 
Union central banks of issue in the recognition and supervision of third-country CCPs 

EN 

35 

   EN 

 
that are active in the currency they issue should also be improved.  Therefore, Union 
central banks of issue should be consulted on certain aspects affecting their monetary 
policy  responsibilities  in  relation  to  financial  instruments  denominated  in  Union 
currencies which are cleared to a significant extent in CCPs located outside the Union. 

(28)  Once the Commission has determined the legal and supervisory framework of a third 
country  as  equivalent  to  the  Union  framework,  the  process  to  recognise  CCPs  from 
that  third  country  should  take  into  account  the  risks  those  CCPs  present  for  the 
financial stability of the Union or for the Member State.    

(29)  When  considering  the  application  of  a  third-country  CCP  for  recognition,  ESMA 
should  assess  the  degree  of  systemic  risk  that  the  CCP  presents  to  the  financial 
stability of the Union on the basis of objective and transparent criteria set out in this 
Regulation. A Commission delegated act should further specify these criteria. 

(30)  CCPs that are not systemically important to the financial stability of the Union or one 
of  its  Member  States  should  be  considered  as  'Tier  1'  CCPs.  CCPs  that  are 
systemically  important,  or  likely  to  become  systemically  important,  to  the  financial 
stability  of  the  Union  or  one  of  its  Member  States  should  be  considered  as  'Tier  2' 
CCPs.  Where  ESMA  determines  that  a  third-country  CCP  is  not  systemically 
important  to  the  financial  stability  of  the  Union,  the  existing  recognition  conditions 
under  Regulation  (EU)  No  648/2012  should  apply  to  that  CCP.  Where  ESMA 
determines that a third-country CCP is systemically important, additional requirements 
proportionate  to  the  degree  of  risk  presented  by  that  CCP  should  be  established. 
ESMA  should  only  recognise  such  a  CCP  where  that  CCP  complies  with  these 
requirements.  

(31)  The additional requirements should include certain prudential requirements set out in 
Regulation (EU) No 648/2012 that aim to increase the safety and efficiency of a CCP. 
ESMA should be directly responsible for ensuring that a systemically-important third-
country  CCP  complies  with  those  requirements.  Related  requirements  should  also 
enable ESMA to carry full and effective supervision of that CCP.  

(32) 

important 

In  order  to  ensure  the  proper  involvement  of  the  central  bank(s)  of  issue,  the 
systemically 
third-country  CCP  should  also  fulfil  any  additional 
requirements that the central bank(s) of issue consider necessary. The central bank(s) 
of  issue  should  provide  ESMA  with  confirmation  whether  or  not  the  CCP  complies 
with any additional requirements as quickly as possible and in any case 180 days from 
the CCP's application to ESMA. 

(33)  The degree of risk posed by a systemically-important CCP to the financial system and 
stability  of  the  Union  varies.  The  requirements  for  systemically-important  CCPs 
should therefore be applied in a manner proportionate to the risks that the CCP may 
present to the Union. Where ESMA and the relevant central bank(s) of issue conclude 
that a third-country CCP is of such systemic importance that additional requirements 
will  not  ensure  the  financial  stability  of  the  Union,  ESMA  should  be  able  to 
recommend  to  the  Commission  that  that  CCP  should  not  be  recognised.  The 
Commission  should  be  able  to  adopt  an  implementing  act  declaring  that  the  third-
country  CCP  should  be  established  in  the  Union  and  authorised  as  such  to  provide 
clearing services in the Union. 

(34)  ESMA should regularly review the recognition of third-country CCPs as well as their 
classification as Tier 1 or Tier 2 CCPs. In this regard, ESMA should consider amongst 
others,  the  changes  in  the  nature,  size  and  complexity  of  the  third-country  CCP's 

EN 

36 

   EN 

 
business. Such reviews should take place at least every two years and more frequently 
where necessary. 

(35)  ESMA should also be able to take into account the extent to which the compliance of a 
systemically-important  third-country  CCP  with  the  requirements  applicable  in  that 
third country can be compared to the compliance of that CCP with the requirements of 
Regulation  (EU)  No  648/2012.  The  Commission  should  adopt  a  delegated  act 
specifying further the modalities and conditions to assess such comparable compliance 

(36)  ESMA  should  have  all  the  powers  necessary  to  supervise  recognised  third-country 
CCPs  to  ensure  their  ongoing  compliance  with  the  requirements  of  Regulation  (EU) 
No  648/2012.  In  certain  areas,  ESMA's  decisions  should  be  subject  to  the  prior 
consent of the relevant central bank(s) of issue. 

(37)  ESMA should be able to impose fines on third-country CCPs where it finds that they 
have  committed,  intentionally  or  negligently,  an  infringement  of  this  Regulation  by 
providing incorrect or misleading information to ESMA. In addition, ESMA should be 
able  to  impose  fines  on  systemically-important  CCPs  where  it  finds  that  they  have 
committed, intentionally or negligently, an infringement of the additional requirements 
applicable to them in this Regulation.  

(38)  ESMA  should  be  able  to  impose  periodic  penalty  payments  to  compel  third-country 
CCPs to end an infringement, to supply complete and correct information required by 
ESMA or to submit to an investigation or an on-site inspection. 

(39)  ESMA should be able to impose fines on both Tier 1 and Tier 2 CCPs where it finds 
that  they  have  committed,  intentionally  or  negligently,  an  infringement  of  this 
Regulation  by  providing  incorrect  or  misleading  information  to  ESMA.  In  addition, 
ESMA should  be able to impose  fines  on Tier 2 CCPs where it finds that they have 
committed, intentionally or negligently, an infringement of the additional requirements 
applicable to them in this Regulation.  

(40)  Fines  should  be  imposed  according  to  the  level  of  seriousness  of  the  infringement. 
Infringements should be divided into different groups for which specific fines should 
be allocated. In order to calculate the fine relating to a particular infringement, ESMA 
should  apply  a  two-step  methodology  consisting  of  setting  a  basic  amount  and 
adjusting  that  basic  amount,  if  necessary,  by  certain  coefficients.  The  basic  amount 
should be established by taking into account the annual turnover of the third-country 
CCPs concerned and the adjustments should be made by increasing or decreasing the 
basic  amount  through  the  application  of  the  relevant  coefficients  in  accordance  with 
this Regulation. 

(41)  This  Regulation  should  establish  coefficients  linked  to  aggravating  and  mitigating 
circumstances in order to give the necessary tools to ESMA to decide on a fine which 
is  proportionate  to  the  seriousness  of  the  infringement  committed  by  a  third  country 
CCP,  taking  into  account  the  circumstances  under  which  that  infringement  has  been 
committed. 

(42)  The  decision  to  impose  fines  or  periodic  penalty  payments  should  be  based  on  an 

independent investigation. 

(43)  Before deciding whether to impose fines or periodic penalty payments, ESMA should 
give  the  persons  subject  to  the  proceedings  the  opportunity  to  be  heard  in  order  to 
respect their rights of defence. 

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37 

   EN 

 
(44)  ESMA should refrain from imposing fines or periodic penalty payments where a prior 
acquittal  or  conviction  arising  from  identical  facts,  or  from  facts  which  are 
substantially  the  same,  has  acquired  the  force  of  res  judicata  as  a  result  of  criminal 
proceedings under national law. 

(45)  ESMA's  decisions  imposing  fines  and  periodic  penalty  payments  should  be 
enforceable  and  their  enforcement  should  be  subject  to  the  rules  of  civil  procedure 
which are in force in the State in the territory of which it is carried out. Rules of civil 
procedure  should  not 
include 
administrative procedural rules. 

include  criminal  procedural  rules  but  could 

(46) 

In  the  case  of  an  infringement  committed  by  a  Tier  2  CCP,  ESMA  should  be 
empowered  to  apply  a  range  of  supervisory  measures,  including  requiring  a  Tier  2 
CCP  to  bring  the  infringement  to  an  end,  and,  as  a  last  resort,  withdrawing  the 
recognition where a Tier 2 CCP has seriously or repeatedly infringed this Regulation. 
The supervisory measures should be applied by ESMA taking into account the nature 
and seriousness of the infringement and should respect the principle of proportionality. 
Before  taking  a  decision  on  supervisory  measures,  ESMA  should  give  the  persons 
subject  to  the  proceedings  an  opportunity  to  be  heard  in  order  to  comply  with  their 
rights of defence. 

(47)  The validation of significant changes to models and parameters adopted to calculate a 
CCP's  margin  requirements,  default  fund  contributions,  collateral  requirements,  and 
other risk-control mechanisms should be aligned with the new requirement of a prior 
consent  of  ESMA  with  certain  decisions  of  the  national  competent  authority  with 
regard  to  CCPs  established  in  the  Union.  To  simplify  the  model  validation 
proceedings,  one  validation  by  the  national  competent  authority  that  is  subject  to 
ESMA's  prior  consent  should  replace  the  two  validations  that  national  competent 
authority  and  ESMA  were  required  to  conduct  independently.  In  addition,  the 
interplay  of  that  validation  and  the  college  decision  should  be  clarified.  The 
preliminary  adoption  of  a  significant  change  to  that  models  or  parameters  should  be 
possible where needed, especially where their swift change is necessary to ensure the 
soundness of the CCP's risk management. 

(48)  The  power  to  adopt  acts  in  accordance  with  Article  290  of  the  Treaty  on  the 
Functioning of the European Union should be delegated to the Commission in respect 
of the further specification of the type of fees, the matters for which fees are due, the 
amount of the fees to be paid and the manner in which they are to be paid; specifying 
the  conditions  under  which  the  criteria  are  specified  to  determine  if  a  third-country 
CCP  is,  or  is  likely  to  become,  systemically  important  for  financial  stability  of  the 
Union or for one or more of its Member States; the further specification of the criteria 
to  be  used  in  its  equivalence  assessments  of  third  countries;  specify  how  and  under 
what  conditions  certain  requirements  shall  be  complied  with  by  third-country  CCPs; 
further  rules  of  procedure  relating  to  the  imposition  of  fines  or  periodic  penalty 
payments, including provisions on the rights of defence, time limits, the collection of 
fines  or  periodic  penalty  payments  and  the  limitation  periods  for  the  imposition  and 
enforcement  of  penalty  payments  or  fines;  measures  to  amend  Annex  IV  in  order  to 
take account of developments in the financial markets. 

(49)  To  ensure  uniform  conditions  for  the  implementation  of  this  Regulation,  and  in 
particular with regard to the recognition of third-country CCPs and the equivalence of 
third  countries'  legal  frameworks,  implementing  powers  should  be  conferred  on  the 
Commission.  

EN 

38 

   EN 

 
(50)  Since the objectives of this Regulation, namely to increase the safety and efficiency of 
CCPs by laying down uniform requirements for their activities, cannot be sufficiently 
achieved by the Member States but can rather, by reason of their scale and effects, 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  principle  of  proportionality,  as  set  out  in  that  Article,  this 
Regulation does not go beyond what is necessary in order to achieve those objectives. 

(51)  The use by ESMA of its power to recognise a third-country CCP as a Tier 1 or a Tier 2 
CCP should be deferred until the criteria to allow the assessment of whether or not a 
third-country  CCP  is  systemically  important,  or  likely  to  become,  for  the  financial 
system of the EU or one or more of its Member States are further specified. 

(52)  Regulation (EU) No 1095/2010 and Regulation (EU) No 648/2012 should therefore be 

amended accordingly, 

HAVE ADOPTED THIS REGULATION: 

Article 1 

Amendments to Regulation (EU) No 1095/2010 

Regulation (EU) 1095/2010 is amended as follows: 

1. 

In Article 4, the following point (4) is inserted: 

“(4) “CCP” means a CCP as defined in point (1) of Article 2 of Regulation (EU) No 
648/2012.” 

2. 

In Article 6, the following point (1a) is inserted: 

“(1a)  a  Board  of  Supervisors  in  Executive  Session  for  CCPs  (CCP  Executive 
Session), which shall exercise the tasks set out in Article 44b"; 

3. 

In Article 35 paragraph (6) is replaced by the following: 

"6. Where complete or accurate information is not available or is not made available 
in a timely fashion under paragraph 1 or 5, the Authority may request information, 
by way of a duly justified and reasoned request, directly from: 

(a)  an  authorised  or  recognised  CCP  in  accordance  with  Articles  14  or  25  of 
Regulation (EU) No 648/2012; 

(b) a central securities depository authorised in accordance with Regulation (EU) No 
909/2014; 

(c)  a  regulated  market  in  accordance  with  point  (14)  of  Article  4(1)  of  Directive 
2004/39/EC; 

(d)  a  multilateral  trading  facility  in  accordance  with  point  (22)  of  Article  4(1)  of 
Directive 2014/65/EU; 

(e)  an  organised  trading  facility  in  accordance  with  point  (23)  of  Article  4(1)  of 
Directive 2014/65/EU. 

The addressees  of such  a  request shall  provide the Authority promptly  and  without 
undue delay with clear, accurate and complete information. 

EN 

39 

   EN 

 
 
The  Authority  shall  inform  the  relevant  competent  authorities  of  requests  in 
accordance with this paragraph and with paragraph 5.  

At the request of the Authority, the competent authorities shall assist the Authority in 
collecting the information." 

4. 

In Article 40(1), the following point (f) is added: 

“(f) the permanent members of the CCP Executive Session, referred to in point (i) of 
Article 44a(1)(a), who shall be non-voting.” 

5. 

In Article 42, the first subparagraph is replaced by the following: 

“When carrying out the tasks conferred upon it by this Regulation, the Chairperson, 
the voting permanent members and the voting members specific to each CCP of the 
CCP  Executive  Session  referred  to  in  point  (i)  of  Article  44a(1)(a)  and  the  voting 
members of the Board of Supervisors shall act independently and objectively in the 
sole interest of the Union as a whole and shall neither seek nor take instructions from 
Union institutions or  bodies, from any  government of a  Member  State or  from any 
other public or private body.” 

6. 

Article 43 is amended as follows: 

(a)  paragraph 1 is replaced by the following: 

“1. The Board of Supervisors shall give guidance to the work of the Authority. 
It shall be responsible for the tasks referred to in Chapter II, except for those 
tasks  for  which  the  CCP  Executive Session  is  responsible  pursuant  to  Article 
44b(1).” 

(b)  paragraph 8 is replaced by the following: 

“8.  The  Board  of  Supervisors  shall  exercise  disciplinary  authority  over  the 
Chairperson and may remove him or her from office in accordance with Article 
48(5).  The  Board  of  Supervisors,  in  agreement  with  the  CCP  Executive 
Session,  shall  exercise  disciplinary  authority  over  the  Executive  Director  and 
may remove him or her from office in accordance with Article 51(5).” 

7. 

In Chapter III, the following section 1A is inserted: 

“Section 1A CCP Executive Session 

Article 44a 

Composition 

1. The CCP Executive Session shall be composed of: 

(a) the following permanent members: 

(i) the Head and two Directors, appointed in accordance with Article 48a, who 
shall be voting; 

(ii) a representative of the ECB, who shall be non-voting: 

(iii) a representative of the Commission, who shall be non-voting; 

(b) the following non-permanent members specific to each CCP: 

(i) a representative of the competent authority for each CCP established in the 
Union in relation to which the CCP Executive Session is convened, who shall 
be voting; 

EN 

40 

   EN 

 
(ii) a representative of each of the relevant central banks of issue referred to in 
point  (h)  of  Article  18(2)  of  Regulation  (EU)  No  648/2012  for  each  CCP 
established  in  the  Union  in  relation  to  which  the  CCP  Executive  Session  is 
convened, who shall be non-voting. 

The Head may invite, where appropriate and necessary, as observers to the meetings 
of the CCP Executive Session: 

(a)  other  members  referred  to  in  Article  18(2)  of  Regulation  (EU)  No  648/2012  of 
the college of the relevant CCP to the meetings of the CCP Executive Session; 

(b) authorities of third-country CCPs recognised by ESMA pursuant to Article 25 of 
Regulation (EU) No 648/2012. 

Meetings  of  the  CCP  Executive  Session  shall  be  convened  by  its  Head  at  its  own 
initiative or at the request of any of its members. 

Where a task of the CCP Executive Session does not relate to a specific Union CCP, 
it shall be composed only of the permanent members referred in point (a) and, where 
relevant, the central banks of issue referred to in point (b)(ii). 

Article 44b 

Tasks and powers of the CCP Executive Session 

1. The CCP Executive Session shall be responsible for: 

taking decisions and actions on CCP matters with respect to Articles 17, 19, 29, 

"(-a) 
29a and 30 of this Regulation;". 

 (a)  providing  the  consent  referred  to  in  Article  21a(1)  of  Regulation  (EU)  No 
648/2012;  

(b) the recognition and supervision of third-country CCPs in accordance with Article 
25  of  Regulation  (EU)  No  648/2012,  the  monitoring  of  regulatory  and  supervisory 
developments  in  third  countries  under  Chapter 2  of  Title  II  of  Regulation  (EU)  No 
648/2012; and 

(c)  the  tasks  referred  to  in  the  first  subparagraph  of  Article  5(1),  the  first 
subparagraph of Article 9(3), Article 9(4), Article 17(2), Article 17(3), Article 18(1), 
Article 20(2), Article 20(6), Article 21c, Article 23, Article 24, Article 29(3), Article 
38(5), 48(3), 49(1) and 54(3) of Regulation (EU) No 648/2012. 

2.  The  CCP  Executive  Session  shall  have  a  dedicated  staff  and  adequate  resources 
provided by ESMA to carry out its tasks. 

3. The CCP Executive Session shall inform the Board of Supervisors of its decisions. 

Article 44c 

Decision-making 

The  CCP  Executive  Session  shall  take  its  decisions  by  a  simple  majority  of  its 
members. The Head shall have the casting vote.” 

The title of Section 3 of Chapter III is replaced by the following: 

“Chairperson, Head and Directors” 

a new Article 48a is inserted: 

"Article 48a 

41 

   EN 

8. 

9. 

EN 

 
Appointment and tasks of the Head of the CCP Executive Session and Directors 

1. By way of derogation from Article 48(1) the Authority shall be represented by the 
Head  of  the  CCP  Executive  Session  for  the  tasks  and  powers  referred to  in  Article 
44b(1). 

The Head of the CCP Executive Session shall be responsible for preparing the work 
of the CCP Executive Session and shall chair its meetings.  

2. The Head of the CCP Executive Session and the Directors referred to in point (i) 
of  Article  44a(1)(a)  shall  be  full-time,  independent  professionals.  They  shall  be 
appointed  on  the  basis  of  merit,  skills,  knowledge  of  clearing,  post-trading  and 
financial  matters,  and  of  experience  relevant  to  CCP  supervision  and  regulation. 
They  shall be  chosen  on  the  basis  of  an  open  selection  procedure  organised  by  the 
Commission,  which  shall  respect  the  principles  of  gender  balance,  experience  and 
qualification. 

3.  The  term  of  office  of  the  Head  of  the  CCP  Executive  Session  and  the  Directors 
referred to in point (i) of Article 44a(1)(a) shall be five years and may be extended 
once. 

The Head of the CCP Executive Session and the Directors referred to in point (i) of 
Article 44a(1)(a) shall not hold any office at national, Union, or international level. 

4. The Commission shall provide to the European Parliament a shortlist of candidates 
for  the  positions  of  Head  and  Directors  referred  to  in  point  (i)  of  Article  44a(1)(a) 
and shall inform the Council of the shortlist. 

The Commission shall submit a proposal for the appointment of the Head of the CCP 
Executive  Session  and  Directors  referred  to  in  point  (i)  of  Article  44a(1)(a)  to  the 
European  Parliament  for  approval.  Following  the  approval  of  that  proposal,  the 
Council  shall  adopt  an  implementing  decision  to  appoint  the  Head  of  the  CCP 
Executive  Session  and  the  Directors  referred  to  in  point  (i)  Article  44a(1)(a).  The 
Council shall act by qualified majority. 

5. Where the Head of the CCP Executive Session or the Directors referred to in point 
(i) of Article 44a(1)(a) no longer fulfil the conditions required for the performance of 
his  or  her  duties  as  referred  to  in  paragraph  2  or  has  been  found  guilty  of  serious 
misconduct,  the  Council  may,  on  a  proposal  from  the  Commission  which  has  been 
approved  by  the  European  Parliament,  adopt  an  implementing  decision  to  remove 
him or her from office. The Council shall act by qualified majority. 

The  European  Parliament  or  the  Council  may  inform  the  Commission  that  they 
consider the conditions for the removal of the Head of the CCP Executive Session or 
the Directors referred to in point (i) of Article 44a(1)(a) from office to be fulfilled, to 
which the Commission shall respond.” 

10. 

Article 49 is replaced by the following: 

“Without prejudice to the role of the Board of Supervisors, in relation to the tasks of 
the Head of the CCP Executive Session and the Directors referred to in point (i) of 
Article  44a(1)(a)  and  Chairperson,  shall  neither  seek  or  take  instructions  from  the 
Union institutions or  bodies, from any  government of a Member  State or  from any 
other public or private body. 

EN 

42 

   EN 

 
 
Neither  Member  States,  the  Union  institutions  or  bodies,  nor  any  other  public  or 
private body shall seek to influence the Head of the CCP Executive Session and the 
Directors  referred  to  in  point  (i)  of  Article  44a(1)(a)  or  the  Chairperson  in  the 
performance of his or her tasks. 

In accordance with the Staff Regulations referred to in Article 68, the Chairperson, 
the Head of the CCP Executive Session and the Directors referred to in point (i) of 
44a(1)(a)  shall,  after  leaving  service,  continue  to  be  bound  by  the  duty  to  behave 
with  integrity  and  discretion  as  regards  the  acceptance  of  certain  appointments  or 
benefits.” 

11. 

Article 50 is replaced by the following: 

“1.  The  European  Parliament  or  the  Council  may  invite  the  Chairperson  or  his 
alternate, or the Head of the CCP Executive Session, to make a statement while fully 
respecting their independence. The Chairperson or the Head shall make a statement 
before  the  European  Parliament  and  answer  any  questions  put  by  its  members, 
whenever so requested. 

2. The Chairperson or the Head of the CCP Executive Session shall report in writing 
on  the  main  activities  of  Board  of  Supervisors  and  of  the  CCP  Executive  Session, 
respectively, to the European Parliament where requested and at least 15 days before 
making the statement referred to in paragraph 1. 

3. In addition to the information referred to in Articles 11 to 18 and Articles 20 and 
33, the Chairperson shall report any relevant information requested by the European 
Parliament on an ad-hoc basis. 

In  addition  to  the  information  referred  to  in  Article  33,  the  Head  of  the  CCP 
Executive  Session  shall  report  any  relevant  information  requested  by  the  European 
Parliament on an ad-hoc basis.” 

12. 

(a) 

Article 53 is amended as follows: 

Paragraph 2 is replaced by the following: 

“2.  The  Executive  Director  shall  be  responsible  for  implementing  the  annual  work 
programme of the Authority under the guidance of the Board of Supervisors and the 
CCP Executive Session and under the control of the Management Board.” 

(b) 

Paragraph 4 is replaced by the following: 

“4. The Executive Director shall prepare a multi-annual work programme, as referred 
to  in  Article  47(2).  For  the  tasks  and  powers  referred  to  in  Article  44b(1),  the 
Executive  Director  shall  obtain  the  consent  of  the  CCP  Executive  Session  prior  to 
submitting it to the Management Board.” 

(c) 

Paragraph 7 is replaced by the following: 

“7. Each year the Executive Director shall prepare a draft report with a section on the 
regulatory and supervisory activities of the Authority and a section on financial and 
administrative matters. 

For the tasks and powers referred to in Article 44b(1), the Executive Director shall 
obtain  the  consent  of  the  CCP  Executive  Session  prior  to  submitting  it  to  the 
Management Board”. 

13. 

In Article 63, the following paragraph 1a is inserted: 

EN 

43 

   EN 

 
 
“1a.  ESMA’s  expenditure  and  fees  relating  to  the  tasks  and  powers  referred  to  in 
Article  44b  (1)  shall  be  separately  identifiable  within  the  statement  of  estimates 
referred  to  in  paragraph  1.  Prior  to  the  adoption  of  that  statement  of  estimates,  the 
draft prepared by the Executive Director relating to such expenditure and fees shall 
be approved by the CCP Executive Session. 

The  annual accounts  of  ESMA  drawn  up  and  published  in  accordance  with  Article 
64(6) shall include the income and expenses related to the tasks referred to in Article 
44b(1).” 

14. 

In Article 70, paragraph 1 is replaced by the following: 

“1.  Members  of  the  Board  of  Supervisors,  the  CCP  Executive  Session  and  the 
Management  Board,  the  Executive  Director,  and  members  of  the  staff  of  the 
Authority, including officials seconded by Member States on a temporary basis and 
all other persons carrying out tasks for the Authority on a contractual basis, shall be 
subject to the requirements of professional secrecy pursuant to Article 339 TFEU and 
the relevant provisions in Union legislation, even after their duties have ceased.” 

15. 

In Article 76, the following paragraph 2a is inserted: 

"2a Until such time as the Head of the CCP Executive Session and the Directors of 
the  CCP  Executive  Session  referred  to  in  Article  44a(1)  take  up  their  duties 
following their appointment in accordance with Article 48a, the functions of the CCP 
Executive Session shall be carried out by the Board of Supervisors". 

Article 2 

Amendments to Regulation (EU) No 648/2012 

Regulation (EU) No 648/2012 is amended as follows: 

1. 

In Article 6, paragraph 2, point (b) is replaced by the following: 

“(b)  the  CCPs  that  are  authorised  in  accordance  with  Article  17  or  recognised  in 
accordance with Article 25 and the date of authorisation or recognition respectively, 
indicating the CCPs that are authorised or recognised for the purpose of the clearing 
obligation”. 

2. 

In Article 17, paragraph 3 is replaced by the following: 

“3. Within 30 working days of receipt of the application, the competent authority, in 
consultation with ESMA, shall assess whether the application is complete. Where the 
application is not complete, the competent authority shall set a deadline by which the 
applicant CCP has to provide additional information. Upon receipt of such additional 
information, the competent authority shall immediately transmit it to ESMA and the 
college established in accordance with Article 18(1). After assessing, in consultation 
with ESMA, that an application is complete, the competent authority shall notify the 
applicant CCP and the members of the college accordingly.” 

3. 

(a) 

Article 18 is amended as follows: 

paragraph 1 is replaced by the following: 

“1.  Within  30  calendar  days  of  the  submission  of  a  complete  application  in 
accordance with Article 17, the CCP’s competent authority shall establish a college 
to facilitate the exercise of the tasks referred to in Articles 15, 17, 49, 51 and 54. 

EN 

44 

   EN 

 
The  Head  of  the  CCP  Executive  Session  referred  to  in  Article  48a  of  Regulation 
(EU) No 1095/2010 shall chair and manage the college.” 

(b) 

in paragraph 2, point (a) is replaced by the following: 

“(a) the permanent members of the CCP Executive Session referred to in Article 44a 
of Regulation (EU) No 1095/2010;” 

(c) 

in paragraph 2, point (c) is replaced by the following: 

“(c)  the  competent  authorities  responsible  for  the  supervision  of  the  clearing 
members  of  the  CCP  which  are  established  in  the  three  Member  States  with  the 
largest  contributions  to  the  default  fund  of  the  CCP  referred  to  in  Article  42  on  an 
aggregate  basis  over  a  one-year  period,  including,  where  relevant,  the  ECB  in 
accordance with Council Regulation (EU) No 1024/2013.54 

4. 

In Article 19, paragraph 3 is replaced by the following: 

“3.  A  majority  opinion  of  the  college  shall  be  adopted  on  the  basis  of  a  simple 
majority of its members. 

For colleges up to and including 12 members, a maximum of two college members 
belonging to the same Member State shall have a vote and each voting member shall 
have  one  vote.  For  colleges  with  more  than  12  members,  a  maximum  of  three 
members  belonging  to  the  same  Member  State  shall  have  a  vote  and  each  voting 
member shall have one vote. 

Where  the  ECB  is  a  member  of  the  college  pursuant  to  points  (a),  (c)  and  (h)  of 
Article 18(2), it shall have the following number of votes: 

(i) a maximum of 2 votes in colleges up to and including 12 members;  

(ii) a maximum of 3 votes for colleges with more than 12 members. 

The  representative  of  the  Commission  shall  be  non-voting  member.  The  other 
permanent members of the CCP Executive Session shall have one vote each.” 

5. 

In Article 20, paragraph 6 is replaced by the following: 

“6. The CCP’s competent authority shall send ESMA and the members of the college 
its fully reasoned draft decision, which shall take into account the reservations of the 
members of the college.” 

6. 

(a) 

Article 21 is amended as follows: 

paragraph 1 is replaced by the following: 

“1. Without prejudice to the role of the college, the competent authorities referred to 
in Article 22, in cooperation with ESMA, shall review the arrangements, strategies, 
processes  and  mechanisms  implemented  by  CCPs  to  comply  with  this  Regulation 
and evaluate the risks to which CCPs are, or might be, exposed.” 

(b) 

paragraph 3 is replaced by the following: 

“3.  ESMA  shall  establish  the  frequency  and  depth  of  the  review  and  evaluation 
referred  to  in  paragraph  1  having  regard  to  the  size,  systemic  importance,  nature, 

54 
Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks 
on  the  European  Central  Bank  concerning  policies  relating  to  the  prudential  supervision  of 
credit institutions, OJ L 287, 29.10.2013, p. 63." 

EN 

45 

   EN 

 
                                                 
scale  and  complexity  of  the  activities  of  the  CCPs  concerned.  The  review  and 
evaluation shall be updated at least on an annual basis. 

The  CCPs  shall  be  subject  to  on-site  inspections.  ESMA  staff  shall  be  invited  to 
participate in these on-site inspections. 

The competent authority shall forward to ESMA any information received from the 
CCPs  and  shall  request  from  the  relevant  CCP  any  information  sought  by  ESMA 
which it cannot provide.” 

7. 

In Title III, Chapter 2, the following Articles 21a, 21b and 21c are inserted: 

"Article 21a 

Preparation of draft decisions 

1.  Competent  authorities  shall  prepare  and  submit  draft  decisions  to  ESMA  for 
consent prior to adoption of any of the following decisions: 

(a) decisions adopted pursuant to Articles 7, 8, 14, 15, 16, 20, 21, 30, 31, 35, 49 
and  54  of  this  Regulation  and  Articles  35  and  36  of  Regulation  (EU)  No 
600/2014; 

(b) any decisions adopted in the carrying out of their duties resulting from the 
requirements set out in Article 16 and Titles IV and V. 

2. Competent authorities shall prepare and submit draft decisions to the central banks 
of  issue  referred  to  in  Article  18(2)(h)  before  adopting  any  decision  pursuant  to 
Articles 14, 15, 20, 44, 46, 50 and 54. 

Competent  authorities  shall  obtain, in  accordance  with  Article  21(b)  the  consent  of 
the central banks of issue referred to in the first subparagraph in respect of any aspect 
of those decisions relating to the carrying out of their monetary policy tasks. 

3. ESMA shall transmit to competent authorities any relevant information which may 
result  in  the  adoption  of  a  decision  referred  to  in  paragraph  1  and  may  request 
specific  supervisory  action,  including  withdrawal  of  authorisation.  Competent 
authorities shall keep ESMA informed of any subsequent action or inaction thereto. 

4.  For  the  purposes  of  paragraph  1,  the  consent  of  ESMA  shall  be  deemed  to  be 
given  unless  it  proposes  amendments  or  objects  to  the  draft  decision  within  a 
maximum  period  of  15  calendar  days  after  having  been  notified  of  that  decision. 
Where  ESMA  proposes  amendments  or  objects  to  a  draft  decision,  it  shall  provide 
full and detailed reasons, in writing. 

5. Where ESMA proposes amendments, the competent authority may only adopt the 
decision as amended by ESMA. 

Where  ESMA  objects  to  a  final  draft  decision,  the  competent  authority  shall  not 
adopt that decision. 

6.  Where  the  competent  authority  disagrees  with  the  proposed  amendment  or  the 
objection of ESMA, it may submit within 5 days a reasoned request to the Board of 
Supervisors  referred  to  in  Article  6(1)  of  Regulation  (EU)  No  1095/2010  to  assess 
that objection or amendment. The Board of Supervisors shall either endorse or reject 
ESMAs  objections  or  amendments  within  10  days  of  that  request  and  paragraph  5 
shall apply accordingly. 

7.  Without  prejudice  to  the  powers  of  the  Commission  under  Article  258  TFEU, 
ESMA may adopt a decision addressed to a financial market participant requiring the 

EN 

46 

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necessary  action  to  comply  with  its  obligations  under  Union  law,  including  the 
cessation of any practice in the following cases: 

(a) where a competent authority does not comply with paragraph 5 in case of 
ESMAs objection or amendments to a final draft decision; 

(b)  where  a  competent  authority,  following  a  request  from  ESMA  in 
accordance  with  paragraph  3,  fails  to  take  the  requested  action  within  a 
reasonable  time  where  that  failure  results  in  a  financial  market  participant 
breaching the applicable requirements in Titles IV and V of this Regulation. 

Decisions adopted pursuant to the first subparagraph shall prevail over any previous 
decision adopted by the competent authorities on the same matter. 

Article 21b 

Consent of the Central Bank of Issue 

1. The consent referred to in Article 21a(2) shall be deemed to be given unless the 
central bank of issue proposes amendments or objects to the draft decision within a 
maximum period of 15 calendar days after its submission. Where the central bank of 
issue  proposes  amendments  or  objects  to  a  draft  decision,  it  shall  provide  full  and 
detailed reasons, in writing. 

Where  ESMA  has  proposed  amendments  pursuant  to  Article  21a(4)  to  the  draft 
decisions  to  be  adopted  pursuant to  Articles  14,  15,  20  and  54,  it  shall also  submit 
them also to the central bank of issue. In that case, the deadline referred to in the first 
subparagraph shall be extended by 5 days. 

2.  Where  the  central  bank  of  issue  proposes  amendments,  the  competent  authority 
may only adopt the decision as amended by that central bank of issue. 

Where the central bank of issue objects to a draft decision, the competent authority 
shall not adopt that decision. 

Article 21c 

Fees 

1. CCPs shall pay the following fees: 

(a) fees associated with applications for authorisation referred to in Article 17; 

(b) fees associated with applications for recognition pursuant to Article 25; 

(c)  annual  fees  associated  with  ESMA's  tasks  in  accordance  with  this 
Regulation. 

2.  The  Commission  shall  adopt  a  delegated  act  in  accordance  with  Article  82  to 
further specify the types of fees, the matters for which fees are due, the amount of the 
fees and the manner in which they are to be paid by the following entities: 

(a)  CCPs  established  in  the  Union  which  are  authorised  or  applying  for 
authorisation; 

(b) CCP established in a third country which are recognised in accordance with 
Article 25(2); 

(c) CCP established in a third country which are recognised in accordance with 
Article 25(2b).” 

8. 

Article 24 is replaced by the following: 

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“The CCP’s competent authority or any other relevant authority shall inform ESMA, 
the college, the relevant members of the ESCB 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,  the 
transmission of monetary policy, the smooth operation of payment systems and the 
stability of the financial system in any of the Member States where the CCP or one 
of its clearing members are established.” 

9. 

(a) 

Article 25 is amended as follows: 

in paragraph 2, the following point (e) is added: 

(e)  the  CCP  has  been  determined  as  not  systemically  important  or  not  likely  to 
become systemically important (Tier 1 CCP) in accordance with paragraph 2a.” 

(b) 

the following paragraphs 2a, 2b and 2c are inserted: 

“2a.  ESMA  shall  determine  whether  a  CPP  is  systemically  important  or  likely  to 
become systemically important for the financial stability of the Union or for one or 
more of its Member States (Tier 2 CCP) by taking into account all of the following 
criteria: 

(a) the nature, size and complexity of the CCP's business, including the value 
in  aggregate  terms  and  in  each  Union  currency of  transactions  cleared  by  the 
CCP, or the aggregate exposure of the CCP engaged in clearing activities to its 
counterparties; 

(b)  the  effect  that  the  failure  of  or  a  disruption  to  the  CCP  would  have  on 
financial markets, financial institutions, or the broader financial system, or on 
the financial stability of the Union or for one or more of its Member States; 

(c) the CCP's clearing membership structure; 

(d)  the  CCP's  relationship,  interdependencies,  or  other  interactions  with  other 
financial  market  infrastructures,  other  financial  institutions  and  the  broader 
financial system. 

The Commission shall adopt a delegated act in accordance with Article 82 to further 
specify the criteria set out in the first subparagraph within [six months from the entry 
into force of this Regulation]. 

2b.  Where  ESMA  determines  a  CCP  to  be  systemically  important  or  likely  to 
become systemically important (Tier 2 CCP) in accordance with paragraph 2a, it may 
only  recognise  that  CCP  where,  in  addition  to  the  conditions  referred  to  in  Article 
25(2)(a), (b), (c) and (d), the following conditions are fulfilled: 

(a)  the  CCP  complies,  at  the  moment  of  recognition  and  thereafter  on  an 
ongoing basis, with the requirements set out in Article 16 and in Titles IV and 
V. ESMA shall take into account, in accordance with Article 25a(2), the extent 
to  which  an  CCP's  compliance  with  those  requirements  is  satisfied  by  the 
CCP's  compliance  with  the  comparable  requirements  applicable  in  the  third 
country; 

(b) following the consultation referred to in point (f) of paragraph 3, the central 
banks  of  issue  referred  to  therein  have  provided  ESMA  with  written 
confirmation,  within  180  days  of  the  submission  of  an  application,  that  the 

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CCP complies with any requirements imposed by those central banks of issue 
in  the  carrying  out  of  their  monetary  policy  tasks.  Where  the  relevant central 
bank  of  issue  has  not  provided  a  written  response  to  ESMA  within  the 
deadline, ESMA may consider this requirement to be fulfilled; 

(c) the CCP has provided ESMA with its unconditional written consent, signed 
by the legal representative of the CCP, to provide within 72 hours after service 
of a request by ESMA any documents,  records, information  and data held  by 
such CCP at any time, and that ESMA may access any of the CCP’s business 
premises,  as  well  as  a  reasoned  legal  opinion  by  an  independent  legal  expert 
confirming  that  the  consent  provided  is  valid  and  enforceable  under  the 
relevant applicable laws; 

(d) the CCP has put in place all necessary measures and procedures that ensure 
the effective compliance with the requirements laid down in points (a) and (c); 

(e)  the  Commission  has  not  adopted  an  implementing  act  in  accordance  with 
paragraph 2c. 

2c. ESMA, in agreement with the relevant central banks of issue and commensurate 
with the degree of systemic importance of the CCP in accordance with paragraph 2a, 
may conclude that a CCP is of such substantial systemic importance that compliance 
with the conditions set out in paragraph 2b does not sufficiently ensure the financial 
stability  of  the  Union  or  of  one  or  more  of  its  Member  States  and  should  not 
therefore  be  recognised.  In  such  a  case,  ESMA  shall  recommend  that  the 
Commission  adopt  an  implementing  act  confirming  that  that  CCP  should  not  be 
recognised in accordance with paragraph 2b.  

After  submission  of  the  recommendation  referred  to  in  the  first  subparagraph,  the 
Commission  may  adopt  an  implementing  act  declaring  that  that  CCP  shall  not  be 
recognised pursuant to paragraph 2b and that it may only provide clearing services in 
the Union after it has been granted authorisation in accordance with Article 14.” 

(c) 

paragraph 5 is replaced by the following: 

“5. ESMA shall, after consulting the authorities and entities referred to in paragraph 
3, review the recognition of the CCP established in a third country where that CCP 
has extended the range of its activities and services in the Union and in any case at 
least every two years. That review shall be conducted in accordance with paragraphs 
2, 3 and 4.” 

(d) 

paragraph 6 is replaced by the following: 

“6. The Commission may adopt an implementing act under Article 5 of Regulation 
(EU) No 182/2011, determining the following: 

(a)  that  the  legal  and  supervisory  arrangements  of  a  third  country  ensure  that 
CCPs authorised in that third country comply on an ongoing basis with legally 
binding  requirements  which  are  equivalent  to  the  requirements  laid  down  in 
Title IV of this Regulation; 

(b) that those CCPs are subject to effective supervision and enforcement in that 
third country on an ongoing basis; 

(c)  that  the  legal  framework  of  that  third  country  provides  for  an  effective 
equivalent  system  for  the  recognition  of  CCPs  authorised  under  third-country 
legal regimes; 

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The Commission may subject the application of the implementing act referred to in 
the first subparagraph to the effective fulfilment of any requirement set out therein by 
a  third  country  on  an  ongoing  basis  and  to  the  ability  by  ESMA  to  effectively 
exercise  its  responsibilities  in  relation  to  third-country  CCPs  recognised  under 
paragraphs  2  and  2b  or  in  relation  to  monitoring  referred  to  in  paragraph  6b, 
including by way of agreeing and applying the cooperation arrangements referred to 
in paragraph 7.” 

(e) 

the following paragraphs 6a and 6b are inserted: 

“6a.  The  Commission  may  adopt  a  delegated  act  in  accordance  with  Article  82  to 
further specify the criteria referred to in points (a), (b) and (c) of paragraph 6. 

6b.  ESMA  shall  monitor  the  regulatory  and  supervisory  developments  in  third 
countries for which implementing acts have been adopted pursuant to paragraph 6. 

Where  ESMA  identifies  any  regulatory  or  supervisory  development  in  those  third 
countries that may impact the financial stability of the Union or for one or more of its 
Member States, it shall inform the Commission confidentially and without delay. 

ESMA  shall  submit  a  confidential  report  to  the  Commission  on  the  regulatory  and 
supervisory developments in the third countries referred to in the first subparagraph 
on an annual basis.” 

(f) 

the first sentence of paragraph 7 is replaced by the following: 

“7.  ESMA  shall  establish  effective  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 
6.” 

(g) 

in paragraph 7, the following point (e) is added: 

“(d)  the  procedures  concerning  the coordination  of  supervisory  activities,  including 
the  agreement  of  third-country  authorities  to  allow  investigations  and  on-site 
inspections in accordance with Articles 25d and 25e respectively. 

(e)  the  procedures  necessary  for  the  effective  monitoring  of  regulatory  and 
supervisory developments in a third country.” 

10. 

The  following  Articles  25a,  25b,  25c,  25d,  25e,  25f,  25g,  25h,  25i,  25j,  25k,  25l, 
25m, 25m are inserted: 

“Article 25a 
Comparable compliance 

1.  The  CCP  referred  to  in  Article  25(2b)(a)  may  submit  a  reasoned  request  that 
ESMA  assesses  its  comparable  compliance  with  the  requirements  referred  to  in 
Article 25(2b)(a) and set out in Article 16 and Titles IV and V. 

2. The request referred to in paragraph 1 shall provide the factual basis for a finding 
of comparability and the reasons why compliance with the requirements applicable in 
the third country satisfies the requirements set out in Article 16 and Titles IV and V. 

3. The Commission, in order to ensure that the assessment referred to in paragraph 1 
effectively reflects the regulatory objectives of the requirements set out in Article 16 
and Titles IV and V and the Union's interests as a whole, shall adopt a delegated act 
to specify the following: 

(a) the minimum elements to be assessed for the purposes of paragraph 1; 

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(b) the modalities and conditions to carry out the assessment. 

The Commission shall adopt the delegated act referred to in the first subparagraph in 
accordance with Article 82. 

Article 25b 

Ongoing compliance with the conditions for recognition 

1.  ESMA  shall  be  responsible  for  carrying  out  the  duties  resulting  from  this 
Regulation for the supervision on an ongoing basis of the compliance of recognised 
Tier 2 CCPs with the requirements referred to in Article 25(2b)(a). 

ESMA shall require confirmation from each Tier 2 CCP at least on a yearly basis that 
the  requirements  referred  to  in  points  (a),  (b),  (c),  (d)  and  (e)  of  Article  25(2b) 
continue to be fulfilled. 

Where a central bank of issue referred to in Article 18(2)(h) considers that a Tier 2 
CCP  no  longer  fulfils  the  condition  referred  to  in  Article  25(2b)(b),  it  shall 
immediately notify ESMA. 

2. ESMA shall prepare and submit draft decisions to the central bank of issue of the 
relevant  currency  referred  to  in  Article  18(2)(h)  before  adopting  any  decision 
pursuant to Articles 41, 44, 46, 50, and 54. 

ESMA  shall  obtain,  in  accordance  with  this  paragraph,  the  consent  of  the  relevant 
central  bank  of  issue  in  respect  of  any  aspect  of  those  decisions  relating  to  the 
carrying out of their monetary policy tasks. The consent of the central bank of issue 
referred to in the second subparagraph shall be deemed to be given unless it proposes 
amendments  or  objects  to  the  draft  decision  within  15  calendar  days  after  having 
been  notified  of  the  draft  decision.  Where  the  central  bank  of  issue  proposes 
amendments or objects to a draft decision, it shall provide full and detailed reasons, 
in writing. 

Where  the  central  bank  of  issue  objects  to  a  draft  decision,  ESMA  shall  not  adopt 
that  decision.  Where  the  central  bank  of  issue  proposes  amendments,  ESMA  may 
only adopt the decision as amended by that central bank of issue. 

3. ESMA shall carry out assessments of the resilience of recognised CCPs to adverse 
market  developments  in  accordance  with  Article  32(2)  of  Regulation  (EU)  No 
1095/2010. 

Article 25c 

Request for information 

1. ESMA may by simple request or by decision require recognised CCPs and related 
third parties to whom those CCPs have outsourced operational functions or activities 
to  provide  all  necessary  information  to  enable  ESMA  to  carry  out  its  duties  under 
this Regulation. 

2.  When  sending  a  simple  request  for  information  under  paragraph  1,  ESMA  shall 
indicate all of the following: 

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(a) the reference to this Article as the legal basis of the request; 

(b) the purpose of the request; 

(c) the information required; 

(d) the time limit to provide the information; 

(e) inform the person from whom the information is requested that there is no 
obligation to provide the information but that in case of a voluntary reply to the 
request the information provided must not be incorrect or misleading; 

(f) the fine provided for in Article 25g in conjunction with point (a) of Section 
V  of  Annex  III,  where  the  answers  to  questions  asked  are  incorrect  or 
misleading. 

3.  When  requiring  that  information  is  provided  under  paragraph  1  by  decision, 
ESMA shall indicate all of the following: 

(a) the reference to this Article as the legal basis of the request; 

(b) the purpose of the request; 

(c) the information required; 

(d) the time limit to provide the information; 

(e)  the  periodic  penalty  payments  provided  for  in  Article  25h  where  the 
production of the required information is incomplete; 

(f) the fine provided for in Article 25g in conjunction with point (a) of Section 
V  of  Annex  III,  where  the  answers  to  questions  asked  are  incorrect  or 
misleading; and 

(g)  the  right  to  appeal  the  decision  before  ESMA’s  Board  of  Appeal  and  to 
have  the  decision  reviewed  by  the  Court  of  Justice  of  the  European  Union 
(‘Court of Justice’) in accordance with Articles 60 and 61 of Regulation (EU) 
No 1095/2010. 

4.  The  persons  referred  to  in  paragraph  1  or  their  representatives  and,  in  case  of 
persons  or  associations  having  no  legal  personality,  the  persons  authorised  to 
represent them by law or by their constitution shall supply the information requested. 
Lawyers duly authorised to act may supply the information on behalf of their clients. 
The  latter  shall  remain  fully  responsible  if  the  information  supplied  is  incomplete, 
incorrect or misleading. 

5. ESMA shall, without delay, send a copy of the simple request or of its decision to 
the  relevant  third-country  competent  authority  where  the  persons  referred  to  in 
paragraph 1 concerned by the request for information are domiciled or established. 

Article 25d 

General investigations 

1.  In  order  to  carry  out  its  duties  under  this  Regulation,  ESMA  may  conduct 
necessary investigations of Tier 2 CCPs. To that end, the officials and other persons 
authorised by ESMA shall be empowered to: 

(a) examine any records, data, procedures and any other material relevant to the 
execution of its tasks irrespective of the medium on which they are stored; 

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(b)  take  or  obtain  certified  copies  of  or  extracts  from  such  records,  data, 
procedures and other material; 

(c)  summon  and  ask  Tier  2  CCPs  or  their  representatives  or  staff  for  oral  or 
written  explanations  on  facts  or  documents  relating  to  the  subject  matter  and 
purpose of the inspection and to record the answers; 

(d) interview any other natural or legal person who consents to be interviewed 
for  the  purpose  of  collecting  information  relating  to  the  subject  matter  of  an 
investigation; 

(e) request records of telephone and data traffic. 

2.  The  officials  and  other  persons  authorised  by  ESMA  for  the  purposes  of  the 
investigations referred to in paragraph 1 shall exercise their powers upon production 
of  a  written  authorisation  specifying  the  subject  matter  and  purpose  of  the 
investigation.  That  authorisation  shall  also  indicate  the  periodic  penalty  payments 
provided  for  in  Article  25h  where  the  production  of  the  required  records,  data, 
procedures or any other material, or the answers to questions asked to Tier 2 CCPs 
are  not  provided  or  are  incomplete,  and  the  fines  provided  for  in  Article  25g  in 
conjunction with point (b) of Section V of Annex III, where the answers to questions 
asked to Tier 2 CCPs are incorrect or misleading. 

3.  Tier  2  CCPs  are  required  to  submit  to  investigations  launched  on  the  basis  of  a 
decision of ESMA. The decision shall specify the subject matter and purpose of the 
investigation,  the  periodic  penalty  payments  provided  for  in  Article  25h,  the  legal 
remedies  available  under  Regulation  (EU)  No  1095/2010  and  the  right  to  have  the 
decision reviewed by the Court of Justice. 

4.  Prior  to  notifying  a  Tier  2  CCP  of  an  investigation,  ESMA  shall  inform  the 
relevant  third-country  competent  authority  where  the  investigation  is  to  be  carried 
out of the investigation and of the identity of the authorised persons. Officials of the 
third-country competent authority concerned may, upon the request of ESMA, assist 
those  authorised  persons  in  carrying  out  their  duties.  Officials  of  the  third-country 
competent  authority  concerned  may  also  attend  the  investigations.  Investigations  in 
accordance  with  this  Article  shall  be  conducted  provided  that  the  relevant  third-
country authority does not object to them. 

5.  If  any  of  the  requests  referred  to  in  paragraph  1  require  authorisation  from  a 
judicial authority according to the applicable national law, such authorisation shall be 
applied for. Such authorisation may also be applied for as a precautionary measure. 

Article 25e 

On-site inspections 

1.  In  order  to  carry  out  its  duties  under  this  Regulation,  ESMA  may  conduct  all 
necessary on-site inspections at any business premises of Tier 2 CCPs. The relevant 
central bank of issue shall be invited to participate in such on-site inspections. 

2.  The  officials  and  other  persons  authorised  by  ESMA  to  conduct  an  on-site 
inspection may enter any business premises or land of the legal persons subject to an 
investigation decision adopted by ESMA and shall have all the powers stipulated in 
Article  25d(1).  They  shall  also  have  the  power  to  seal  any  business  premises  and 
books or records for the period of, and to the extent necessary for, the inspection. 

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3. In sufficient time before the inspection, ESMA shall give notice of the inspection 
to  the  relevant  third-country  competent  authority  where  the  inspection  is  to  be 
conducted.  Where  the  proper  conduct  and  efficiency  of  the  inspection  so  require, 
ESMA, after informing the relevant third-country competent authority, may carry out 
the on-site inspection without prior notice to the CCP. Inspections in accordance with 
this Article shall be conducted provided that the relevant third-country authority has 
confirmed that it does not object to those inspections. 

The officials and other persons authorised by ESMA to conduct an on-site inspection 
shall exercise their powers upon production of a written authorisation specifying the 
subject  matter  and  purpose  of  the  inspection  and  the  periodic  penalty  payments 
provided  for  in  Article  25h  where  the  persons  concerned  do  not  submit  to  the 
inspection.  

4. Tier 2 CCPs shall submit to on-site inspections ordered by decision of ESMA. The 
decision  shall  specify  the  subject  matter  and  purpose  of  the  inspection,  appoint  the 
date on which it is to begin and indicate the periodic penalty payments provided for 
in Article 25h, the legal remedies available under Regulation (EU) No 1095/2010 as 
well as the right to have the decision reviewed by the Court of Justice.  

5. Officials of, as well as those authorised or appointed by, the competent authority 
of  the  third  country  where  the  inspection  is  to  be  conducted  may,  at  the  request  of 
ESMA, actively assist the officials and other persons authorised by ESMA. Officials 
of the third-country competent authority may also attend the on-site inspections. 

6. ESMA may also request third-country competent authorities to carry out specific 
investigatory  tasks  and  on-site  inspections  as  provided  for  in  this  Article  and  in 
Article 25d(1) on its behalf. 

7.  Where  the  officials  and  other  accompanying  persons  authorised  by  ESMA  find 
that a person opposes an inspection ordered pursuant to this Article, the third-country 
competent authority concerned may afford them the necessary assistance, requesting, 
where  appropriate,  the  assistance  of  the  police  or  of  an  equivalent  enforcement 
authority, to enable them to conduct their on-site inspection. 

8. If the on-site inspection provided for in paragraph 1 or the assistance provided for 
in  paragraph  7  requires  authorisation  by  a  judicial  authority  according  to  the 
applicable  national  law,  such  authorisation  shall  be  applied  for.  Such  authorisation 
may also be applied for as a precautionary measure. 

Article 25f 

Procedural rules for taking supervisory measures and imposing fines 

1. Where, in carrying out its duties under this Regulation, ESMA finds that there are 
serious indications of the possible existence of facts liable to constitute one or more 
of  the  infringements  listed  in  Annex  III,  ESMA  shall  appoint  an  independent 
investigation  officer  within  ESMA  to  investigate  the  matter.  The  appointed  officer 
shall not be involved or have been directly or indirectly involved in the recognition 
or  supervision  process  of  the  CCP  concerned  and  shall  perform  his  functions 
independently from ESMA.  

2.  The  investigation  officer  shall  investigate  the  alleged  infringements,  taking  into 
account  any  comments  submitted  by  the  persons  who  are  subject  to  the 
investigations, and shall submit a complete file with his findings to ESMA. 

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In  order  to  carry  out  his  tasks,  the  investigation  officer  may  exercise  the  power  to 
request information in accordance with Article 25c and to conduct investigations and 
on-site  inspections  in  accordance  with  Articles  25d  and  25e.  When  using  those 
powers, the investigation officer shall comply with Article 25c(4). 

Where  carrying  out  his  tasks,  the  investigation  officer  shall  have  access  to  all 
documents and information gathered by ESMA in its activities. 

3.  Upon  completion  of  his  investigation  and  before  submitting  the  file  with  his 
findings  to  ESMA,  the  investigation  officer  shall  give  the  persons  subject  to  the 
investigations  the  opportunity  to  be  heard  on  the  matters  being  investigated.  The 
investigation  officer  shall  base  his  findings  only  on  facts  on  which  the  persons 
concerned have had the opportunity to comment. 

The  rights  of  the  defence  of  the  persons  concerned  shall  be  fully  respected  during 
investigations under this Article. 

4. When submitting the file with his findings to ESMA, the investigation officer shall 
notify  that  fact  to  the  persons  who  are  subject  to  the  investigations.  The  persons 
subject to the investigations shall be entitled to have access to the 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 affecting third 
parties. 

5. On the basis of the file containing the investigation officer’s findings  and, when 
requested  by  the  persons  concerned,  after  having  heard  the  persons  subject  to  the 
investigations in accordance with Article 25i, ESMA shall decide if one or more of 
the infringements listed in Annex III has been committed by the persons who have 
been  subject  to  the  investigations  and,  in  such  a  case,  shall  take  a  supervisory 
measure in accordance with Article 25n and impose a fine in accordance with Article 
25g. 

6.  The  investigation  officer  shall  not  participate  in  ESMA's  deliberations  or  in  any 
other way intervene in ESMA's decision-making process. 

7.  The  Commission  shall  adopt  delegated  acts  in  accordance  with  Article  82  to 
specify further the rules of procedure for the exercise of the power to impose fines or 
periodic  penalty  payments,  including  provisions  on  the  rights  of  the  defence, 
temporal provisions, and the collection of fines or periodic penalty payments, and the 
limitation periods for the imposition and enforcement of penalties. 

8.  ESMA  shall  refer  matters  for  criminal  prosecution  to  the  appropriate  authorities 
for investigation and possible criminal prosecution where, in carrying out its duties 
under  this  Regulation,  it  finds  that  there  are  serious  indications  of  the  possible 
existence  of  facts  liable  to  constitute  criminal  offences.  In  addition,  ESMA  shall 
refrain from imposing fines or periodic penalty payments where a prior acquittal or 
conviction  arising  from  identical  fact  or  facts  which  are  substantially  the  same  has 
already acquired the force of res judicata as the result of criminal proceedings under 
national law. 

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Article 25g 

Fines 

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1.  Where,  in  accordance  with  Article  25f(5),  ESMA  finds  that  a  CCP  has, 
intentionally or negligently, committed one of the infringements listed in Annex III, 
it  shall  adopt  a  decision  imposing  a  fine  in  accordance  with  paragraph  2  of  this 
Article. 

An infringement by a CCP shall be considered to have been committed intentionally 
if  ESMA  finds  objective  factors  which  demonstrate  that  the  CCP  or  its  senior 
management acted deliberately to commit the infringement. 

2. The basic amounts of the fines referred to in paragraph 1 shall be up to twice the 
amount of the profits gained or losses avoided because of the breach where those can 
be  determined,  or  up  to  10  %  of  the  total  annual  turnover,  as  defined  in  relevant 
Union law, of a legal person in the preceding business year. 

3. The basic amounts set out in paragraph 2 shall be adjusted, if need be, by taking 
into  account  aggravating  or  mitigating  factors  in  accordance  with  the  relevant 
coefficients set out in Annex IV. 

The  relevant  aggravating  coefficients  shall  be  applied  one  by  one  to  the  basic 
amount.  If  more  than  one  aggravating  coefficient  is  applicable,  the  difference 
between  the  basic  amount  and  the  amount  resulting  from  the  application  of  each 
individual aggravating coefficient shall be added to the basic amount. 

The relevant mitigating coefficients shall be applied one by one to the basic amount. 
If more than one mitigating coefficient is applicable, the difference between the basic 
amount and the amount resulting from the application of each individual mitigating 
coefficient shall be subtracted from the basic amount. 

4. Notwithstanding paragraphs 2 and 3, the amount of the fine shall not exceed 20 % 
of  the  annual  turnover  of  the  CCP  concerned  in  the  preceding  business  year  but, 
where the CCP has directly or indirectly benefited financially from the infringement, 
the amount of the fine shall be at least equal to that benefit. 

Where an act or omission of a CCP constitutes more than one infringement listed in 
Annex III, only the higher fine calculated in accordance with paragraphs 2 and 3 and 
relating to one of those infringements shall apply. 

Article 25h 

Periodic penalty payments 

1. ESMA shall, by decision, impose periodic penalty payments in order to compel: 

(a) a Tier 2 CCP to put an end to an infringement in accordance with a decision 
taken pursuant to Article 25n(1)(a);  

(b) a person referred to in Article 25c(1) to supply complete information which 
has been requested by a decision pursuant to Article 25c; 

(c) a Tier 2 CCP: 

(i)  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 a 
decision pursuant to Article 25d; or 

(ii)  to  submit  to  an  on-site  inspection  ordered  by  a  decision  taken 
pursuant to Article 25e. 

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2.  A  periodic  penalty  payment  shall  be  effective  and  proportionate.  The  periodic 
penalty payment shall be imposed for each day of delay. 

3.  Notwithstanding  paragraph  2,  the  amount  of  the  periodic  penalty  payments  shall 
be 3 % of the average daily turnover in the preceding business year, or, in the case of 
natural persons, 2 % of the average daily income in the preceding calendar year. It 
shall  be  calculated  from  the  date  stipulated  in  the  decision  imposing  the  periodic 
penalty payment. 

4. A periodic penalty payment shall be imposed for a maximum period of six months 
following  the  notification  of  ESMA's  decision.  Following  the  end  of  the  period, 
ESMA shall review the measure. 

Article 25i 

Hearing of the persons concerned 

1. Before taking  any decision  on a  fine or  periodic penalty payment under Articles 
25g and 25h, ESMA shall give the persons subject to the proceedings the opportunity 
to be heard on its findings. ESMA shall base its decisions only on findings on which 
the persons subject to the proceedings have had an opportunity to comment. 

2. The rights of the defence of the persons subject to the proceedings shall be fully 
respected in the proceedings. They shall be entitled to have access to ESMA’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 or 
ESMA’s internal preparatory documents. 

Article 25j  

Disclosure, nature, enforcement and allocation of fines and periodic penalty 
payments 

1.  ESMA  shall  disclose  to  the  public  every  fine  and  periodic  penalty  payment  that 
has  been  imposed  pursuant  to  Articles  25g  and  25h  unless  such  disclosure  to  the 
public  would  seriously  jeopardise  the  financial  markets  or  cause  disproportionate 
damage  to  the  parties  involved.  Such  disclosure  shall  not  contain  personal  data 
within the meaning of Regulation (EC) No 45/2001. 

2.  Fines  and  periodic  penalty  payments  imposed  pursuant  to  Articles  25g  and  25h 
shall be of an administrative nature. 

3. Where ESMA decides to impose no fines or penalty payments, it shall inform the 
European  Parliament,  the  Council,  the  Commission,  and  the  relevant  third-country 
competent authorities accordingly and shall set out the reasons for its decision. 

4.  Fines  and  periodic  penalty  payments  imposed  pursuant  to  Articles  25g  and  25h 
shall be enforceable. 

Enforcement shall be governed by the rules of civil procedure in force in the Member 
State or third-country in which it is carried out. 

5. The amounts of the fines and periodic penalty payments shall be allocated to the 
general budget of the European Union. 

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Article 25k 

Review by the Court of Justice 

The  Court  of  Justice  shall  have  unlimited  jurisdiction  to  review  decisions  whereby 
ESMA  has  imposed  a  fine  or  a  periodic  penalty  payment.  It  may  annul,  reduce  or 
increase the fine or periodic penalty payment imposed. 

Article 25l 

Amendments to Annex IV 

In order to take account of developments on financial markets the Commission shall 
be  empowered  to  adopt  delegated  acts  in  accordance  with  Article  82  concerning 
measures to amend Annex IV. 

Article 25m 

Withdrawal of recognition 

1. Without prejudice to Article 25n, and subject to the following paragraphs, ESMA 
shall withdraw a recognition decision adopted in accordance with  Article 25 where 
the CCP concerned: 

(a) does not make use of the recognition within 6 months, expressly renounces 
the authorisation or has ceased to engage in business for more than six month; 

(b)  has  obtained  the  recognition  through  false  statements  or  by  any  other 
irregular means; 

(c) no longer meets the conditions for recognition pursuant to Article 25(2b); 

(d)  the  implementing  act  referred  to  in  Article  25(6)  has  been  withdrawn  or 
suspended, or any of the conditions attached to it is no longer satisfied.  

ESMA may limit the withdrawal of the recognition to a particular service, activity or 
class of financial instruments. 

When  determining  the  date  of  entry  into  effect  of  the  decision  to  withdraw  the 
recognition ESMA shall endeavor to minimise market disruption 

2.  Where  ESMA  considers  that  the  criterion  referred  to  in  point  (c)  of  the  first 
paragraph  is  fulfilled  in  relation  to  a  CCP,  ESMA  shall  inform  that  CCP  and  the 
relevant  third-country  authorities  prior  to  withdrawing  a  recognition  decision,  and 
request that appropriate action is taken within a set timeframe of up to a maximum of 
3 months to remedy the situation.  

Where  ESMA  determines  that  remedial  action  within  the  set  timeframe  or  that  the 
action taken is not appropriate, it shall withdraw the recognition decision. 

3.  ESMA  shall,  without  undue  delay,  notify  the  relevant  third-country  competent 
authority of a decision to withdraw the recognition of a recognised CCP. 

4. Any of the authorities referred to in Article 25(3) which consider that one of the 
conditions  referred  to  in  paragraph 1  has  been  met  may  request  ESMA  to  examine 
whether  the  conditions  for  the  withdrawal  of  recognition  of  a  recognised  CCP 
concerned  are  met.  Where  ESMA  decides  not  to  withdraw  the  registration  of  the 
recognised CCP concerned, it shall provide full reasons to the requesting authority. 

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Article 25n 

Supervisory measures 

1.  Where,  in  accordance  with  Article  25f(5),  ESMA  finds  that  a  Tier  2  CCP  has 
committed one of the infringements listed in Annex III, it shall take one or more of 
the following decisions: 

(a) require the CCP to bring the infringement to an end; 

(b) impose fines under Article 25g; 

(c) issue public notices; 

(d) withdraw the recognition of a CCP under Article 25m. 

2.  When  taking  the  decisions  referred  to  in  paragraph  1,  ESMA  shall  take  into 
account  the  nature  and  seriousness  of  the  infringement,  having  regard  to  the 
following criteria: 

(a) the duration and frequency of the infringement; 

(b)  whether  the  infringement  has  revealed  serious  or  systemic  weaknesses  in 
the CCP's procedures or in its management systems or internal controls; 

(c)  whether  financial  crime  has  been  occasioned,  facilitated  or  otherwise 
attributable to the infringement; 

(d) whether the infringement has been committed intentionally or negligently. 

3.  Without  undue  delay,  ESMA  shall  notify  any  decision  adopted  pursuant  to 
paragraph  1  to  the  CCP  concerned,  and  shall  communicate  it  to  the  relevant  third-
country  competent  authorities  and  the  Commission.  It  shall  publicly  disclose  any 
such  decision  on  its  website  within  10  working  days  from  the  date  when  it  was 
adopted. 

When making public its decision as referred to in the first subparagraph, ESMA shall 
also  make  public  the  right  of  the  CCP  concerned  to  appeal  the  decision,  the  fact, 
where relevant, that such an appeal has been lodged, specifying that such an appeal 
does not have suspensive effect, and the fact that it is possible for ESMA’s Board of 
Appeal  to  suspend  the  application  of  the  contested  decision  in  accordance  with 
Article 60(3) of Regulation (EU) No 1095/2010.” 

11. 

(a) 

Article 49 is amended as follows: 

Paragraph 1 is replaced by the following: 

“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 obtain independent validation, shall inform its competent authority and ESMA 
of the results of the tests performed and shall obtain the validation of the competent 
authority in accordance with paragraphs (1a) before adopting any significant change 
to the models and parameters.  

The adopted models and parameters, including any significant change thereto, shall 
be subject to an opinion of the college in accordance with the following paragraphs. 

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ESMA shall ensure that information on the results of the stress tests is passed on to 
the  ESAs,  the  ESCB  and  the  Single  Resolution Board  to  enable  them  to  assess the 
exposure of financial undertakings to the default of CCPs.” 

(b) 

The following paragraphs 1a, 1b, 1c, 1d, 1e and 1f are added: 

“1a.  Where  a  CCP  intends  to  adopt  any  significant  change  to  the  models  and 
parameters  referred  to  in  paragraph  1,  it  shall  apply  to  the  competent  authority  for 
validation  of  that  change.  The  CCP  shall  enclose  an  independent  validation  of  the 
intended change to its application. 

1b. Within 30 working days of the receipt of the application, the competent authority, 
in consultation with ESMA, shall conduct a risk assessment of the CCP and submit a 
report to the college established in accordance with Article 18. 

1c. Within 15 working days of the receipt of the report referred to in paragraph 1b, 
the college shall adopt a majority opinion in accordance with Article 19(3). 

1d. Within 60 working days of the receipt of the application referred to in paragraph 
1a,  the  competent  authority  shall  inform  the  CCP  in  writing,  with  a  fully  reasoned 
explanation, whether the validation has been granted or refused. 

1e.  The  CCP  may  not  adopt  any  significant  change  to  the  models  and  parameters 
referred to in paragraph 1 before obtaining the validation referred to in paragraph 5. 
The  CCP's  competent  authority,  in  agreement  with  ESMA,  may  allow  for  a 
provisional adoption of a significant change those models or  parameters prior to its 
validation where duly justified. 

12. 

In Article 89, the following paragraphs are added: 

“3a.  ESMA  shall  not  exercise  its  powers  pursuant  to  paragraph  2a,  2b  and  2c  of 
Article 25 until [insert date of entry into force of the delegated act referred to in the 
second subparagraph of paragraph 3 of that Article]  

3b. ESMA shall review the recognition decisions adopted pursuant to Article 25(1) 
before  [entry  into  force  of  this  Regulation]  within  12  months  from  the  entry  into 
force of the delegated act referred to in the second subparagraph of Article 25(2a), in 
accordance with Article 25(5)." 

13. 

The texts set out in the Annex to this Regulation are added as Annexes III and IV. 

This Regulation shall enter into force on the twentieth day following that of its publication in 
the Official Journal of the European Union. 

Article 3 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1.  Title of the proposal/initiative  

1.2.  Policy area(s) concerned in the ABM/ABB structure 

1.3.  Nature of the proposal/initiative  

1.4.  Objective(s)  

1.5.  Grounds for the proposal/initiative  

1.6.  Duration and financial impact  

1.7.  Management mode(s) planned  

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

2.2.  Management and control system  

2.3.  Measures to prevent fraud and irregularities  

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

3.2.  Estimated impact on expenditure  

3.2.1. Summary of estimated impact on expenditure  

3.2.2. Estimated impact on operational appropriations  

3.2.3. Estimated impact on appropriations of an administrative nature 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions  

3.3.  Estimated impact on revenue

EN 

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1.  Title of the proposal/initiative  

1.2.  Policy area(s) concerned 

1.3.  Nature of the proposal/initiative  

1.4.  Objective(s)  

1.5.  Grounds for the proposal/initiative  

1.6.  Duration and financial impact  

1.7.  Management mode(s) planned  

2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

2.2.  Management and control system  

2.3.  Measures to prevent fraud and irregularities  

3. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1.  Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

3.2.  Estimated impact on expenditure  

3.2.1. Summary of estimated impact on expenditure  

3.2.2. Estimated impact on operational appropriations  

3.2.3. Estimated impact on appropriations of an administrative nature 

3.2.4. Compatibility with the current multiannual financial framework 

3.2.5. Third-party contributions  

3.3.  Estimated impact on revenue

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LEGISLATIVE FINANCIAL STATEMENT 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative  

Proposal for a Regulation of the European Parliament and of the Council amending 
Regulation  (EU)  No  1095/2010  establishing  a  European  Supervisory  Authority 
(European  Securities  and  Markets  Authority)  and  amending  Regulation  (EU)  No 
648/2012 as regards the procedures and authorities involved for the authorisation of 
CCPs and requirements for the recognition of third-country CCPs. 

1.2. 

Policy area(s) concerned  

Internal Market - Financial markets 

1.3. 

Nature of the proposal/initiative  

X The proposal/initiative relates to a new action  

  The  proposal/initiative 
project/preparatory action55  

relates 

to  a  new  action 

following  a  pilot 

 The proposal/initiative relates to the extension of an existing action  

 The proposal/initiative relates to an action redirected towards a new action  

1.4. 

Objective(s) 

1.4.1.  The  Commission's  multiannual 

strategic  objective(s) 

targeted  by 

the 

proposal/initiative  

Contribute to a deeper and fairer internal market. 

1.4.2. 

Specific objective(s) 

Specific objective No 

2.5 The financial regulatory framework is evaluated, appropriately implemented and 
enforced across the EU. 

2.6  Financial  institutions  can  absorb  losses  and  liquidity  shocks,  financial  market 
infrastructures are stable and function effectively, and structural and cyclical macro-
prudential risks are proactively addressed. 

55 

As referred to in Article 54(2)(a) or (b) of the Financial Regulation. 

EN 

63 

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1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

Enhanced supervision of CCPs at EU level. 

More involvement of central banks of issue in the supervision of CCPs. 

Better ability of the EU to monitor, identify and mitigate third-country CCP risks. 

1.4.4. 

Indicators of results and impact  

Specify the indicators for monitoring implementation of the proposal/initiative. 

Possible indicators: 

• 

Number of CCPs that have entered into recovery or resolution; 

Number of times the dispute resolution mechanism has been used by national 

• 
competent authorities; 

• 

• 

Number of on-site inspections of third-country CCPs; 

Number of recognised third-country CCPs; 

Number  of  infringements  of  equivalence  and/or  recognition  conditions  by 

• 
third-country CCPs; 

• 

Estimated costs to EU counterparties. 

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term  

Since the adoption of EMIR, the volume of CCP activity – in the EU and globally – 
has  grown  rapidly  not  only  in  scale  and  but  also  scope.  This  expansion  in  CCP 
activity is likely  to continue in the coming  years as  further clearing  obligations are 
introduced and the incentives to mitigate risks and costs lead to additional voluntary 
clearing.  However, 
limited. 
Accordingly,  clearing  markets  are  integrated  across  the  EU  and  are  highly 
concentrated in certain asset classes. They are also highly interconnected. 

the  number  of  CCPs  has  remained  relatively 

Under EMIR, EU CCPS are supervised by colleges of national supervisors, ESMA, 
relevant  members  of  the  ESCB  and  other  relevant  authorities.  These  arrangements 
raise several concerns: CCPs in  individual  Member States are increasingly  relevant 
for  the  EU  financial  system  as  a  whole;  divergent  supervisory  practices  can  create 
risks  of  regulatory  and  supervisory  arbitrage;  and  the  role  of  central  banks  is  not 
adequately  reflected  in  CCP  colleges.  Third-country  CCPs  however  clear  a 
significant volume of instruments denominated in EU currencies. This creates issues 
relating  to:  shortcomings  in  EMIR's  system  of  equivalence  and  recognition  as 
regards  ongoing  supervision;  potential  misalignments  between  supervisory  and 
central bank objectives; and the mechanism for ongoing monitoring of third country 
rules. 

The proposal should address these challenges. 

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1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

Reasons for action at European level (ex-ante): 

EMIR sets out the supervisory framework applying both to CCPs established in the 
EU and to third-country CCPs that provide clearing services to clearing members or 
trading  venues  established  in  the  EU.  Under  EMIR,  the  Member  State  of 
establishment  of  the  CCP  plays  a  major  role  in  the  supervisory  arrangements. 
However,  Member  States  and  national  supervisors  unilaterally  cannot  solve  the 
systemic  risks  posed  by  highly  integrated  and  interconnected  CCPs,  which  operate 
on  a  cross-border  basis  beyond  the  scope  of  national  jurisdictions.  In  addition, 
Member  States  cannot  mitigate  on  their  own  risks  arising  from  diverging  national 
supervisory practices. Member States and national authorities cannot address on their 
own the systemic risks that third-country CCPs can pose to the financial stability of 
the EU as a whole.  

Expected generated Union added value (ex-post): 

The  proposal  should  improve  the  coherence  and  further  strengthen  the  supervisory 
arrangements  for  CCPs  established  in  the  EU  and  enable  EU  authorities  to  better 
monitor  and  mitigate  risk  related to  the  EU's  exposure  to  third  country CCPs.  This 
will  help  to  lower  even  further  the  already  low  probability  (but  extremely  high 
impact) risk of a CCP failure and reinforce the overall stability of the EU financial 
system as a whole. The enhanced supervisory framework will also improve legal and 
economic certainty. 

1.5.3.  Lessons learned from similar experiences in the past 

The proposal learns from the past experience with EMIR, notably in relation to the 
operation  of  the  EU  supervisory  regime  for  CCPs  and  the  current  equivalence 
framework for third country CCPs, to establish requirements at the appropriate levels 
where necessary. See Section 1.5.1 for further information. 

1.5.4.  Compatibility and possible synergy with other appropriate instruments 

The objectives of the initiative are consistent with a number of other EU policies and 
ongoing  initiatives  that  aim  to:  (i)  address  the  systemic  importance  of  CCPs;  (ii) 
develop  the  CMU;  (iii)  enhance  the  efficiency  and  effectiveness  of  EU-level 
supervision,  both  within  and  outside  the  EU;  and  (iv)  promote  further  the  use  of 
central clearing.  
First, this initiative is consistent with the Commission's proposal56 for a Regulation 
on CCP Recovery and Resolution adopted in November 2016. That proposal seeks to 
ensure that EU and national authorities are appropriately prepared to address a failing 
CCP,  maintain  financial  stability  and  avoid  that  costs  associated  with  the 
restructuring and the resolution of failing CCPs fall on taxpayers. The Commission's 
proposal  aims  to  ensure  that,  in  the  unlikely  scenario  where  CCPs  face  severe 
distress  or  failure,  the  critical  functions  of  CCPs  are  preserved  while  maintaining 

56 

Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  on  a  framework  for  the 
recovery and resolution of central counterparties and amending Regulations (EU) No 1095/2010, (EU) 
No 648/2012, and (EU) 2015/2365. 

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financial  stability  and  helping  to  avoid  that  costs  associated  with  the  restructuring 
and  the  resolution  of  failing  CCPs  fall  on  taxpayers.  The  crisis-management 
arrangements  for  recovery  and  resolution  of  CCPs  included  in  that  proposal  are 
based on the existence of the highest quality arrangements for crisis prevention (i.e. 
for  CCP  regulation  and  supervision)  under  EMIR.  By  further  enhancing  the 
supervision of CCPs under EMIR, the likelihood, however small, of needing to resort 
to recovery and resolution measures should be further diminished.  

Second, it is consistent with the Commission's ongoing efforts to further develop the 
Capital  Markets  Union  ('CMU').  Further  supervisory  convergence  of  CCPs  at  EU 
level can support the development of deeper and better integrated capital markets, as 
more efficient and resilient CCPs are essential elements for the well-functioning of 
CMU.  The  urgency  of  further  developing  and  integrating  EU  capital  markets  was 
stressed  in  the  Communication  on  CMU  of  September  201657.  Conversely,  the 
emergence of larger and more liquid financial markets implied by CMU will result in 
even  more  transactions  being  cleared  via  CCPs,  and  will  increase  the  systemic 
relevance of CCPs. Given the potential for increased volumes as well as the current 
opportunities  for  regulatory  and  supervisory  arbitrage,  further  enhancements  of  the 
supervisory framework are required in order to ensure a strong and stable CMU.  

Third, it is consistent with the March 2017 consultation launched by the Commission 
on  the  operations  of  the  ESAs58,  with  a  view  to  strengthening  and  improving  the 
effectiveness and efficiency of the ESAs. 

Fourth,  it  is  consistent  with  DG  FISMA's  experience  with  the  implementation  and 
enforcement of third-country provisions in EU financial legislation, as set out in its 
Staff Working Document on equivalence59. The Staff Working Document provides a 
factual  overview  of  the  equivalence  process  with  third  countries  in  EU  financial 
services legislation. It sets out DG FISMA's experience with the implementation and 
enforcement of third-country provisions in EU financial legislation. It also presents 
the key aspects of equivalence (e.g. exercise of empowerments, assessment, ex-post 
monitoring) and provides more clarity on how DG FISMA approaches these tasks in 
practice.  
Fifth,  it  is  consistent  with  the  Commission's  proposal60  for  an  amendment  to  the 
Capital Requirements Regulation (CRR)61 adopted in November 2016. The proposal 
seeks  to  exclude  from  the  calculation  of  the  leverage  ratio  thresholds  the  initial 
margins on centrally-cleared derivative transactions received by clearing members in 

57 

58 

59 

60 

61 

"Capital Markets Union - Accelerating Reform", 14.9.2016, COM(2016) 601 final, available at  
https://ec.europa.eu/transparency/regdoc/rep/1/2016/EN/1-2016-601-EN-F1-1.PDF  

"Public consultation on the operations of the European Supervisory Authorities", 21.03.2017, available 
at https://ec.europa.eu/info/finance-consultations-2017-esas-operations_en  

"EU  equivalence  decisions  in  financial  services  policy:  an  assessment",  27.02.2017,  SWD(2017)  102 
final, available at  
https://ec.europa.eu/info/sites/info/files/eu-equivalence-decisions-assessment-27022017_en.pdf  

Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EU) No 
575/2013  as  regards  the  leverage  ratio,  the  net  stable  funding  ratio,  requirements  for  own  funds  and 
eligible liabilities, counterparty credit risk, market risk, exposures to central counterparties, exposures 
to  collective  investment  undertakings,  large  exposures,  reporting  and  disclosure  requirements  and 
amending Regulation (EU) No 648/2012. 
Regulation  (EU)  no  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential requirements for credit institutions and investment firms. 

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cash  from  their  clients  and  passed  on  to  CCPs.  It  will,  therefore,  ease  access  to 
clearing – as the capital requirements to offer client or indirect clearing services will 
diminish – again reinforcing the importance of CCPs within the financial system. 

EN 

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1.6. 

Duration and financial impact  

 Proposal/initiative of limited duration  

–    Proposal/initiative in effect from [DD/MM]YYYY to [DD/MM]YYYY  

–    Financial impact from YYYY to YYYY  

X Proposal/initiative of unlimited duration 

–  Implementation with a start-up period from entry into force of the Regulation to 2 

years after the entry into force of the Regulation, 

–  followed by full-scale operation. 
1.7.  Management mode(s) planned62  

  Direct management by the Commission 

–   by its departments, including by its staff in the Union delegations;  

–    by the executive agencies  

 Shared management with the Member States  

X Indirect management by entrusting budget implementation tasks to: 

–   third countries or the bodies they have designated; 

–   international organisations and their agencies (to be specified); 

–  the EIB and the European Investment Fund; 

–   bodies referred to in Articles 208 and 209 of the Financial Regulation; 

–   public law bodies; 

–   bodies governed by private law with a public service mission to the extent that 

they provide adequate financial guarantees; 

–   bodies governed by the private law of a Member State that are entrusted with 
the  implementation  of  a  public-private  partnership  and  that  provide  adequate 
financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

– 

If more than one management mode is indicated, please provide details in the ‘Comments’ section. 

Comments  

N/A 

62 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

EN 

68 

   EN 

 
                                                 
2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

In  line  with  already  existing  arrangements  ESMA  prepares  regular  reports  on  its 
activity  (including  internal  reporting  to  Senior  Management,  MB  reporting,  six 
month  activity  reporting  to  BoS  and  the  production  of  the  annual  report),  and 
undergoes audits by the Court of Auditors and the Internal Audit Service on its use of 
resources. Monitoring and reporting of the present proposed actions will comply with 
the same already existing requirements. 

2.2.  Management and control system  

2.2.1.  Risk(s) identified  

In  relation  to  the  legal,  economic,  efficient  and  effective  use  of  appropriations 
resulting  from  the  proposal,  it  is  expected  that  the  proposal  would  not  bring  about 
new  risks  that  would  not  be  currently  covered  by  an  existing  internal  control 
framework. 

2.2.2. 

Information concerning the internal control system set up 

Management  and  control  systems  as  provided  for  in  the  ESMA  Regulation  are 
already implemented. ESMA works closely together with the Internal Audit Service 
of  the  Commission  to  ensure  that  the  appropriate  standards  are  met  in  all  internal 
controls areas. These arrangements will apply also with regard to the role of ESMA 
according  to  the  present  proposal.  Annual  internal  audit  reports  are  sent  to  the 
Commission, Parliament and Council. 

2.2.3.  Estimate of the costs and benefits of the controls and assessment of the expected level 

of risk of error  

N/A 

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures. 

For  the  purposes  of  combating  fraud,  corruption  and  any  other  illegal  activity,  the 
provisions of Regulation (EC) No 1073/1999 of the European Parliament and of the 
Council of 25 May 1999 concerning investigations conducted by the European Anti-
Fraud Office (OLAF) shall apply to ESMA without any restrictions.  

ESMA shall accede to the Interinstitutional Agreement of 25 May 1999 between the 
European Parliament, the Council of the European Union and the Commission of the 
European  Communities  concerning  internal  investigations  by  the  European  Anti-
Fraud  Office  (OLAF)  and  shall  immediately  adopt  appropriate  provisions  for  all 
ESMA staff. 

The  funding  decisions  and  the  agreements  and  the  implementing  instruments 
resulting from them shall explicitely stipulate that the Court of Auditors and OLAF 
may, if need be, carry out on the spot checks on the beneficiaries of monies disbursed 
by ESMA as well as on the staff responsible for allocating these monies. 

EN 

69 

   EN 

 
3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of  
expenditure 

Contribution  

Heading of 
multiannual 
financial 
framework 

Number  
[…][Heading………………………...………
……] 

Diff./Non-
diff.63 

from 
EFTA 
countries
64 

from 
candidate 
countries65 

from third 
countries 

within the 
meaning of 
Article 21(2)(b) of 
the Financial 
Regulation  

1a 

12.02 06 ESMA 

Diff. 

YES 

NO 

NO 

NO 

63 
64 
65 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

EN 

70 

   EN 

 
 
 
                                                 
3.2. 

Estimated impact on expenditure  

This legislative initiative will have the following impacts on expenditures: 

1. The hiring of 47 new temporary agents at ESMA (as from August 2018). See Annex for more information on its role and the ways its cost was 
calculated. 

2. The cost of these new temporary agents will be fully funded by fees raised from the industry (no impact on EU budget). However, assuming 
that the adoption and entry into force of the proposal would take place mid-2018, the fact that the Commission would have to prepare a delegated 
act specifying the type of fees, the matters to which the fees are due, the amount of the fees and the manner in which they are to be paid, there 
will be no fees collection before at best mid-2019. As ESMA would however incur costs under the Regulation from the entry into force of the 
Regulation,  there  is  a  need  to  obtain  additional  budget  from  the  EU  in  2018  and  2019  in  order  to  cover  for  at  least  the  12  first  months  of 
operations following the entry into force of the Regulation.  

The fees to be collected will also cover the costs incurred as from 2018, allowing ESMA to return the advance made by the EU at the lastest in 
2020. 

This additional budget should come from the general budget, as DG FISMA's budget cannot cover for such an amount. 

3.2.1. 

Summary of estimated impact on expenditure  

EUR million (to three decimal places) 

Heading of multiannual financial  
framework  

Number  Heading 1a Competitiveness for growth and jobs 

DG: FISMA 

 Operational appropriations  

12.02 06 

Number of budget line 

Year 
2018 

Year 
2019 

Year 
2020 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

Commitments 

Payments 

Commitments 

Payments 

(1) 

(2) 

(1a) 

(2a) 

4 310 555 
4 310 555 

7 788 789 
7 788 789 

EN 

71 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appropriations  of  an  administrative  nature  financed  from  the 
envelope of specific programmes66  

Number of budget line 

TOTAL appropriations 
for DG FISMA 

 TOTAL operational appropriations  

Commitments 

Payments 

Commitments 

Payments 

  TOTAL  appropriations  of  an  administrative  nature 
financed from the envelope for specific programmes  

(3) 

=1+1a 
+3 

=2+2a 

+3 

(4) 

(5) 

(6) 

TOTAL appropriations  
under HEADING <….> 
of the multiannual financial framework 

Commitments 

=4+ 6 

Payments 

=5+ 6 

4 310 555 

7 788 789 

4 310 555 

7 788 789 

66 

EN 

Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, 
direct research. 

72 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Heading of multiannual financial  
framework  

5 

‘Administrative expenditure’ 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6)  

TOTAL 

EUR million (to three decimal places) 

DG: <…….> 

 Human resources  
 Other administrative expenditure  

TOTAL DG <…….> 

Appropriations  

TOTAL appropriations 
under HEADING 5 
of the multiannual financial framework  

(Total  commitments  = 
Total payments) 

TOTAL appropriations  
under HEADINGS 1 to 5 
of the multiannual financial framework  

Commitments 

Payments 

Year 
N67 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as 
necessary to show the duration 
of the impact (see point 1.6) 

TOTAL 

EUR million (to three decimal places) 

67 

Year N is the year in which implementation of the proposal/initiative starts. 

EN 

73 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.2.  Estimated impact on operational appropriations  

–    The proposal/initiative does not require the use of operational appropriations  

–    The proposal/initiative requires the use of operational appropriations, as explained below: 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

OUTPUTS 

Commitment appropriations in EUR million (to three decimal places) 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

o
N

Cost  N

o

Cost 

o
N

Cost 

o
N

Cost  N

o

Cost  N

o

Cost  N

o

Cost 

Total 
No 

Total 
cost 

Indicate 
objectives and 
outputs  

 

Type68 

Avera
ge 
cost 

SPECIFIC OBJECTIVE No 169… 

- Output 

- Output 

- Output 

Subtotal for specific objective No 1 

SPECIFIC OBJECTIVE No 2 ... 

- Output 

Subtotal for specific objective No 2 

TOTAL COST 

68 
69 

Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.). 
As described in point 1.4.2. ‘Specific objective(s)…’  

EN 

74 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.  Estimated impact on appropriations of an administrative nature 

3.2.3.1.  Summary  

–    The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–    The proposal/initiative requires the use of appropriations of an administrative 

nature, as explained below: 

EUR million (to three decimal places) 

Year 
N 70 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show the 
duration of the impact (see point 1.6) 

TOTAL 

HEADING 5 
of the multiannual 
financial framework 

Human resources  

Other administrative 
expenditure  

Subtotal HEADING 5 
of the multiannual 
financial framework  

Outside HEADING 571 
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 5 
of the multiannual 
financial framework  

TOTAL 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the 
DG,  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the  managing  DG  under  the  annual 
constraints.
allocation 

procedure 

budgetary 

light 

and 

the 

of 

in 

70 
71 

Year N is the year in which implementation of the proposal/initiative starts. 
Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of 
EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

75 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.3.2.  Estimated requirements of human resources 

–    The proposal/initiative does not require the use of human resources.  

–  X  The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full time equivalent units 

Year 
2018 

Year 
2019 

Year 2020 

Ye
ar 
202
1 

Enter 
as 
many 
years 
as 
necessa
ry to 
show 
the 
duratio
n of the 
impact 
(see 
point 
1.6) 

 Establishment plan posts (officials and temporary staff) 

XX 01 01 01 (Headquarters and Commission’s 
Representation Offices) 

XX 01 01 02 (Delegations) 

XX 01 05 01 (Indirect research) 

10 01 05 01 (Direct research) 

 External staff (in Full Time Equivalent unit: FTE)72 

XX 01 02 01 (AC, END, INT from the ‘global 
envelope’) 

XX 01 02 02 (AC, AL, END, INT and JED in the 
delegations) 

XX 01 04 yy 73 

- at Headquarters 

- in Delegations  

XX 01 05 02 (AC, END, INT - Indirect research) 

10 01 05 02 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

XX is the policy area or budget title concerned. 

The human resources required will be met by staff from the DG who are already assigned to management of the 
action  and/or  have  been  redeployed  within  the  DG,  together  if  necessary  with  any  additional  allocation  which 
may  be  granted  to  the  managing  DG  under  the  annual  allocation  procedure  and  in  the  light  of  budgetary 
constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

External staff 

NA  

NA 

72 

73 

AC=  Contract  Staff;  AL  =  Local  Staff;  END=  Seconded  National  Expert;  INT  =  agency  staff; 
JED= Junior Experts in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 

EN 

76 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
3.2.4.  Compatibility with the current multiannual financial framework  

–    The proposal/initiative is compatible the current multiannual financial framework. 

–  X  The proposal/initiative will entail reprogramming of the relevant heading in the multiannual financial framework. 

Explain what reprogramming is required, specifying the budget lines concerned and the corresponding amounts. 

A reprogramming of ESMA budget line 12.02.06 is required. Although the full amounts envisaged (see Annex for details) will be covered by fees from EU and third 
country  CCPs,  an  advance  will  be  required  from  the  EU  budget  to  cover  the  costs  incurred  during  at  least  the  first  6  months  of  operation  (i.e.  2018  budget)  and  at  a 
maximum the first 12 months of operation. 

After the adoption of the proposal, the Commission will be required to adopt a delegated act specifying in detail the methodology for calculating and collecting the fees 
from EU and third country CCPs. This will then require non-objection from the European Parliament and Council and publication in the official journal before fees can 
start being collected. Nevertheless, these costs should be recuperated over time. 

–    The proposal/initiative requires application of the flexibility instrument or revision of the multiannual financial framework. 

Explain what is required, specifying the headings and budget lines concerned and the corresponding amounts. 

[…] 

3.2.5.  Third-party contributions  

–  The proposal/initiative does not provide for co-financing by third parties.  

–  The proposal/initiative provides for the co-financing estimated below: 

Year 
2018 

Year 
2019 

Year 
2020 

Year 
2021 

Enter as many years as necessary 
to show the duration of the 
impact (see point 1.6) 

Total 

Appropriations in EUR million (to three decimal places) 

Specify  the  co-financing 
body:  

TOTAL appropriations 
co-financed  

EN 

77 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated impact on revenue  

–    The proposal/initiative has no financial impact on revenue. 

–    The proposal/initiative has the following financial impact: 

– 

– 

 

 

on own resources  

on miscellaneous revenue  

Appropriation
s available for 
the current 
financial year 

Budget revenue line: 

Article …………. 

Impact of the proposal/initiative74 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show 
the duration of the impact (see point 1.6) 

For miscellaneous ‘assigned’ revenue, specify the budget expenditure line(s) affected. 

[…] 

Specify the method for calculating the impact on revenue. 

[…] 

EUR million (to three decimal places) 

74 

EN 

As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net amounts, i.e. gross amounts after deduction of 25 % for collection 
costs. 

78 

EN 

 
  
 
 
 
 
 
 
 
 
 
 
 
                                                 
Annex to the legislative financial statement for a Proposal for a Regulation of the European 
Parliament  and  of  the  Council  amending  Regulation  (EU)  No  1095/2010  establishing  a 
European Supervisory Authority (European Securities and Markets Authority) and amending 
Regulation  (EU)  No  648/2012  as  regards  the  procedures  and  authorities  involved  for  the 
authorisation of CCPs and requirements for the recognition of third-country CCPs. 

The  costs  related  to  the  tasks  to  be  carried  out  by  ESMA  have  been  estimated  for  staff 
expenditure  in  conformity  with  the  cost  classification  in  the  ESMA  draft  budget  for  2018. 
These estimates may nevertheless need to be revisited if the financing of the ESAs were to be 
changed in a proposal of the Commission on the review the ESAs. 

Additional tasks 

The  proposal  of  the  Commission  includes  provisions  giving  new  or  expanded  tasks  for 
ESMA.  First,  ESMA  will  be  required  to  take  on  a  broader  range  of  supervisory  tasks  in 
relation to third-country CCPs. For 'tier 1' CCPs, this would mean a more intensive follow-up 
on the recognition process, potentially including onsite inspections and direct meetings with 
the CCPs. For 'tier 2' CCPs this would imply a de facto supervision of the third-country CCPs. 
As  such,  ESMA  would  have  to  have  the  necessary  resources  to  engage  in  such  supervisory 
activity. Second, the staff for the newly established CCP Executive Session will be financed 
from ESMA's budget, notably the permanent members of the CCP Executive Session. Third, 
ESMA  will  have  its  own  additional  tasks  supporting  the  work  of  a  newly  established  CCP 
Executive  Session  which  will  create  more  convergence  in  supervisory  practices  across  the 
EU.  Finally,  the  proposal  contains  provisions  which  would  require  ESMA  to  develop 
technical advice for the preparation of several Commission delegated acts that should ensure 
that provisions of a highly technical nature are consistently implemented across the EU. It can 
not  be  excluded  that,  under  the  existing  empowerments  in  EMIR,  amendments  to  existing 
Regulatory Technical  Standards  or  Implementing  Technical  Standards  could  be  proposed  in 
order to reflect changes in this proposal (e.g. existing RTS on colleges). In addition, ESMA 
may have to renegotiate cooperation arrangements with relevant authorities of third countries. 

The  CCP  Executive  Session  will  have  5  permanent  members.  The  main  tasks  of  the  CCP 
Executive Session will be to review and to endorse (or not as the case may be)  supervisory 
decisions  of  NCAs  in  relation  to  certain  requirements  under  EMIR,  notably  authorisation 
withdrawal  of  authorisation,  prudential  requirements  of  CCPs  and 
interoperability 
arrangements.  This  will require  an  expert  analysis  and  understanding  of the  decisions  being 
presented to the CCP Executive Session for reflection, an assessment of the risks and benefits 
of the decision as well as the necessary coordination and dialogue with the Central Bank of 
Issue and national competent authorities, in particular those in the existing EMIR college.  

Regarding the timing, it has been assumed that the Regulation will enter into force mid-2018. 
The additional ESMA resources are therefore required from mid-2018. As regards the nature 
of  the  positions,  the  successful  and  timely  delivery  of  the  establishment  of  the  new  CCP 
Executive  Session  and  the  implementation  of  the  new  supervisory  framework  for  EU  and 
third  country  CCPs  will  require  additional  resources  to  be  allocated  to  tasks  on  CCP 
supervision,  consisting  of  but  not  limited  to:  day-to-day  contact  (physical  meetings, 
conference  calls,  etc)  with  CCP  management,  compliance,  legal,  IT,  risk  management, 
financial,  business  and  operations  teams;  assessment  of  risk  models,  CCP  rulebook  and 
procedures,  board  and  executive  staff  appointments,  outsourced  services,  extension  of 
activities  and  services,  IT  solutions,  capital  adequacy,  CCP's  shareholders  /  shareholding 
structure,  and  interoperability  arrangements;  review  of  internal  audits;  comprehensive  risk 
assessment;  issuance  of  recommendations  and  crisis  management.  Staff  will  be  required  to 

EN 

79 

   EN 

 
carry out the following tasks: risk analysis and modelling; legal analysis and support; bilateral 
and multilateral meetings with stakeholders, in particular CCPs and trading venues as well as 
with other regulators or supervisors, both in a national and an international setting, therefore 
requiring frequent travels. For third-country CCPs, staff will also be required to carry out new 
tasks, including the monitoring of the ongoing compliance of recognised third-country CCPs 
with  EMIR  requirements,  through  requests  for  information,  questionnaires  and  on-site 
inspections.  ESMA  will  also  need  to  determine  whether  applicant  and  recognised  third-
country  CCPs  are  systemically  important  to  the  financial  stability  of  the  EU  and  of  the 
Member  States.  For  third-country  CCPs  deemed  systemically  important  (Tier  2  CCPs), 
ESMA  will  need  to  monitor  their  compliance  with  additional  requirements.  Finally,  ESMA 
will  need  to  develop  tools  to  assess  comparable  compliance.  This  will  involve  a  substantial 
exchange of information both with the third-country authorities and CCPs, and the processing 
of a substantial amount of data, collected via questionnaires and analysed by the ESMA staff. 
Overall,  the  work  also  requires  bilateral  and  multilateral  meetings  with  stakeholders,  in 
particular  CCPs  and  other  regulators/supervisors,  setting-up  and  management  of  the  CCP 
Executive  Session  composed  of  supervisors  from  Member  States;  negotiating  international 
memorandums  of  understandings/cooperation  agreements;  providing  technical  analysis  and 
drafting  documents  for  the  CCP  Executive  Session.  (i.e.  onsite  inspections,  analysis  of  risk 
models, etc.). 

The required work is closely related and will build on existing work by ESMA under EMIR in 
terms  of  the  recognition  of  third  country  CCPs  and  the  current  role  of  ESMA  in  the 
supervision  of  EU  CCPs  through  colleges.  So  far,  there  have  been  28  third  country  CCPs 
recognised  and  17  EU  CCPs  have  been  authorised  under  EMIR.  A  further  12  third-country 
CCPs  have  requested  recognition  but  not  yet  been  granted  it  due  to  the  fact  that  the 
Commission has not yet adopted an equivalence decision for their home jurisdictions. 

Human resources 

Assuming all third-country CCPs requesting recognition are recognised eventually, that would 
mean  around  40  third-country  CCPs  under  ESMA's  competence  –  either  indirectly  through 
monitoring  and  information  exchange  (i.e.  non  systemically-important  Tier  1  CCPs)  or 
through more direct supervision of Tier 2 CCPs that present potentially more significant risks. 
Given  the  potential  negative  impact  that  CCPs  present  for  both  financial  stability  and 
indirectly the real economy, it is essential that adequate resources are dedicated to the tasks in 
question. 

Thus, taking account of the number of third-country CCPs to be supervised either indirectly or 
directly,  type  and  complexity  of  tasks  to  be  fulfilled  by  ESMA  for  tier  1  and  tier  2  CCPs 
respectively,  the  number  of  full  time  equivalents  needed  is  estimated  at  45  full  time 
equivalents. Given the specialist and expert nature of the work, and the potential challenges in 
recruiting experienced staff quickly, it is assumed that at the beginning, more national experts 
will  be  required  to  conduct  the  necessary  tasks.  As  the  number  of  staff  increases  and  gains 
experience, the number of national experts required should correspondingly decline. 

A  core  number  of  staff  will  be  required  in  order  to  set  up  and  operationalise  the  CCP 
Executive  Session.  Once  up  and  running,  and  combined  with  existing  ESMA  staff  dealing 
with  the  daily  business  of  EMIR  colleges,  etc.  the  number  of  new  staff  required  should 
decline. 

Finally, for ESMA a number of ASTs will be required to help administer the CCP Executive 
Session as well as engage in the recruitment of the necessary staff. 

ESMA Staff  

2018 

2019 

2020 

EN 

80 

   EN 

 
ADs 

ENDs 

ASTs 

TOTAL STAFF 

20 

3rd country CCPs  25 

EU CCPs  10 

10 

3rd country CCPs  15 

EU CCPs  0 

0 

30 

27 

35 

5 

12 

10 

0 

1 

40 

36 

35 

5 

13 

10 

0 

2 

49 

In addition to the additional staff required by ESMA, three permanent members (Chair, plus 2 
additional permanent members) of the EU Executive Session are required. They will also be 
paid from ESMA's budget. Those members should be experienced and have a remuneration 
appropriate to their level. 

There will be also inevitable costs related to the recruitment of these additional staff (travel, 
hotel, medical examinations, installation and other allowances, removal costs, etc) estimated 
at €12,700. 

Assumptions in calculating staff costs: 

 

 

 

The additional posts are assumed to be a temporary agents of functional group and 
grade AD7.  

Average  salary  costs  for  different  categories  of  personnel  are  based  on  DG  BUDG 
guidance; 

Salary correction coefficient for Paris is 1.138. 

Other required resources 

The  envisaged  substantial  increase  in  ESMA's  staff  will  have  inevitable  consequences  for 
ESMA's infrastructure arrangements. 

First, they will have to acquire additional office space. This may be done by either expanding 
their existing office space or obtaining a new building. The cost for the additional office space 
is  estimated  at  EUR  1.057  million  per  year  for  the  rent  and  EUR  600 000  for  fitting  and 
security costs.  

Second, a key new task originates from the supervision of third-country CCPs recognised in 
the EU. It is likely that there will therefore be a need for a number of missions both to third 
countries and in the EU, as well as a number of meetings. Mission costs are estimated at EUR 
12 000 per month for 20 staff members, or EUR 240 000 per annum. 

Third,  a  number  of  miscellaneous  costs  will  also  be  incurred,  for  example,  new  staff  will 
require a degree of training, and additional resources may be required to develop new IT tools 
or expand existing IT projects. 

Revenues 

The  proposal  also  envisages  that  the  additional  costs  incurred  by  ESMA  will  be  largely 
covered  by  fees  raised  from  CCPs.  The  costs  related  to  the  recognition  and  ongoing 
supervision of third-country CCPs will reflect whether they are considered as a tier 1 CCP or 
a tier 2 CCP and be proportionate to the actual costs ESMA incurs.  

EN 

81 

   EN 

 
 
ESMA staff 
expenditure 
Salaries and 
allowances 

TAs (ADs and ASTs) 

ENDs 

Expenditure 
related to 
recruitment 
Mission expenses 

CCP Executive 
Session  
Salaries and 
allowances 

Mission expenses 
Expenditure 
related to 
recruitment 
Rental costs  
Fitting costs 
Other costs 
(training, It tools, 
etc…) 

TOTAL 

REVENUE 

CCPs Fees 

Calculation 

2018 
20 TAs + 10 
ENDs 

2019 
28 TAs + 12 
ENDs 

2020 
36 TAs + 13 
ENDs 

TOTAL 

= (30x138 000)x1.138 
in 2018 
= (15x78 000)x1.139 in 
2018 

1,570,440  

4,397,232  

5,653,584   11,621,256 

443,820  

1,065,168  

1,153,932  

2,662,920  

= 30x12 700 
= 20 x 12 x 1 000 

38,100  
120,000  

127,000 
240,000  

114,300 
240,000  

622,300  
600,000  

=(21 990x12)x1.138 + 
2x(21 323x12)x1.138 

441,335  

882,669  

882,669  

2,206,673  

=3x12x2 500 

45,000  

90,000  

90,000  

225,000  

=3x12 700 
=1554m²x680  
estimated 600K€ 

38,100  
528,360  
600,000  

1,056,720  

1,056,720  

38,100  
2,641,800  
600,000  

estimated 2500€ 1st 
year - 1000€ after pp 

142,500  

57,000  

57,000  

256,500  

4,310,555  

7,915,789  

9,248,205   21,474,549  

2018 

2019 

2020 

TOTAL 

4,310,555  

7,915,789  

9,248,205   21,474,549  

=25 ADs + 15 ENDs in 
2018 and 35 ADs + 10 
ENDs after + 
Supervisory Executive 
Session  + related costs 

TOTAL 

4,310,555  

7,915,789  

9,248,205   21,474,549  

EN 

82 

   EN