COMMISSION STAFF WORKING DOCUMENT IMPACT ASSESSMENT REPORT Accompanying the documents Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets and Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions
Date: 2022-12-07
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: capital market, credit institution, financial control, financial derivative, financial legislation, financial supervision, financial transaction, investment company, private-sector liquidity, securities

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 7.12.2022  SWD(2022) 697 final  COMMISSION STAFF WORKING DOCUMENT  IMPACT ASSESSMENT REPORT    Accompanying the documents   Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulations (EU) No 648/2012, (EU) No 575/2013 and (EU) 2017/1131 as regards measures to mitigate excessive exposures to third-country central counterparties and improve the efficiency of Union clearing markets  and  Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directives 2009/65/EU, 2013/36/EU and (EU) 2019/2034 as regards the treatment of concentration risk towards central counterparties and the counterparty risk on centrally cleared derivative transactions {COM(2022) 697 final} - {SEC(2022) 697 final} - {SWD(2022) 698 final}  
 
 
Table of contents 

1. 

2. 

INTRODUCTION ................................................................................................................................ 1 

ECONOMIC, POLITICAL AND LEGAL CONTEXT ........................................................................ 3 

2.1.  ECONOMIC CONTEXT ...................................................................................................................... 3 

2.2.  LEGAL CONTEXT .............................................................................................................................. 4 

2.3.  POLITICAL CONTEXT ...................................................................................................................... 5 

2.4.  CONSULTATIVE PROCESS .............................................................................................................. 6 

3. 

PROBLEM DEFINITION .................................................................................................................... 7 

3.1.  WHAT ARE THE PROBLEMS? ......................................................................................................... 7 

3.1.1. SUPPLY SIDE PROBLEMS .................................................................................................................. 8 

3.1.2. DEMAND SIDE PROBLEMS ............................................................................................................... 9 

3.1.3. INSUFFICIENT CONSIDERATION OF CROSS-BORDER RISKS ................................................... 10 

3.2.  WHAT ARE THE PROBLEM DRIVERS? ....................................................................................... 14 

3.2.1. COMPLEX, LENGTHY, AND BURDENSOME PROCEDURES ....................................................... 14 

3.2.2. LIMITED  PARTICIPATION  IN  EU  CCPS  AND  CONCENTRATION  IN  INCUMBENT 

CCPS ................................................................................................................................................... 18 

3.2.3. INTERCONNECTEDNESS OF EU FINANCIAL SYSTEM ................................................................ 19 

3.2.4. INEFFICIENT FRAMEWORK FOR SUPERVISORY COOPERATION ............................................ 21 

3.3.  HOW LIKELY IS THE PROBLEM TO PERSIST? .......................................................................... 23 

3.3.1. LIMITED ATTRACTIVENESS OF EU CCPS AND OVER-RELIANCE ON NON-EU CCPS ............ 23 

3.3.2. RISKS TO EU FINANCIAL STABILITY ............................................................................................. 24 

4.  WHY SHOULD THE EU ACT? ........................................................................................................ 26 

4.1.  LEGAL BASIS ................................................................................................................................... 26 

4.2.  SUBSIDIARITY: NECESSITY OF EU ACTION ............................................................................. 26 

4.3.  SUBSIDIARITY: ADDED VALUE OF EU ACTION ...................................................................... 27 

5.  OBJECTIVES: WHAT IS TO BE ACHIEVED? ............................................................................... 27 

5.1.  GENERAL OBJECTIVES .................................................................................................................. 27 

5.2.  SPECIFIC OBJECTIVES ................................................................................................................... 28 

6.  WHAT ARE THE AVAILABLE POLICY OPTIONS? .................................................................... 29 

6.1.  WHAT IS THE BASELINE FROM WHICH OPTIONS ARE ASSESSED? .................................... 29 

6.2.  DESCRIPTION OF THE POLICY OPTIONS ................................................................................... 29 

6.2.1. IMPROVE THE ATTRACTIVENESS OF EU CCPS ........................................................................... 29 

6.2.2. ENCOURAGE CLEARING IN EU CCPS ........................................................................................... 30 

6.2.3. ENHANCE THE ASSESSMENT AND MANAGEMENT OF CROSS-BORDER RISKS ...................... 31 

6.3.  OPTIONS DISCARDED AT AN EARLY STAGE ........................................................................... 32 

7.  WHAT ARE THE IMPACTS OF THE OPTIONS AND HOW DO THEY COMPARE? ................ 32 

7.1.  A - MEASURES TO IMPROVE THE ATTRACTIVENESS OF EU CCPS ..................................... 32 

7.1.1. OPTION  A2  –  SIMPLIFY  THE  PROCEDURES  FOR  LAUNCHING  PRODUCTS  AND 

CHANGING MODELS AND PARAMETERS ..................................................................................... 32 

7.1.2. OPTION  A3 

– 

INTRODUCE  AN  EX-POST  APPROVAL/NON-OBJECTION 

PROCEDURE/REVIEW FOR CERTAIN CHANGES ......................................................................... 35 

 
 
7.1.3. OPTION A4 – COMBINATION OF OPTIONS A2 AND A3 ............................................................... 37 

7.1.4. CHOICE OF PREFERRED OPTION. ................................................................................................ 39 

7.2.  B - MEASURES TO ENCOURAGE CLEARING IN THE EU ........................................................ 39 

7.2.1. OPTION B2 - LIMIT/DIS-INCENTIVISE BANKS’ EXCESSIVE EXPOSURES TO CCPS ................ 39 

7.2.2. OPTION B3 – ACTIVE ACCOUNT AT EU CCPS ............................................................................. 44 

7.2.3. OPTION  B4  –  BROADEN  THE  SCOPE  OF  CLEARING  PARTICIPANTS,  I.E.  PUBLIC 

ENTITIES ............................................................................................................................................ 48 

7.2.4. OPTION B5 – FACILITATE CLEARING BY CLIENTS ..................................................................... 51 

7.2.5. OPTION B6 – COMBINATION OF ALL OPTIONS ........................................................................... 54 

7.2.6. CHOICE OF PREFERRED OPTION ................................................................................................. 56 

7.3.  C  -  MEASURES  TO  ENHANCE  THE  ASSESSMENT  AND  MANAGEMENT  OF 

CROSS-BORDER RISK .................................................................................................................... 57 

7.3.1. OPTION C2: TARGETED AMENDMENTS TO CURRENT SUPERVISORY FRAMEWORK ........... 57 

7.3.2. OPTION C3: CENTRALISE EU CCP SUPERVISION ....................................................................... 60 

7.3.3. CHOICE OF PREFERRED POLICY OPTION .................................................................................. 62 

8. 

PREFERRED OPTIONS .................................................................................................................... 62 

8.1.  SUMMARY OF THE PREFERRED PACKAGE .............................................................................. 62 

8.2.  COMBINED IMPACTS ..................................................................................................................... 64 

8.2.1. OVERALL IMPACT OF THE PACKAGE ON RELEVANT STAKEHOLDERS .................................. 64 

8.2.2. IMPACT ON FINANCIAL STABILITY ............................................................................................... 66 

8.2.3. IMPACT ON SMALL AND MEDIUM SIZED ENTERPRISES ........................................................... 67 

8.2.4. SOCIAL AND ENVIRONMENTAL IMPACT ...................................................................................... 67 

8.2.5. IMPACT ON THE EU BUDGET ........................................................................................................ 67 

8.3.  REFIT  (SIMPLIFICATION  AND  IMPROVED  EFFICIENCY)  AND  APPLICATION  OF 

THE ‘ONE IN, ONE OUT’ APPROACH .......................................................................................... 67 

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? .................................. 68 

ANNEX 1: PROCEDURAL INFORMATION ............................................................................................ 70 

ANNEX 2: STAKEHOLDER CONSULTATION ....................................................................................... 72 

OVERVIEW OF RESPONDENTS .............................................................................................................. 74 

SUMMARY OF KEY MESSAGES ............................................................................................................. 75 

ANNEX 3: WHO IS AFFECTED AND HOW? .......................................................................................... 94 

ANNEX 4: ANALYTICAL METHODS ................................................................................................... 100 

ANNEX 5: TABLES AND FIGURES ....................................................................................................... 102 

ANNEX 6: OPTIONS DISCARDED AT AN EARLY STAGE ................................................................ 106 

ANNEX 7: BACKGROUND ..................................................................................................................... 108 

1. 

2. 

3. 

4. 

THE OVER-THE-COUNTER (OTC) DERIVATIVES MARKET ................................................. 108 

CLEARING ...................................................................................................................................... 109 

CCPS ARE VITAL INFRASTRUCTURES FOR THE FINANCIAL SYSTEM ............................ 109 

CLEARING IN THE EU .................................................................................................................. 110 

4.1.  INCREASING VOLUMES OF CLEARING ................................................................................... 110 

4.2.  CONCENTRATED AND INTEGRATED CCP LANDSCAPE ...................................................... 112 

 
 
4.3.  BIG DIFFERENCES IN PRODUCT OFFERINGS ......................................................................... 113 

4.4.  LIQUIDITY ...................................................................................................................................... 117 

 
 
 
 
Term or 
acronym 

Glossary 

Meaning or definition 

Authorised 
CCP/ EU CCP 

A CCP established in a Member State and authorised under Regulation (EU) No 
648/2012. 

BCBS 

CBI 

CCP 

CDS 

CEA 

The  Basel  Committee  on  Banking  Supervision  is  the  primary  global  standard  setter  for 
the  prudential  regulation  of  banks  and  provides  a  forum  for  regular  cooperation  on 
banking supervisory matters. Its 45 members are central banks and bank supervisors from 
28 jurisdictions. 

Central Bank of Issue 

Central Counterparty 

Credit Default Swaps 

The Commodity Exchange Act regulates the trading of commodity futures in the US. 

Central clearing  The  process  by  which  a  CCP  establishes  positions,  including  the  calculation  of  net 
obligations, and ensures that financial instruments, cash, or both, are available to secure 
the exposures arising from those positions. 

Central 
Counterparty 
(CCP) 

CFTC 

Clearing 

Clearing 
member/direct 
participant 

Clearing 
obligation/central 
clearing 
obligations 

Clients 

A legal person interposing itself between the counterparties to contracts traded on one or 
more financial markets, becoming the buyer to every seller and the seller to every buyer. 

The  Commodity  Futures  Trading  Commission  is  an  independent  agency  of  the  US 
government that regulates US derivatives markets. 

The  process  of  establishing  positions,  including  the  calculation  of  net  obligations,  and 
ensuring  that  financial  instruments,  cash,  or  both,  are  available  to  secure  the  exposures 
arising from them. 

An undertaking, typically a large internationally active bank, which participates in a CCP 
and is responsible for discharging the financial obligations arising from that participation. 

The  process  by  which  ESMA  determines  that  certain  market  participants  should  clear 
certain types of OTC derivatives in an EU CCP or in a third-country CCP recognised by 
ESMA. 

Clients  are  clients  of  clearing  members,  e.g.  hedge  funds,  pensions  funds,  investment 
funds, banks, insurance firms, etc. who use clearing members to help clear in a CCP. 

CMU 

Capital Markets Union 

Collateral 

An  asset  or  third-party  commitment  that  is  used  by  the  collateral  provider  to  secure  an 
obligation to the collateral taker. Collateral arrangements may take different legal forms; 
collateral may be obtained using the method of title transfer or pledge. 

Counterparty 
credit risk 

The risk that a counterparty will not settle an obligation for full value, either when due or 
at any time thereafter. Credit risk includes pre-settlement risk (replacement cost risk) and 
settlement risk. 

CPMI 

The  Committee  on  Payments  and  Market  Infrastructures  is  an  international  standard 
setter  that  promotes,  monitors  and  makes  recommendations  about  the  safety  and 
efficiency of payment, clearing, settlement and related arrangements, thereby supporting 
financial stability and the wider economy. The CPMI also serves as a forum for central 
bank  cooperation  in  related  oversight,  policy  and  operational  matters,  including  the 
provision of central bank services. 

 
 
Credit risk 

The risk of a change in value due to actual credit losses deviating from expected credit 
losses  due  to  the  failure  to  meet  contractual  debt  obligations.  Credit  risk  comprises 
default and settlement risk. Credit risk can arise on issuers of securities (in  a company’s 
investment portfolio), debtors (e.g. mortgagors), counterparties (e.g. derivative contracts 
or deposits) and intermediaries, to whom the company is exposed. 

CRR 

DCO 

EMIR 

EBA 

EIOPA 

ESAs 

ESCB 

ESMA 

FTE 

IRD 

IRS 

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  and 
amending Regulation (EU) No 648/2012 

Derivatives Clearing Organization 

'European Markets Infrastructure Regulation', short for: 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 

European Banking Authority 

European Insurance and Occupational Pensions Authority 

European Supervisory Authorities (i.e. EBA, ESMA, EIOPA) 

European System of Central Banks 

European Securities and Market Authority 

Full time equivalent 

Interest rate derivatives are financial instruments which value is linked to the movements 
of  an  interest  rate  reference.  They  may  include  futures,  options,  or  swaps  contracts. 
Interest  rate  derivatives  are  often  used  as  hedges  by  institutional  investors,  banks, 
companies,  and  individuals  to  protect  themselves  against  changes  in  interest  rates,  but 
they can also be used to speculate on the evolution of interest rates. 

An  interest  rate  swap  is  a  forward  contract  in  which  one  stream  of  future  interest 
payments  is  exchanged  for  another  based  on  a  specified  principal  amount.  Interest  rate 
swaps usually involve the exchange of a fixed for a floating rate, or vice versa, to reduce 
or  increase  exposure  to  fluctuations  in  interest  rates  or  to  obtain  a  marginally  lower 
interest rate than would have been possible without the swap. 

Implementing 
Technical 
Standards (ITSs) 

Implementing technical standards are adopted by means of an implementing act pursuant 
to Article 291 of the Treaty on the Functioning of the European Union (TFEU). ESMA, 
as the other ESAs, may be entrusted with preparing draft ITSs to be subsequently adopted 
by  the  Commission  pursuant  to  the  procedure  set  out  in  Article  15  of  the  ESMA 
Regulation (Regulation (EU) No 1095/2010). 

FSB 

IOSCO 

The  Financial  Stability  Board  is  an  international  body  that  monitors  and  makes 
recommendations  about  the  global  financial  system.  It  promotes  international  financial 
stability;  it  does  so  by  coordinating  national  financial  authorities  and  international 
standard-setting  bodies  as  they  work  toward  developing  strong  regulatory,  supervisory 
and other financial sector policies. It fosters a level playing field by encouraging coherent 
implementation  of  these  policies  across  sectors  and  jurisdictions.  Policies  developed  in 
the pursuit of these objectives are implemented by jurisdictions and national authorities. 

The International Organization of Securities Commissions is an association of regulators 
of  the  world's  securities  and  futures  markets.  Members  are  typically  primary  securities 
and/or  futures  regulators  in  a  national  jurisdiction  or  the  main  financial  regulator  from 
each  country.  Its  mandate  is  to:  develop,  implement,  and  promote  high  standards  of 
regulation  to  enhance  investor  protection  and  reduce  systemic  risk;  share  information 
with exchanges and assist them with technical and operational issues; establish standards 
to monitoring global investment transactions across borders and markets. 

 
 
Level 1 act  

The  term  Level  1  act  refers  to  Directives  and  Regulations  adopted  by  the  European 
Parliament and Council on the basis of a Commission proposal. 

Level 2 act 

Many level 1 regulations and directives in the area of financial services (so called ‘basic 
acts’) contain empowerments for level 2 measures to be adopted by the Commission by 
means of delegated acts or implementing acts. Delegated acts, as defined in Article 290 
TFEU, are acts supplementing or amending certain non-essential elements of a basic act. 
Implementing  acts,  as  defined  in  Article  291  TFEU  are  to  be  used  where  uniform 
conditions for implementing basic acts are required. Where the level 2 measures require 
the  expertise  of  supervisory  experts,  it  can  be  determined  in  the  basic  act  that  these 
measures are technical standards based on drafts developed by the European Supervisory 
Authorities  (see  also  the  terms  Regulatory  Technical  Standards  and  Implementing 
Technical Standards). 

Legacy trades 

Transactions  entered  into  before  a  given  date,  typically  the  entry  into  force  of  a 
Regulation or a given (new) provision. 

Margin 
(initial/variation) 

An asset (or third-party commitment) accepted by a counterparty to ensure performance 
on  potential  obligations  to  it  or  cover  market  movements  on  unsettled  transactions. 
‘Initial margin’ means margins collected by the CCP to cover potential future exposure 
to clearing members providing the margin and, where relevant, interoperable CCPs in the 
interval  between  the  last  margin  collection  and  the  liquidation  of  positions  following  a 
default  of  a  clearing  member  or  of  an  interoperable  CCP  default.  ‘Variation  margin’ 
means  margins  collected  or  paid  out  to  reflect  current  exposures  resulting  from  actual 
changes in market price. 

National 
competent 
authority (NCA) 

The  authority/ies  designated  by  each  Member  State  in  accordance  with  Article  22  of 
EMIR  tasked  with  the  authorisation  and  supervision  of  EU  CCPs  established  in  that 
Member State. 

Non-Financial 
Counterparty 
(NFC) 

An  EU  undertaking  that  is  not  a  CCP  or  a  financial  counterparty,  as  defined  in  EMIR, 
Article 2(9).  The  requirements  vary  depending  on  the  profile  of  a  NFC.  In  determining 
whether  an  NFC  should  be  subject  to  the  clearing  obligation,  EMIR  considers  the 
purpose for which that NFC uses OTC derivative contracts as  well as to the size of the 
exposures that it has in those instruments. NFCs are subject to the clearing obligation and 
risk  mitigation  techniques  requirements  where  their  positions  in  non-hedging  OTC 
derivatives  exceed  certain  thresholds  defined  by  ESMA.  These  NFCs  are  known  as 
'NFC+' as opposed to NFCs below the threshold which are known as 'NFC-'. 

OTC 

"Over-the-counter"  can  be  used  to  refer  to  stocks  that  trade  via  a  dealer  network  as 
opposed  to  on  a  regulated  market.  It  also  refers  to  debt  securities  and  other  financial 
instruments such as derivatives, which are traded through a dealer network. 

OTC derivative  A derivative contract the execution of which does not take place on a regulated market as 
within  the  meaning  of  Article  4(1)(14)  of  Directive 2004/39/EC  or  on  a  third-country 
market considered as equivalent to a regulated market in accordance with Article 19(6) of 
Directive 2004/39/EC. 

PSA 

Pension Scheme Arrangement 

Recognised CCP  A  third-country  CCP  that  has  been  recognised  by  ESMA  in  accordance  with  the 

procedure and the requirements laid out in EMIR, Article 25. 

Regulated 
market 

A  multilateral  system  operated  and/or  managed  by  a  market  operator,  which  brings 
together  or  facilitates  the  bringing  together  of  multiple  third-party  buying  and  selling 
interests  in  financial  instruments  –  in  the  system  and  in  accordance  with  its  non-
discretionary  rules  –  in  a  way  that  results  in  a  contract,  in  respect  of  the  financial 
instruments  admitted  to  trading  under  its  rules  and/or  systems,  and  which  is  authorised 
and functions regularly and in accordance with Title III of Directive 2014/65/EU; 

Regulatory 

Regulatory Technical Standards are adopted by the Commission by means of a delegated 

 
 
Technical 
Standards 
(RTSs) 

SSM 

act  pursuant  to  Article  290  of  the  Treaty  on  the  Functioning  of  the  European  Union. 
ESMA,  as  the  other  ESAs,  may  be  entrusted  with  preparing  draft  RTSs  to  be 
subsequently adopted by the Commission pursuant to the procedure set out in Articles 10 
to 14 of the ESMA Regulation (Regulation (EU) No 1095/2010). 

The  Single  Supervisory  Mechanism  refers  to  the  EU  system  of  banking  supervision.  It 
comprises the ECB and the national supervisory authorities of the participating countries. 
EU banking supervision is one of the two pillars of the EU banking union, along with the 
Single Resolution Mechanism. 

STIR futures  

Short-term interest rate derivatives 

Systemic risk 

The risk that the inability of one participant to meet its obligations in a system will cause 
other  participants  to  be  unable  to  meet  their  obligations  when  they  become  due, 
potentially  with  spill  over  effects  (e.g.  liquidity  or  credit  problems)  threatening  the 
stability of or confidence in the financial system. That inability to meet obligations can be 
caused by operational or financial problems. 

Third-country 
CCP 

A CCP established outside of the EU. 

Tier 1 CCPs 

Recognised third-country CCPs that have not been determined as Tier 2 CCPs by ESMA. 

Tier 2 CCPs 

Recognised third-country CCPs that have been determined by ESMA, pursuant to Article 
25(2a), to be, or likely to become, of systemic importance to the financial stability of the 
EU or one or more of its Member States. Tier 2 CCPs have to comply with certain EMIR 
requirements and are supervised by ESMA.  

Trade repository 
(TR) 

Trade  repositories  centrally  collect  and  maintain  the  records  of  derivatives  under 
Regulation EU No 648/2012 (EMIR). TRs also centrally collect and maintain records of 
securities financing transactions (SFTs) under Regulation No 2015/2365, on transparency 
of securities financing transactions and of reuse and amending EMIR (SFTR). 

TFEU 

Treaty on the Functioning of the European Union 

 
 
 
1. 

INTRODUCTION 

This  impact  assessment  concerns  a  review  of  the  European  Market  Infrastructure 
Regulation  (EMIR).1  EMIR  regulates  derivatives  transactions,  including  measures  to 
limit their risks through central counterparties (CCPs).2 It was adopted in the wake of the 
2008-2009  financial  crisis  to  promote  financial  stability  and  to  make  markets  more 
transparent,  more  standardised,  and  thus  safer.  Similar  reforms  were  implemented  in 
most  G20  countries.  EMIR  requires  that  derivatives  transactions  are  reported  to  ensure 
market transparency for regulators and supervisors; and that their risks are appropriately 
mitigated  through  centrally  clearing  at  a  CCP  or  exchanging  collateral,  known  as 
‘margin’,  in  bilateral  transactions.  CCPs  and  the  risks  they  manage  have  grown 
considerably  since  the  adoption  of  EMIR.  The  EU  subsequently  adapted  the  banking 
rules  on  counterparty  credit  risk  in  the  Capital  Requirements  Regulation  to  grant  a 
preferential  capital  treatment  to  exposures  to  CCPs,  reflecting  the  risk-reducing  role  of 
CCPs. Rules on counterparty risk also exist in the frameworks for investment funds3 and 
insurance companies4, however these were not adjusted to fully reflect the role of CCPs.  

In 2017, the Commission published two legislative proposals amending EMIR, adopted 
by the co-legislators in 2019. EMIR REFIT recalibrated some of the rules to ensure their 
proportionality, while  ensuring  financial stability.  Acknowledging the emerging issues 
related to the increasing concentration of risks in CCPs, in particular third-country CCPs, 
EMIR  2.2  revised  the  supervisory  framework  and  set  out  a  process  for  assessing  the 
systemic nature of third-country CCPs by the European Securities and Markets Authority 
(ESMA) in cooperation with the European Systemic Risk Board (ESRB) and the central 
banks of issue. EMIR is complemented by the CCP Recovery and Resolution Regulation, 
adopted in 2020,5 to prepare for the unlikely – though massively impactful - event that an 
EU  CCP  faces  severe  distress.6  Financial  stability  is  at  the  core  of  these  pieces  of  EU 
legislation. This impact assessment should be put in this context. 

Since 2017, concerns have been repeatedly expressed about the ongoing risks to the EU 
financial  stability  arising  from  the  excessive  concentration  of  clearing  in  some  third-
country CCPs, notably in the United Kingdom, in a stress scenario. To avoid cliff edge 
effects  related  to  the  withdrawal  of  the  UK  from  the  EU,  the  Commission  adopted  a 
series  of  equivalence  decisions  to  maintain  access  to  UK  CCPs.7  Therein,  the 

1  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 L 201, 27.7.2012, p. 1. 

2  See Annex 7 for a detailed background on derivatives and how CCPs operate within financial markets. 
3  Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination 
of  laws,  regulations  and  administrative  provisions  relating  to  undertakings  for  collective  investment  in 
transferable securities (UCITS), OJ L 302, 17.11.2009, p. 32 – 96. 

4   Commission  Delegated  Regulation  (EU)  2015/35  of  10 October 2014  supplementing  Directive 
2009/138/EC of the European Parliament and of the Council on the taking-up and pursuit of the business of 
Insurance and Reinsurance (Solvency II), OJ L 12, 17.1.2015. 

5   The Regulation builds on the standards developed by the Financial Stability Board in  the aftermath of the 
financial crisis. See “Key Attributes of Effective Resolution Regimes for Financial Institutions”, Financial 
Stability  Board  (November  2011)  http://www.financialstabilityboard.org/publications/r_111104cc.pdf. 
Updated 
in  October  2014  with  sector-specific  annexes  http://www.financialstabilityboard.org/wp-
content/uploads/r_141015.pd .  

6   Regulation  (EU)  2021/23  of  the  European  Parliament  and  of  the  Council  of  16  December  2020  on  a 
framework  for  the  recovery  and  resolution  of  central  counterparties  and  amending  Regulations  (EU)  No 
1095/2010, (EU) No 648/2012, (EU) No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and Directives 
2002/47/EC, 2004/25/EC, 2007/36/EC, 2014/59/EU and (EU) 2017/1132, OJ L 22, 22.1.2021, p. 1–102.  
7   Equivalence  decisions  for  UK  CCPs  (Commission  Implementing  Decision  (EU)  2018/2031  of 
19 December 2018,  Commission  Implementing  Decision  (EU)  2019/544  of  3 April 2019,  Commission 

1 

 
 
                                                           
 
Commission  called  on  market  participants  to  reduce  their  excessive  exposures  to 
systemic  CCPs  outside  the  EU.  This  was  reiterated  in  the  Communication  on  open 
strategic autonomy in January 2021.8 But challenges persist to reduce those exposures.  

These  aspects  also  emerged  in  the  report  on  the  systemic  importance  of  UK  CCPs 
published  by  ESMA  in  December  2021  (henceforth  “the  2021  ESMA  report  on  UK 
CCPs”)9. That report concluded that some services provided by those CCPs were of such 
substantial  systemic  importance  that  the  existing  EMIR  2.2  framework  could  be 
insufficient  to  manage  the  risks  to  EU  financial  stability.10  It,  however,  underlined 
that  the  costs  of  requiring  those  services  to  be  relocated  to  the  EU  would,  at  present, 
outweigh the benefits. In addition, a Member of the ECB Executive Board expressed the 
view  that  financial  markets  are  more  stable  when  market  participants  have  options  for 
where to clear, and there is room for the EU to further develop its clearing system11. 

The  issues  identified  in  this  impact  assessment  affect  EU  financial  stability  by 
obstructing  the  reduction  of  excessive  exposures  to  systemic  CCPs  and  constitute  a 
significant impediment to developing an efficient and competitive EU clearing market, a 
cornerstone  of  a  deep  and  liquid  Capital  Markets  Union  (CMU).  Risks  to  financial 
stability  stemming  from  excessive  exposures  to  third-country  entities  are  a  source  of 
vulnerabilities  for  the  EU  market  and  affect  the  EU’s  open  strategic  autonomy.  A 
robust clearing alternative within the EU supports the resilience of EU financial markets 
and contributes to global financial stability, by broadening the clearing options available. 
As the Commission stated in its Communication on open strategic autonomy, “the EU is 
open  to  global  financial  markets  but  it  is  ready  to  protect  its  interests”.12  The  need  to 
address the risks to EU financial stability due to the EU’s overreliance on third-country 
CCPs  was  also  recognised  by  the  Council,  which  supported  “current  work  from  the 
Commission  to  assess  and  tackle  such  excessive  reliance,  e.g.  on  third-country  central 
counterparties clearing derivatives”.13 

At  the  same  time,  addressing  these  issues  and  facilitating  clearing  in  the  EU  entails 
ensuring that the supervisory framework for EU CCPs  is sufficient to manage the risks 
associated with the interconnectedness of the EU financial system and increasing clearing 

Implementing Decision (EU) 2019/2211 of 19 December 2019, Commission Implementing Decision (EU) 
2020/1308  of  21 September 2020  and  Commission  Implementing  Decision  (EU)  2022/174  of 
8 February 2022). 

8   Commission Communication ‘The European economic and financial system: fostering openness, strength 

of 

Report 

EMIR”, 

under  Article 

9   “Assessment 

and resilience’, COM/2021/32 final, 19 January 2021.  
25(2c) 
https://www.esma.europa.eu/press-news/esma-news/esma-publishes-results-its-assessment-systemically-
important-uk-central  (later  referred  to  as  “2021  ESMA  report  on  UK  CCPs”).  National  competent 
authorities  responsible  for  the  supervision  of  financial  market  participants  and  CCP  supervisors  were 
involved  in  the  adoption  of  that  report  through  their  participation  to  ESMA’s  Board  of  Supervisors 
(ESMA’s decision-making body) and the CCP Supervisory Committee (responsible for preparing the draft 
report to be adopted by the Board of Supervisors) respectively. ESMA consulted the ESRB, discussed the 
assessment with the relevant central banks of issue, and reached out to a wide range of market participants.  
10   Ibid;  ESMA  determined  that  some  clearing  services  provided  by  those  CCPs  are  of  substantial  systemic 
importance which “entails that the respective CCP services are assessed to have the potential to negatively 
impact EU financial stability, even though they are in full compliance with EMIR”.  

16 December 2021. 

ESMA, 

11   See  speech  by  F.  Panetta,  “Building  a  robust  and  diversified  clearing  ecosystem”,  available  at 

https://www.ecb.europa.eu/press/key/date/2022/html/ecb.sp220322~fb2f159779.en.html. 

12   Commission Communication ‘The European economic and financial system: fostering openness, strength 

and resilience’, COM/2021/32 final, 19 January 2021, p. 12. 

13   See  Council  conclusions  on  the  EU’s  economic  and  financial  strategic  autonomy:  one  year  after  the 

Commission’s Communication, paras. 31-32, 5 April 2022. 

2 

 
                                                                                                                                                                            
volumes. Important cross-border risks and their implications for the wider financial 
system  could  be  overlooked  under  the  current  arrangements.  These  risks  could  be 
further  amplified  as  EU  clearing  markets  grow.  Moreover,  the  current  complex  and 
burdensome supervisory system limits the attractiveness of EU CCPs. 

This  impact  assessment  assesses  the  need  to  address  the  potential  financial  stability 
risks to the EU due to the continued overreliance on systemic non-EU CCPs and the 
options  to reduce  identified risks  and vulnerabilities  by building a  more attractive 
and robust EU clearing market, which will in turn strengthen the CMU. It analyses 
options  to  address:  supply-side  issues,  caused  by  excessive  compliance  costs  limiting 
EU  CCPs’  ability  to  compete  and  a  lack  of  capacity,  notably  in  the  range  of  products 
offered;  demand-side  issues,  i.e.  limited  liquidity  and  network  efficiencies;  and  the 
insufficient  consideration  of  cross-border  risks.  Addressing  these  issues,  thereby 
improving  the  attractiveness  and  soundness  of  EU  clearing  markets,  will  enhance  the 
EU’s financial stability. 

2.  ECONOMIC, POLITICAL AND LEGAL CONTEXT 

2.1.  Economic context 

CCPs  interpose  themselves  between  buyers  and  sellers  and,  by  way  of  netting  and 
concentration,  reduce  the  overall  credit  risk  in  the  system.  Concentration  of  OTC 
derivatives  clearing  is  driven  by  the  nature  of  the  business,  with  its  low  marginal  cost, 
economies  of  scale  and  a  high  premium  on  liquidity  –  all  of  which  promote  the 
emergence of large market providers. Since the 2008-2009 financial crisis, the market for 
centrally-cleared  derivatives  has  expanded  in  a  limited  number  of  CCPs  resulting  in 
heavy  concentration  and  high  levels  of  interconnectedness,  and  therefore  in  new 
risks,14 linked to the concentration and interconnectedness of those infrastructures across 
political and monetary jurisdictions. 

As  of  end-June  2021,  the  outstanding  notional  of  OTC  derivatives  amounted  to 
EUR 514 trillion, corresponding to 88% of the overall derivatives market.15 Interest rate 
derivatives (IRD) represented 80% of outstanding OTC derivatives, of which 60% were 
cleared through  CCPs.16  At end 2020, UK-based  LCH  Ltd17 cleared more than 90% of 
centrally cleared OTC IRD globally, and more than 80% and 90% of the volume of OTC 
IRDs denominated in euro and in other EU currencies respectively.18 The economies of 
scale  (due  to  netting  and  diversification  benefits)  in  central  clearing  lead  to  significant 
concentration  of  the  market  in  a  small  number  of  large  CCPs.  Annex  7  contains 
information on the role of CCPs and their economic development. 

The  financial  resources  of  such  large  CCPs  are,  however,  not  unlimited.  One  severe 
shock could potentially threaten their viability. Their financial soundness is thus essential 
to  ensure  the  stability  of  the  entire  financial  system.  A  CCP  could  default  for  various 
reasons, e.g. operational failures or unforeseen losses following simultaneous defaults of 

14   Article 5 of EMIR gives the Commission an ongoing mandate for determining the asset classes subject to 

the clearing obligation. 

15   BIS, OTC derivatives statistics: https://www.bis.org/statistics/derstats.htm. 
16   BIS, OTC derivatives statistics: https://www.bis.org/statistics/derstats.htm. 
17   LCH Ltd is a CCP established in the UK that has been recognised by ESMA and therefore able to provide 
services to clearing members and trading venues established in the EU. LCH SA is a CCP established in 
France and authorised under EMIR. LCH Ltd and LCH SA are subsidiaries of the same group, the London 
Stock Exchange Group (LSEG). 

18     Annex 7 contains information on the role of CCPs and their economic development. See also CEPS, 2021, 

“Setting EU CCP policy – much more than meets the eye”. 

3 

 
                                                           
several  of  its  members.  The  knock-on  effects  could  be  far-reaching  if  the  CCP  were 
unable  to  manage  the  default  within  its  default  waterfall.  In  addition,  large  banking 
groups tend  to  be clearing members in several CCPs,  amplifying  the systemic effect of 
their  failure.  Problems  at  a  large  CCP  may  spread  financial  contagion,  as  all  major 
financial institutions are interconnected via direct and indirect links to CCPs.  

The cessation of operations of a CCP would deprive market participants of certain basic 
post-trade functions, entailing the shutdown of entire markets and uncertainty regarding 
exposures  of  several  market  participants  with  massive  knock-on  effects.  Resolution 
frameworks, set up to different extents around the world, aim at preserving the continuity 
of a CCP’s critical functions in case of a crisis, to safeguard financial stability.19  

2.2.  Legal context 

As seen above, in Section 1.1, the most recent amendment to EMIR aimed at enhancing 
the  supervisory  framework  for  EU  and  third-country  CCPs  to  ensure  EU  financial 
stability,20 introducing new supervisory arrangements for EU and third-country CCPs.  

First,  for  EU  CCPs,  national  competent  authorities  (NCAs)  continue  to  have  full 
supervisory  powers  over  CCPs  in  their  Member  State,  including  their  ongoing 
supervision.  EMIR  has  two  processes  to  ensure  the  cooperation  of  authorities: 
consultation of colleges and of ESMA (see Table 3, Annex 5). Colleges were introduced 
in  2012,  bringing  together  authorities  with  an  interest  in  CCP  operations  as  voting 
members21 or as non-voting members.22 ESMA has binding mediation powers in certain 
areas when a negative opinion is adopted. Under EMIR 2.2, the college can also include 
recommendations in its opinion. Any central bank may “adopt recommendations relating 
to  the  currency  it  issues”.  EMIR  2.2  also  increased  ESMA’s  role  by  empowering  it  to 
issue  opinions  before  certain  NCA  decisions  are  adopted.  The  newly  established  CCP 
Supervisory  Committee  (CCP  SC)  prepares  decisions  for  adoption  by  the  Board  of 
Supervisors and carries out some of ESMA’s tasks for EU CCPs.  

Second,  EMIR  2.2  enhanced  the  role  of  ESMA  and  central  banks  in  relation  to 
recognised third-country CCPs, in particular those classified as systemic (Tier 2 CCPs). 
In contrast to Tier 1 CCPs (i.e. CCPs that are not systemically important or are not likely 
to  become  systemically  important),  Tier  2  CCPs  have  to  comply  with  additional 
requirements  (including  organisational,  conduct  of  business  and  prudential  EMIR 
requirements) and are subject to direct supervision by ESMA in consultation, in some 
areas, with central banks of issue. Where a Tier 2 CCP infringes the requirements ESMA 
can  impose  supervisory  measures,  including  fines,  periodic  penalty  payments  and  the 
withdrawal of that CCP’s recognition.  Currently, ESMA has determined that  only LCH 
Ltd  and  ICEU,  both  established  in  the  UK,  qualify  as  Tier  2  CCPs.  Where  ESMA,  in 

19   In the EU, see CCP Recovery and Resolution Regulation (see footnote 6). See also the 2021 ESMA report 
on UK CCPs (see footnote 9 above), pp. 6-7. ESMA notes that the UK recovery and resolution framework 
is still under development. 

20  Regulation  (EU)  2019/2099  of  23  October  2019  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, OJ L 322, 12.12.2019, p. 1–44. 

21   Including the CCP’s national supervisor, the supervisors of the clearing members which are established in 
the  three Member States  with the largest contributions to that  CCP’s default  fund, supervisors of  market 
infrastructures to which the CCP is linked, central banks of issue of most relevant currencies cleared and 
members of the ESCB responsible for the oversight of the CCPs. 

22  National supervisors and central banks other than those referred to in footnote 21 may request participation 

in the college (Article 18(2) of EMIR). 

4 

 
                                                           
agreement with the central banks of issue and in consultation with the ESRB, considers a 
third-country CCP or some of its clearing services of substantial systemic importance, it 
shall recommend that that third-country CCP should not be recognised. The Commission 
may  then  require  some  or  all  of  the  clearing  services  of  that  CCP  to  be  provided  only 
after it has established itself in the EU.  

Experience  with  the  application  of  the  revised  EMIR  framework  has  already  revealed 
some shortcomings (see Section 3). A targeted review of EMIR 2.2., in particular on the 
supervisory arrangements, is required under EMIR (Article 85(7)) by 2 January 2023;23 
this  requirement  is  fulfilled  in  the  context  of  this  initiative.  A  more  comprehensive 
review of EMIR is required by 2024 under Article 85(1) of EMIR as currently in force. 

To  address  the  challenges  posed  by  the  growing  importance  of  CCPs  and  improve  the 
preparedness and the tools to handle the potential crisis of an EU CCP, the EU adopted 
the CCP Recovery and Resolution Regulation in December 2020. Its aim is to ensure that 
EU CCPs and national authorities have the means to act decisively in a crisis scenario.24 
The  Regulation  aims  to  preserve  the  critical  functions  of  EU  CCPs,  ensuring  financial 
stability and protecting taxpayers.  

2.3.  Political context 
In the context of the CMU Action Plans,25 efficient and competitive post-trade markets, 
and clearing in particular, can contribute to creating deeper, more liquid, EU markets as 
post-trade infrastructures are the foundation stones of capital markets. A more centralised 
approach  to  supervision  is  also  aimed  for,  as  it  supports  convergence  and  better 
management  of  cross-border  risks.26  Those  goals  are  consistent  with  the  EU’s  aim  for 
open strategic autonomy and financial stability, while remaining open to global financial 
markets.  As  stressed  in  the  Communication  “The  European  economic  and  financial 
system:  fostering  openness,  strength  and  resilience”27,  the  EU  has  a  key  interest  in 
developing  its  financial  market  infrastructures  to  ensure  financial  stability  and  to  avoid 
excessive  reliance  on  the  provision  of  critical  services  from  third  countries.  The 
withdrawal  of  the  UK  from  the  single  market  and  its  common  system  of  regulation, 
coordinated  supervision  and  enforcement,  coupled  with  the  significant  amount  of 
financial instruments in EU currencies cleared by UK CCPs, create major challenges for 
EU and Member States’ authorities in managing financial stability, particularly in times 
of stress. 

The level of exposure of EU clearing participants to UK CCPs is why, from the start of 
the process of withdrawal of the UK from the EU, central clearing has been seen a sector 
where financial stability risks could be significant in the event of an abrupt disruption in 
access  to  such  CCPs  by  EU  participants.  To  address  such  risks  in  the  short  term,  the 
Commission  adopted, in  September 2020,  a time-limited equivalence decision for UK 
CCPs. In this, market participants were urged to take action and reduce their  excessive 
exposures,  in  particular  their  OTC  derivative  exposures  denominated  in  euro  and  other 
EU  currencies.  ESMA  was  mandated  to  assess  whether  a  Tier  2  CCP  or  some  of  its 

23   Article 87(7) of EMIR. 
24   See Annex 7 for further explanation. 
25   Commission  Communication  ‘Action  Plan  on  Building  a  Capital  Markets  Union’,  COM/2015/0468  final 
and  Commission  Communication  ‘A  Capital  Markets  Union  for  people  and  businesses  –  New  Action 
Plan’,  COM/2020/590  final.  Commission  Communication  ‘Capital  Markets  Union  -  Delivering  one  year 
after the Action Plan’, COM/2021/720 final. 

26   2020 CMU Action Plan (see footnote 25), Action 16. 
27   Commission Communication on open strategic autonomy (see footnote 8). 

5 

 
                                                           
clearing services could be of such substantial systemic importance that that CCP should 
not  be  recognised  to  provide  certain  clearing  services  or  activities.  In  December  2021, 
ESMA identified28 three clearing services of substantial systemic importance for the EU 
or  one  or  more  Member  States,  namely  LCH  Ltd  SwapClear  for  euro  and  Polish  zloty 
and  ICE  Clear  Europe  for  CDS  and  STIR  services  for  euro  products.  While  the 
assessment  concluded  that,  at  present,  the  costs  of  derecognising  these  services  would 
outweigh  the  benefits,  ESMA  identified  several  measures  to  possibly  address  the  risks 
arising  from  the  concentration  of  certain  clearing  services  of  UK  CCPs.  Among  these, 
ESMA  proposed  to  consider  adopting  appropriate  incentives  for  reducing  the  size  of 
EU’s exposures to Tier 2 CCPs, e.g. requirements for alternative clearing arrangements 
for clearing members or clients and prudential requirements. 

On  10  November  2021,  Commissioner  McGuinness  made  a  Statement  on  the  way 
forward for central clearing29, announcing an extension of the equivalence decision for 
UK CCPs, to avoid the short-term financial stability risks for the EU that an abrupt cut-
off  from  UK  CCPs  would  have  put  on  the  EU  financial  system.30  It  was  also 
acknowledged that time is needed to build clearing capacity in the EU, along with robust 
supervision, to reduce the EU’s excessive exposures and financial stability risks from the 
overreliance on UK CCPs, as well as manage risks in the EU. This review follows from 
this statement, identifying the underlying issues, and considering how obstacles could be 
addressed. 

In  conclusion,  this  initiative  should  be  seen  in  the  broader  agenda  to  make  EU  capital 
markets  more  competitive,  deeper  and  resilient,  as  well  as  build  robust  EU  clearing 
capacity to  enhance  financial stability in  the longer term  by  reducing  the risk  posed by 
the excessive exposures towards UK CCPs and the uncertainty related to the protection 
of the EU interests in times of crisis. 

2.4.  Consultative process 

The Commission has engaged in  a broad consultation process in the preparation of this 
initiative,  including  a  targeted  consultation,  a  call  for  evidence,  the  establishment  of  a 
Working Group on the opportunities and challenges of transferring derivatives from the 
UK  to  the  EU  as  well  as  meetings  with  Member  States,  Members  of  the  European 
Parliament  and  various  stakeholders,  e.g.  CCPs,  clearing  members,  investment  funds, 
pension  funds.  In  addition,  the  Commission  considered  the  2021  ESMA  report  on  UK 
CCPs31 and the ESRB’s response to ESMA’s consultation32 (see Annex 2).  

Considering  the  relatively  recent  entry  into  force  of  EMIR  2.2  and  the  fact  that  some 
requirements do not apply yet,33 it is not considered appropriate to prepare a full back-to-
back  evaluation  of  the  entire  framework.  Key  areas  were  identified  upfront  based  on 
stakeholder input and internal analysis. ESMA’s report provides a detailed assessment of 
Tier  2  CCPs  and  an  evaluation  of  the  relevant  provisions.  The  identified  shortcomings 

28   See 2021 ESMA report on UK CCPs (see footnote 9 above). 
29   https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_21_5905.  
30   EU  clearing  members  would  have  been  off-boarded  from  UK  CCPs  with  a  three-month  notice  and  their 

remaining positions liquidated in the market. 

31   See 2021 ESMA report on UK CCPs (see footnote 9 above). 
32.  ESRB response to the targeted consultation on the review of the EU central clearing framework, 22 March 
2022, https://www.esrb.europa.eu/pub/pdf/other/esrb.letter220323_on_review_central_clearing~c95cf8bae6.en.pdf.  
33   E.g. the regulatory technical standards (RTS) on the procedures for the approval of an extension of services 
or the  approval of changes to risk  models  under  Articles 15 and 49 of EMIR respectively have not been 
adopted yet. 

6 

 
                                                           
and  conclusions  drawn  in  that  report  served  as  one  of  the  main  considerations  for  the 
problem definition and the policy options presented in this impact assessment. Questions 
to evaluate the current framework were also put forward in other parts of the consultation 
process.  Furthermore,  an  evaluation  considering  all  aspects  of  EMIR,  is  intended  to  be 
introduced  in  the  legislative  proposal  and  should  take  place  at  least  5  years  after 
application. The evaluation would seek to collect input from all relevant stakeholders, but 
particularly CCPs, clearing members and clients. Input would also be sought from ESMA 
as well as national authorities and central banks. Statistical data for the analysis would be 
sought  primarily  from  ESMA  and  the  ESRB  (please  see  chapter  9  of  this  impact 
assessment for further details). 

During  the  consultation  process,  data  was  repeatedly  requested  from  all  stakeholders, 
including in the targeted consultation. The available quantitative data is however limited 
for  several  reasons.  First,  while  supervisors  and  other  authorities  may  have  access  to 
quantitative information on market participants, the Commission does not have access to 
such  data  directly  or  indirectly  (via  NCAs  or  central  banks).  Second,  despite  the 
Commission’s  efforts  to  obtain  data  through  the  targeted  consultation  or  bilateral 
meetings,  market  participants  seem  hesitant  to  share  it  either  due  to  confidentiality 
concerns (as they may contain business secrets) or because they lack an incentive to do 
so. This analysis is thus built on practical experience of, amongst others, EU and third-
country CCPs, EU and third-country banks, EU and third-country investment firms, EU 
and  national  authorities  and  central  banks,  and  is  primarily  qualitative  in  nature. 
Quantification is provided where data was provided to the Commission services. 

3.  PROBLEM DEFINITION 

3.1.  What are the problems? 
Input  received  from  EU  and  national  authorities,  as  well  as  market  participants,34  has 
shown  that  risks  to  the  EU’s  financial  stability  remain  due  to  the  ongoing  over-
reliance on  Tier 2 CCPs. In addition, there is  a  perceived  lack  of attractiveness  of 
EU CCPs. More specifically: 

  Member  States  have  called  on  the  Commission  to  act,  underlining  that  the 
“excessive  reliance  on  third-country  critical  services  providers  could  create 
financial  stability  risks  in  times  of  financial  market  disruption”  and  that  they 
“supports current work from the Commission to assess and tackle such excessive 
reliance, e.g. on third-country central counterparties clearing derivatives”35; 
  National CCP and market supervisors, who sit in the ESMA’s CCP Supervisory 
Committee and Board of Supervisors, have expressed their concerns in the ESMA 
2021 report about the risks stemming from certain clearing services of substantial 
systemic importance36.  

34   See Annex 2 for non-confidential feedback to the targeted consultation and meetings with Member States. 
35   See Council Conclusions of 5 April 2022, see footnote 13. 
36   See 2021 ESMA report on UK CCPs (see footnote 9 above), p 6. “Substantial systemic importance entails 
that  the  respective  CCP  services  are  assessed  to  have  the  potential  to  negatively  impact  EU  financial 
stability, even though they are in full compliance with EMIR. Based on the characteristics of each clearing 
service, and an analysis of scenarios of how they may impact EU financial stability even where the Tier  2 
CCPs are in full compliance with EMIR requirements, the assessment concludes that the following clearing 
services are of substantial systemic importance for the financial stability of the Union or one or more of its 
Member States:” 

7 

 
                                                           
  National central banks, via the ESRB, have noted that the reduction in exposures 
to  UK  CCPs  is  essential  to  ensure  financial  stability37;  in  addition,  national 
central banks were also consulted prior to the adoption of ESMA’s 2021 report on 
UK CCPs38.  

Extensive consultation (see Annex 2) has highlighted several issues: supply side issues; 
demand side issues; and insufficient consideration of cross-border risks. These problems 
are  driven  by  complex  and  often  burdensome  procedures,  limited  participation  in  EU 
CCPs/concentration  in  incumbent  CCPs,  the  interconnectedness  of  the  EU  financial 
system and an inefficient framework for supervisory cooperation.  

Figure 1: Problem tree 

3.1.1.  Supply side problems 

While  the  clearing  offer  for  cash  equity  market,  equity  derivatives,  bonds  or  euro-
denominated  repo  meets  market  participants’  demand,  the  offer  by  EU CCPs  in  some 
widely used asset classes is not as broad as the one available in some third-country 
CCPs. The difference in the services provided by EU CCPs and, e.g. UK CCPs, can be 
seen in several classes of derivatives: interest rate derivatives, credit default swaps, short-
term interest rate derivatives (STIR futures) and commodity derivatives (see Annex 7).  

EU  CCPs  are  hesitant  to  expand  their  product  offer  for  two  reasons.  First,  market 
participants  tend  to  clear  in  incumbent  CCPs.  EU  CCPs  may  be  hesitant  to  list 
additional products if market participants do not commit to using those services. Listing 
additional products requires IT investments, operational and human resources as well as 
drafting  of  methodologies,  procedures  and  risk  models.  EU  CCPs  look  for  reassurance 
that  these  development  costs  will  be  covered  by  sufficient  demand.  But  this  may  not 
materialise  due  to  the  advantage  for  incumbents  in  this  field  –  market  participants  that 
already  clear  these  products  in  incumbent  CCPs  do  not  have  a  clear  incentive  to  shift 
away  from  them  or  split  their  clearing  portfolios  between  several  CCPs  (See  Section 
3.2.2). A CCP launching  a product  already  available in  another CCP must bring  added 
value  for  market  participants  to  shift  business  to  that  CCP  and  break  the  economies  of 

37   See  ESRB  response  to  the  European  Commission  targeted  consultation  on  the  review  of  the  central 

clearing framework in the EU, 22 March 2022, see footnote 32. 

38   See 2021 ESMA report on UK CCPs (see footnote 9 above), p 6 and 10. 

8 

 
 
                                                           
scale  and  netting  efficiencies  they  benefit  from  in  incumbent  CCPs.  Second,  the 
regulatory framework and the supervisory arrangements take too long, are complex and 
uncertain in their outcome for CCPs to bring new products to the market or adapt 
their  models  due  to  the  procedures  in  Articles  15  and  49  of  EMIR  respectively.  Eight 
respondents to the targeted consultation, mainly CCPs, stressed their concerns regarding 
the complexity of the regulatory governance and its procedures. Member States generally 
agreed with these observations and underlined the lack of efficiency of these procedures, 
which, in addition, increase costs for CCPs and all stakeholders involved in the clearing 
process (see Section 3.2.1). 

This  limits  EU  CCPs’  ability  to  bring  new  products  and  models  to  market,  which  is 
important for EU CCPs to compete internationally.39 For instance, if the time required for 
EU  CCPs  to  obtain  the  relevant  authorisation  to  launch  a  new  product  is  too  long  and 
uncertain,  market  participants  may  start  clearing  elsewhere.40  If  clearing  members  then 
use a recognised third-country CCP, in which they are already clearing substantially, this 
could exacerbate the over-reliance on that CCP, in turn creating risks for the EU financial 
stability  (See  Section  3.1.3).  A  CCP’s  ability  to  adapt  its  models  in  a  reactive  and 
predictable way is also key for market participants when assessing a CCP’s performance 
and  its  attractiveness.41  This  leads  to  a  circular  problem  where  CCPs  are  reluctant  to 
expand  their  services  without  the  commitment  of  the  demand  side,  while  the  market  is 
reluctant to commit to other CCPs due to less netting efficiencies, reduced possibility for 
margin  optimisation  and  the  uncertainty  in  the  time  to  market  of  different  CCP’s 
services.  

3.1.2.  Demand side problems 

Section 3.1.1 shows the connection between the supply and demand side issues. The lack 
of  demand  from  clearing  members  and  clients  is  however  compounded  by  several 
factors:  network  effects  of  continuing  to  clear  at  incumbent  CCPs  and  insufficient 
liquidity in EU CCPs. 

First,  clearing,  by  nature,  favours  concentration  by  providing  economies  of  scale  and 
netting  benefits  (see  Section  2.1).  Those  are  obtained  by  bundling  together  correlated 
transactions and applying portfolio margining techniques. Such techniques allow market 
participants  to  offset  their  risks  and  benefit  from  up  to  80%  reduction  in  the  collateral 
required  by  the  CCP  for  a  given  portfolio.42  Additionally,  clearing  members  and  CCPs 
favour clearing for a wide range of clients in various transaction types43 to diversify away 
risk. With more diverse clients, CCPs can more easily face a potential default of a client 
or a clearing member: the CCP could transfer the positions or sell them in auctions faster 
and  at  a  lower  cost,  lowering  the  risk  that  the  financial  resources  of  other  clearing 
members are needed. Market participants thus prefer to clear in a CCP where a variety of 
interests are met. To compete with an incumbent CCP, a competitor must attract flows of 
different  natures  and  not  just  specific,  targeted  profiles.  Market  participants  seek 

39   See European Association of Clearing Houses (EACH) response - ESMA Consultation Paper “Regulatory 
technical standards on conditions under which additional services or activities to  which a CCP wishes to 
extend its business are not covered by the initial authorisation and conditions under which changes to the 
models and parameters are significant under EMIR” – November 2020. 

40   Confidential information provided to DG FISMA services. 
41   See ISDA, “CCP Best Practices”, January 2019, https://www.isda.org/a/cigME/CCP-Best-Practice.pdf. 
42   See Article 41 of EMIR and the corresponding regulatory technical standards. 
43   Participants are not all active on the same maturities or in the same direction, some may have shorter needs 

or some may want to lock an interest rate over a longer period of time. 

9 

 
                                                           
reassurance that the risk taken in redirecting some of their clearing flows to another CCP 
is  offset  by  an  opposite  interest  in  that  CCP  and  that  the  risk  profile  in  the  incumbent 
CCP remains the same. Some CCPs would however state that a vast majority of clients, 
in particular pension funds and institutional investors, do not operate in a wide range of 
currencies  and  do  not  in  practice  benefit  from  complex  correlations  but  would  rather 
benefit from a mono-currency cross-product approach to portfolio margining.44 

Second,  as  highlighted  by  62%  of  the  respondents  to  the  targeted  consultation,  is  the 
insufficient liquidity at EU CCPs. Liquidity is linked to the number of clearing members 
and clients of a CCP and the variety and size of their interests/positions, as there has to 
be  a  balance  between  payers  and  receivers.  CCP’s  liquidity  is  an  important  factor  for 
market participants in determining where to clear as in a liquid CCP it is easier to close 
positions without incurring significant losses, and easier to enter into contracts. Linked to 
that, in a liquid CCP there are better opportunities to successfully auction out positions of 
a defaulting clearing member and generally to distribute losses across clearing members 
if needed, reducing the size of the loss for them. As such, the lower perceived liquidity at 
EU  CCPs  is  a  factor  which  drives  the  market  to  some  other  recognised  third-country 
CCPs,  where  liquidity  is  perceived  as  greater.  This  results  in  dependencies  and  over-
reliance on some third-country CCPs to the financial stability within the EU. 

Insufficient  liquidity  is  linked  to  two  main  issues.  First,  participation  in  EU  CCPs  is 
more  limited  than  at  incumbent  third-country  CCPs.  With  a  limited  participation, 
liquidity tends to be lower, or is perceived45 as such. Second, EU CCPs do not offer as 
broad a range of products/currencies as  some third-country  CCPs and offer less netting 
opportunities  (see  Annex  7).  As  such,  they  are  seen  as  less  attractive  to  market 
participants.  As  such,  ,  there  is  a  tendency  towards  concentration  in  third-country 
incumbent  CCPs.  This  is  linked  to:  strong  economies  of  scale  and  scope  which 
characterise the clearing business, cost considerations (i.e. the price paid for clearing the 
same product at a CCP relative to another one, so called “basis”); and a perception that 
certain  third-country  CCPs,  e.g.  LCH  Ltd,  are  operationally  more  efficient.46  Persistent 
concentration  of  clearing  at  incumbent  third-country  CCPs  mechanically  contributes  to 
lower  liquidity  in  EU  CCPs,  as  market  participants  continue  choosing  the  same  third-
country CCPs. These effects are described in more detail in Section 3.2.2. 

3.1.3.  Insufficient consideration of cross-border risks 

One of the main aims of EMIR since its adoption is the mitigation of risks arising from 
the operation of CCPs in the EU. EMIR 2.2 further developed this framework to mitigate 
the  risks  resulting  from  exposures  to  third-country  CCPs,  especially  those  which  are 
highly  interconnected  with  the  EU  financial  system.  However,  the  supervisory 
architecture  still  fails  to  give  due  consideration  to  these  cross-border  risks  and  their 
implications for the financial stability of the EU for three main reasons: concentration of 
clearing  in  incumbent  third-country  CCPs;  interconnectedness  of  the  EU  financial 
system; and inefficient cooperation between national authorities. 

First,  clearing  is  highly  concentrated  in  a  limited  number  of  clearing  service 
providers globally (see Section 2.1). When there is significant concentration of clearing 
in CCPs outside the EU this raises concerns as they, and the large financial stability risk 

44   See Commission Staff Working Document, SWD/2017/0246 final – 2017/0136 (COD), p. 63-65. 
45   Confidential information provided to DG FISMA services. 
46   E.g. successful handling of the Lehman Brothers failure at LCH Ltd is often mentioned as a case in point to 

confirm the soundness and good performance of the CCP. 

10 

 
                                                           
they  mitigate  for  the  EU,  are  mainly  supervised  by  third-country  authorities  which  in 
times of crisis  are likely to  have divergent  interests to  those of the EU. For some asset 
classes, there is only a small number of EU CCPs offering certain services (e.g. only one 
EU CCP clears credit derivatives and only one EU CCP clears inflation-rate derivatives). 
Additionally, as shown in Annex 7, for some third-country CCPs’ clearing offer there is 
no  substitute,  not  only  in  the  EU  but  globally,  e.g.  LME  Ltd  in  the  UK  is  the  only 
recognised CCP clearing certain commodity derivatives which are vital for non-financial 
entities.  This  concentration,  where  a  significant  proportion  of  clearing  activities  of 
importance  to  the  EU’s  financial  stability  takes  place  in  third-country  CCPs  thereby 
creating dependencies for EU market participants (e.g. banks, non-bank financial entities, 
and non-financial entities) raises concerns.47  

Financial  market  infrastructures  present  potential  risks  (hence  their  regulation  under 
EMIR), but those risks are potentially compounded if they are outside the EU. A default 
or disruption at a non-EU CCP or clearing service with a dominant market share can have 
substantial  destabilising  effects  on  clearing  members,  their  clients  or  on  other  financial 
market  infrastructures  due  to  the  size  of  the  exposures  of  EU  clearing  members  and 
clients,  the  interconnections  with  the  rest  of  the  financial  system,  and  the  lack  of 
alternative clearing services. This can be a source of substantial  financial stability risks 
for the EU or its Member States.  

For this  reason, the Commission,  in  2017 came forward with  its  EMIR  2.2 proposal  to 
mitigate  those  risks.  Two  UK  CCPs,  LCH  Ltd  and  ICE  Clear  Europe,  were  ultimately 
identified by ESMA as Tier 2 CCPs, implying a higher degree of systemic importance. 
The  UK  in  particular  grew  as  an  important  clearing  hub  over  the  years  and  UK  CCPs 
have created such dependencies for EU market participants. Even if EMIR 2.2 aimed at 
addressing  these  concerns  by  requiring  them  to  comply  with  the  relevant  EMIR 
requirements and granting direct supervisory powers to ESMA over Tier 2 CCPs, those 
CCPs remain, at least primarily, supervised by third-country authorities that are not part 
of  the  regulatory,  supervisory  and  enforcement  framework  which  characterises  the 
internal market nor are they bound by the duty of sincere cooperation to which EU and 
Member  State  authorities  are  subject  to  under  Article  4(3)  of  the  Treaty  on  European 
Union. The importance of UK CCPs to EU financial stability was highlighted by ESMA 
in  December  2021;  where  ESMA  concluded  that  the  continued  recognition  of  three 
clearing services offered by  two UK CCPs poses substantial systemic risks to the EU’s 
financial stability that are not fully mitigated under EMIR.48 

Where  a  CCP  or  some  of  its  clearing  services  are  considered  to  be  of  a  substantial 
systemic  importance  this  can  imply  greater  financial  stability  risks  per  se;  e.g.  where 
there are changes in the eligible collateral, margins or haircuts this may create feedback 
loops  that  negatively  impact  sovereign  bond  markets,  and  more  broadly  financial 
stability.  In  its  report49,  ESMA  outlines  various  scenarios  in  which  the  EU  financial 
stability may be impacted due to events affecting a Tier 2 CCP. The report highlights that 
such  scenarios  may  be  relevant  for  EU  CCPs  as  well,  however  “the  EU  regulatory 
regime  provides  stronger  mitigating  factors  to  address  the  risks  posed  by  EU  CCPs”. 
Indeed,  EU  CCPs  are  under  a  common  regulatory  framework,  coordinated  supervision 
and the enforcement framework of the single market and Court of Justice of the EU. This 
entails  coordination  among  authorities,  including  in  case  of  market  stress  or  crises. 

47   See 2021 ESMA report on UK CCPs (see footnote 9 above). 
48   See 2021 ESMA report on UK CCPs (see footnote 9 above). 
49   See 2021 ESMA report on UK CCPs (see footnote 9 above). 

11 

 
                                                           
Authorities  within  the  EU  are  expected  to  take  EU  financial  stability  concerns  into 
account to a greater extent than third-country ones and are subject to the duty of sincere 
cooperation enshrined in the Treaty on European Union. As Tier 2 CCPs are systemically 
important financial market infrastructures it is not sufficient to just comply with certain 
requirements  under  a  regulation,  such  as  EMIR  (or  to  comply  with  equivalent 
requirements)  to  fully  mitigate  the  effects  of  market  stress  or  crisis.  Rather,  tools  are 
needed to manage such market stress or crisis in the best possible way to prevent it from 
spreading through the system. Where a CCP is (or some of its clearing services are) of a 
substantial systemic importance this becomes even more important as well as difficult.50 

To  mitigate  the  potentially  negative  effects  in  the  EU  and  its  Member  States,  a  more 
balanced risk is needed, to ensure clearing is less concentrated in  a few non-EU CCPs. 
Cooperation  could  only  mitigate  risks  where  the  non-EU  CCP  is  not  considered  a 
substantially  systemic  CCP;  where  it  is,  cooperation  cannot  mitigate  the  effects  of 
decisions  taken  in  a  crisis  scenario  as  such  decisions  will  likely  primarily  have  the 
national  financial  market  in  mind,  even  though  they  can  have  a  material  impact  on  the 
EU or some or all of its  Member States.  In the  current  framework, in  case of  financial 
crisis at a UK CCP, no EU body or authority would be in the driving seat for decisions 
that can have significant impacts on EU firms. 

To conclude, the main issue with the Tier 2 UK CCPs is therefore that they are financial 
market  infrastructures  offering  services  of  substantial  systemic  importance,  thus 
presenting substantial potential risks to the EU. Since the UK  withdrawal from the EU, 
they are also  outside the EU common framework, increasing their systemic importance 
even  further  as  not  part  of  the  cooperation  framework  within  the  Union.  While  EMIR 
requires  Tier  2  CCPs  to  comply  with  certain  provisions  of  EMIR  and  provides  ESMA 
with  supervisory  powers  over  Tier  2  CCPs,  the  actual  possibility  for  ESMA  to  induce 
change  or  enforce  corrective  actions  relies  on  the  cooperation  of  third-country 
authorities.  In  addition,  supervisors  also  have  more  direct  access  to  information  over 
entities located in their jurisdiction.  

The situation within the EU derives from very specific circumstances where the UK had 
established itself as a clearing-hub for the EU before the UK’s withdrawal from the EU. 
The  UK  used  to  be  part  of  the  EU  legal  and  cooperation  framework,  but  since  its 
withdrawal from the EU, this is no longer the case. With the UK’s withdrawal from the 
EU, the fundamental position of UK has changed, and where any decision before Brexit 
would  have  been  made  taking  into  account  also  the  interests  of  the  EU,  this  will  not 
necessarily  be  the  case  any  more.  It  is  therefore  not  possible  to  compare  the  situation 
between the UK and the EU globally. 

Second, the EU financial system is  largely interconnected, which may lead to cross-
border risks across Member States. Analyses show that derivatives and repo exposures 
for Eurex Clearing and LCH SA regarding clearing members domiciled in the Euro area, 

50   ESMA notes in its report that “To reduce (i) the substantial systemic importance of LCH Ltd SwapClear, 
ICEU CDS, and ICEU STIR for the financial stability of the EU or one or more of its Member States and 
(ii) the identified risks and vulnerabilities linked to the recognition of these clearing services, ESMA is of 
the  opinion  that  the  adoption  of  appropriate  measures  and  safeguards  to  mitigate  risks  should  be 
considered.  Given  the  significance of  the  risks  caused  by  the  lack  of  supervisory  and  crisis  management 
powers in times of distress and the size of the exposures of EU clearing participants as explained above, 
ESMA  should  after  an  appropriate  period  review  the  clearing  services  that  have  been  assessed  in  the 
assessment  against  whether  introduced  measures  and  safeguards  have  achieved  the  desired  mitigating 
effect”. See 2021 ESMA report on UK CCPs (see footnote 9 above). 

12 

 
                                                           
but  not  the  CCP’s  home  jurisdiction,  are  comparable  to  those  of  clearing  members 
established  in  the  same  Member  State  as  those  CCPs.51  CCP  links  to  trading  venues 
established in other Member States also lead to  the development of intra-EU exposures 
and  risks.  This  means  that  decisions  taken  by  a  few  national  CCP  supervisors  have  an 
impact which is at least equal over entities established in their Member State and at times 
even larger on entities (clearing members, clients, institutional investors, etc.) throughout 
the EU, thereby also possibly impacting the stability of other Member States and the EU 
at large. Furthermore, it is important to note that under the recently introduced CCP RR 
Regulation  the  loss  allocation  tools  in  recovery  and  resolution  plans  mostly  rely  on 
additional  resources  provided  by  clearing  members  and  have  made  the  probability  of 
public bailouts more remote.  

The EU-wide systemic risk impact of EU CCPs is expected to further  rise. The current 
initiative to improve the attractiveness and capacity of EU CCPs is expected to result in 
additional flows of clearing activity into the EU and into a limited number of EU CCPs 
that have the capacity to accommodate such increased flow.52 This in turn would lead to 
more  cross-border  activity  in  the  EU  as  clearing  members  and  clients  from  throughout 
the  EU  will  be  using  progressively  a  finite  number  of  EU  CCPs.  As  such,  CCPs  in 
individual Member States will become increasingly relevant for the EU financial system 
as  a  whole.  EU  authorities  and  NCAs  across  the  EU  thus  need  an  overview  of  their 
activities as the potential financial distress of those CCPs could have a significant impact 
on clearing members and clients located in other Member States. 

Finally, the framework for supervisory cooperation amongst NCAs for EU CCPs is 
inefficient and inadequate leading to insufficient consideration of cross-border risks in 
the EU. EMIR requires national CCP supervisors to consult colleges and ESMA only in 
specific cases (see Table 3 in Annex 5 and Section 3.2.4), primarily on the authorisation 
stage  (nb.  all  EU  CCPs  are  authorised  and  new  market  entrants  are  rare)  or  when  the 
NCA  considers  that  a  significant  change  in  the  CCP’s  operations  has  taken  place  (e.g. 
extension  of  activities  or  services  or  significant  change  in  risk  models  or  parameters). 
This means that despite the interconnectedness of the EU financial system and the impact 
that the decisions of a CCP’s supervisor can have throughout the EU, as discussed later 
in  this  section,  ESMA  and  other  national  supervisors  are  only  partially  involved  in  the 
ongoing  activities  of  EU  CCPs  (e.g.  the  annual  review  and  evaluation  of  each  CCPs’ 
arrangements, strategies, processes and mechanisms to comply with EMIR as well as the 
evaluation  of  the  risks,  including  at  least  financial  and  operational  risks,  it  is  exposed 
to).53  Divergent  supervisory  practices  across  the  EU  (e.g.  NCAs’  different  approaches 
when a CCP should apply for an extension of its authorisation or for a model validation54 
and,  thus,  differences  when  the  college  and  ESMA  are  consulted)  create  an  unlevel 

51   Confidential information provided to FISMA services. 
52   The  volume  of  these  additional  flows  will  depend  on  a  range  of  different  factors  including  the  policy 
options chosen, their ultimate calibration, as well as other economic and political developments across the 
globe. See Section 5 for further information on the objectives of this initiative. 

53   Confidential  information  provided  to  DG  FISMA  services  stated  that  there  is  a  risk  that,  following 
authorisation,  CCP  colleges  have  become  a  mechanism  for  the  exchange  of  information,  rather  than  an 
effective supervisory tool. 

54   E.g. according to confidential information provided to DG FISMA, one national supervisor gave, prior to 
the  entry into force of EMIR 2.2, a “blanket”  authorisation to a  CCP  so no extension  of activities under 
Article 15 of EMIR would be needed. In another case, ESMA and a national supervisor did not agree on 
whether  the  change  in  models  proposed by  a  CCP  was  significant  (and  deserved  an  Article 49  of  EMIR 
validation); the college agreed with the national supervisor. 

13 

 
                                                           
playing  field  leading  to  risks  of  regulatory  and  supervisory  arbitrage  for  CCPs  and 
indirectly for their clearing members and clients.  

For example, there are 14 EU CCPs (see Annex 5); in 2021 ESMA was only asked six 
times  to  issue  an  opinion  on  NCAs’  draft  decisions  and  none  submitted  decisions  for 
ESMA’s  opinion  voluntarily.55  Moreover,  three  out  of  these  six  cases  included 
recommendations to the NCAs for implementation by the CCP either immediately or in a 
certain timeframe. ESMA, however, has no means of knowing or ensuring whether these 
are  followed56  (beyond  voluntary  feedback  by  the  NCA)  or  of  informing  interested 
parties  that  its  recommendations  have  not  been  applied,  thereby  limiting  supervisory 
convergence in the EU. While the diversity of the college membership is an asset as it is 
representative  of  the  clearing  ecosystem,  certain  stakeholders  noted  that  colleges  have 
limited added value as  they  in  principle agree with the assessment of  NCAs – at  times 
even  deciding  not  to  agree  with  the  recommendations  proposed  by  ESMA.57  Since  the 
entry  into  force  of  EMIR  2.2,  in  principle  only  one  college  meeting  per  CCP  has  been 
held per year and for a limited number of CCPs, no college meeting  has been held in a 
given year.58 ESMA has also observed some heterogeneity in the degree of participation 
of different college members59. 

The involvement of central banks of issue in the supervision of EU CCPs is also limited 
(i.e. in colleges and as non-voting members of the CCP Supervisory Committee when the 
latter  discusses  EU  market  developments  and  stress  tests),  despite  the  importance  of 
CCPs for the conduct of monetary policy and the functioning of payment systems. 

The  length  of  procedures  for  extending  services  or  activities,  as  well  as  changes  to  a 
CCP’s  models  also  raises  financial  stability  concerns  (see  also  Section  3.1.1).  Many 
changes on risk parameters and methodologies should be approved swiftly by NCAs and 
ESMA  to  increase  CCPs’  resilience.  However,  the  way  Article  49  of  EMIR  is  applied 
may lead to a rise in the risks that CCPs face if the proposed changes are not applied in 
time (see Section 3.2.1). For example, during a  market  stress period in  2022, one CCP 
noted that, based on their back-testing procedure,  the margins requested in one of their 
products  were  insufficient  and  decided  to  change  the  model  inputs.60  Even  though  the 
Article  49(1e)  of  EMIR  procedure  was  applied  (provisional  validation  –  see  Section 
3.2.1), it still took four weeks from the moment the CCP informed the authorities of the 
change  to  its  approval.  A  default  during  those  four  weeks  would  have  put  the  market 
unnecessarily at risk due to a known issue. 

3.2.  What are the problem drivers? 

3.2.1.  Complex, lengthy, and burdensome procedures  

When an EU CCP wishes to extend the activities and  services it offers (Article 15 of 
EMIR61), and/or to make significant changes to its risk models and model parameters 

55   E.g.  in  areas  not  required  under  EMIR.  ESMA  Confidential  Report,  EMIR  2.2  staffing  and  resources, 

para. 30.  

56   Based  on  confidential  information  provided  to  DG  FISMA  services,  in  two  cases,  for  example,  national 

supervisors did not take into account the ESMA recommendations. 

57   Confidential information provided to DG FISMA services.  
58   Confidential information provided to DG FISMA services. 
59   ESMA  review  of  CCP  colleges  under  EMIR  (2015/20),  https://www.esma.europa.eu/document/esma-

review-ccp-colleges-under-emir, para. 32. 

60   Confidential information provided to DG FISMA services. 
61   Article 15 EMIR sets out the procedure under which an EU CCP can extend its services or activities. An 

extension of the authorisation follows the same procedure as that for authorising a CCP (Article 17). 

14 

 
                                                           
(Article 49 of EMIR) that CCP often faces complex, lengthy and burdensome procedures 
interacting with their supervisors and the other bodies involved in their supervision under 
EMIR  due  to  how  the  processes  are  structured.  This  affects  the  ability  of  EU  CCPs  to 
compete,  limiting  their  attractiveness,  and  is  a  source  of  excessive  compliance  costs 
for  them  (see  Section  3.1.1)  and  is  the  result  of  both  the  relevant  EMIR  provisions 
themselves as well as how they are applied by national authorities and ESMA.  

The  vast  majority  of  stakeholders  responding  to  the  targeted  consultation  (90%,  i.e.  20 
out of 22 respondents to that section) supported the idea of improving the ability of EU 
CCPs to be competitive by expanding their offer and speeding up the approval  process 
for  new  products.  Respondents  (mainly  CCPs,  but  also  two  business  associations,  a 
central bank and a national supervisory authority of a Member State) highlighted that in 
particular  the  long  EMIR  approval  process  to  launch  new  products  had  negative 
consequences on EU CCPs’ competitiveness. They considered the existing governance as 
well as the requested documentation too complex and pointed to a lack of clear timelines. 
Three public authorities agreed that there is room for a faster approval process for certain 
initiatives. Other respondents, notably banks, agreed that it is crucial that EU CCPs are 
able to increase their offer to make it comparable to the offer of non-EU CCPs.62 ESMA 
also  notes  that  improvements  in  the  framework  are  desirable.63  In  the  meeting  with 
Member States on 16 June 2022, Member States agreed in general that procedures under 
Article 15 and 49 EMIR should be more efficient and the processes improved64.  

The  current  approval  times  for  an  extension  of  services  or  activities  by  EU  CCPs  are 
concerning  as  they  significantly  lengthen  time-to-market,  especially  as  EU  CCPs  are 
looking to expand their clearing offer to compete. For example, the procedures for a CCP 
to extend their services are set out in Article 15 of EMIR, however these procedures are 
only  triggered  once  the  application  has  been  declared  complete.  It  is  understood  from 
stakeholders, that the time taken for an application to be declared complete makes up the 
largest  part  of  the  process.  Sometimes  it  takes  several  months  to  get  the  approvals  for 
launching a service or activity65 (on average, 8.5 months since EMIR 2.2 was adopted, 
with  timeframes  ranging  from  3  to  15  months  after  an  application  has  been  declared 
complete66).  One  CCP  noted  that  the  process  from  submission  of  the  first  application 
took more than 2 years.67 Reportedly, such delays are due to lengthy interactions with the 
NCA when the latter assesses if a new initiative is an “extension of authorisation” or not, 
and when the authority assesses the CCP’s application68 to determine its completeness.69 

62   See  section  3.4.1.  of  the  Summary  Report  of  the  Targeted  Consultation  on  the  Review  of  the  Central 
Clearing  Framework  in  the  European  Union  (“EMIR”),  hereinafter  “Summary  Report  of  2022  EMIR 
Targeted Consultation”. 

63   ESMA  response  to  the  European  Commission’s  targeted  consultation  on  the  review  of  the  EU  central 
April 2022, 

clearing 
https://www.esma.europa.eu/sites/default/files/library/esma91-372-
2125_letter_chair_esma_response_to_ec_consultation_on_targeted_emir_review.pdf, paras.  94 ff. 

ESMA91-372-21251, 

framework, 

64   See Annex 2, Minutes Meeting with Member States on 16 June 2022. 
65   Confidential information provided to FISMA services. 
66   According to confidential information provided to FISMA services. 
67   Confidential information provided to DG FISMA services. 
68   According to confidential information provided to FISMA services, interactions with a NCA in the initial 
phase  to  launch  a  new  initiative  needs  the  CCP  to  assess  the  initiative  against  all  EMIR  articles,  with 
multiple questions and answers sessions  with the NCA, leading to a self-assessment of more than 60 A3 
pages and evidence amounting to more than 130 documents. 

69   EACH response  - ESMA Consultation Paper “Regulatory  technical standards on conditions  under  which 
additional services or activities to which a CCP wishes to extend its business are not covered by the initial 

15 

 
                                                           
 
In  practice,  an  NCA  can  ask  the  CCP  for  additional  information  without  an  ultimate 
deadline  which  can  lead  to  indefinite  delays  for  the  review  of  the  application70.  CCPs 
have  asked  for  more  clarity  from  the  beginning  on  what  documents/information  are 
exactly expected,71 while other stakeholders believe the observed delays are due to overly 
complex supervisory processes and inefficient interactions between national supervisors, 
colleges and ESMA.72  

Similar  concerns  were  raised  by  market  participants  on  the  length  and  complexity  of 
procedures  for  validating  significant  changes  to  CCPs’  risk  models  and  model 
parameters  under  Article  49  of  EMIR.73  EMIR  2.2  amended  the  process  to  try  to 
simplify  the  procedure.  In  the  event,  the  end  result  is  multiple  consecutive  procedures, 
lengthening  the  time  taken  to  obtain  model  approval  significantly.  This  procedure 
requires validations by the NCA, ESMA and an independent party, as well as an opinion 
of the college.74 As such, it may take from several months up to 2.5 years75 (7.1 months 
on average since EMIR 2.2 was adopted) to obtain such validations. This leads to high 
compliance  costs  and  to  potentially  even  higher  opportunity  costs  due  to  lost  revenues 
because  products  cannot  be  offered  on  time  and impacts  on  the  resilience  of  EU  CCPs 
due to the significant time needed to bring new  products to clearing participants and to 
adopt  new  or  amended  risk  models.  As  noted,  these  problems  derive  from  different 
identified issues, including that a CCP may be asked to submit documents several times 
and the respective procedures vary based on which authorities are involved, but also due 
to  uncertainty  on  certain  aspects  of  the  validation  process:  e.g.  stakeholders  perceive  a 
lack of clarity on what documentation that has to be provided when applying for a new 
approval  or validation.76  In addition,  stakeholders  noted  that even  a decision  whether a 
change is material or not (and hence should be subject to the procedure of Article 49 of 
EMIR) may take weeks.77  
To  ensure  timely  management  of  its  risks  and  avoid  procyclical  behaviour,78  it  is 
important  for  a  CCP  to  quickly  adapt,  e.g.  the  models  according  to  which  it  seizes  its 
default fund, to adjust its models for margin calculation to changes in market volatility or 
in  reaction  to  the  tests  performed  on  the  models  themselves.  For  example,  in  times  of 
stress,  CCPs  may  need  to  adjust  model  parameters  quickly,  so  that  such  parameters 
actually  reflect  market  dynamics  that  are  important  for  a  proper  calculation  of  margins 
and thus for risk management.  

authorisation  and  conditions  under  which  changes  to  the  models  and  parameters  are  significant  under 
EMIR”, November 2020.  

70   Confidential information provided to DG FISMA services. 
71   Confidential information provided to DG FISMA services. 
72   Confidential information provided to DG FISMA services. 
73   Confidential information provided to DG FISMA services. 
74   Significant  changes  to  a  CCP’s  models  and  parameters  need  to  be  validated  by  the  CCP’s  NCA  and 
ESMA, after validation by an independent party (Article 49 of EMIR); they are also subject to a college 
opinion,  to  which  the  NCA  and  ESMA  submit  a  report  based  on  a  risk  assessment.  EMIR  2.2  required 
ESMA  to  develop  draft  technical  standards  specifying  the  conditions  under  which  changes  to  a  CCP’s 
models and parameters are “significant”; under these draft standards (published in March 2021) the college 
is also required to issue an opinion as to whether a change should be considered “significant”. 

75   Confidential information provided to DG FISMA services. 
76   See Summary Report 2022 EMIR Targeted Consultation (see footnote 48). 
77   Confidential information provided to DG FISMA services. 
78   See responses to ESMA’s Consultation Paper “Regulatory technical standards on conditions under which 
additional services or activities to which a CCP wishes to extend its business are not covered by the initial 
authorisation  and  conditions  under  which  changes  to  the  models  and  parameters  are  significant  under 
EMIR”, https://www.esma.europa.eu/press-news/consultations/public-consultation-article-15-and-49-emir. 

16 

 
                                                                                                                                                                            
EMIR  has  a  “faster”  procedure  (i.e.  a  provisional  validation  procedure)  for  changes  to 
risk  models  and  parameters  where  justified  (Article  49(1e)  of  EMIR).  As  its  scope  is, 
however,  considered  unclear  and  limited,  it  has  not  been  used  much  in  practice  (e.g. 
NCAs are unsure or reluctant to approve changes).79 Moreover, market participants noted 
that this process does not reduce the burden for small and incremental improvements to 
CCPs’  risk  management  capabilities,  including  under  the  proposed  regulatory  technical 
standards.80  Market  participants  say,  in  essence,  that  that  procedure  is  used  as  an 
emergency  measure  but  not  to  facilitate  or  expedite  the  overall  validation  process.81 
Finally,  even  for  cases  where  provisional  validations  have  been  agreed,  the  lack  of 
deadlines and process for the subsequent validation of the model changes poses concerns 
of level playing field across CCPs and potential regulatory arbitrage. 

The  burdensome  and  lengthy  procedures  required  for  CCPs  to  extend  their  services  or 
activities (Article 15 of EMIR) and for model validations (Article 49 of EMIR) also, as 
indicated above, lead to  compliance costs arising from, amongst others the need to  get 
external legal advice, engage consultants and use significant internal resources, e.g.:82 (a) 
legal counsel fees: from EUR 150 000 to EUR 250 000 (Article 15 of EMIR procedure); 
between EUR 10 000 and EUR 50 000 (Article 49 of EMIR procedure) for medium and 
complex model changes; (b) external consultant fees: the independent validation costs 
for  an  Article  49  of  EMIR  procedure  range  from  EUR 25 000  to  EUR 150 000.  For 
Articles 15 and 49 procedures, CCPs may need external consultants, the costs for which 
may  range  between  EUR 200 000  and  EUR 350 000.  Depending  on  the  length  of  the 
approval  procedure,  those  costs  may  increase;  (c)  internal  CCP  resources:  CCPs 
employ  4  to  6  full  time  equivalents  (FTEs)  to  work  on  these  procedures,  but  in  some 
cases  as  many  as  13  FTEs  were  required.  Internal  costs  may  be  from  EUR 200 000  to 
EUR 300 000.  Staff  dedicated  to  the  projects  for  longer  periods  may  also  impact  the 
conduct  of  other  activities;  (d)  application  fees  for  Articles  15  and  49  procedures: 
CCPs may have to pay fees to their NCAs. These range for Article 15 from, e.g. a fixed 
fee  of  EUR 50 000  in  one  Member  State  to  a  variable  fee  ranging  from  EUR 8 352  to 
EUR 723 836 in another. Similarly, for Article 49, the fee also varies; e.g. there is a fixed 
fee of EUR 50 000 in one Member State  and a variable fee ranging from EUR 8 352 to 
EUR 361 918 in another.  

Other  costs  for  CCPs  include  the  opportunity  cost  of  lost  revenue  from  a  new  service; 
increased  risk  if  the  change  was  to  strengthen  the  risk  management  model  (see  also 
Section 3.1.3); increased operational risk if the service was to improve the efficiency and 
automation of the process; risk of changes to the law and the impossibility to adjust  its 
rules during the process; and the cost of internal process support.83  

These costs  are often  also  passed through to clearing members and, subsequently, their 
clients. First, they generally translate into a higher cost of clearing for clearing members 
and  clients;  they  also  face  prolonged  uncertainty  and  additional  implementation  costs 
(including adapting their IT systems) due to their inability to plan with confidence around 
launch  dates  of  new  products  over  an  extended  period  as  these  are  often  aligned  with 
CCPs. A delay in the provision of services or in certain updates by CCPs may also lead 
to more costs for clients if they need to use other CCPs for the respective  product, and 

79   Confidential information provided to DG FISMA services. 
80   Confidential information provided to DG FISMA services 
81   Confidential information provided to DG FISMA services. 
82   All figures, except for point (d) are based on confidential information provided to DG FISMA services. 
83   Confidential information provided to DG FISMA services. 

17 

 
                                                           
thus  maintain  dual  CCP  set-ups.  Also,  in  case  of  changes  of  operating  systems, 
procedures and contracts with customers84 need to be changed every time. 

Finally,  in  other  jurisdictions  the  time  required  for  CCPs  to  extend  their  services  or  to 
amend models is significantly shorter and the costs substantially smaller. In the US,85 for 
example,  a  CFTC  registered  CCP  may  implement  a  new  rule  or  amendment  in  10 
business  days  after  a  written  self-certification  to  the  CFTC  that  the  rule  or  change 
complies  with  the  Commodity  Exchange  Act  and  CFTC  Regulations.  In  certain 
circumstances, the CFTC  can extend this period, but  this seems  rare.86  It  has  also  been 
noted  that  the  underlying  documentation  can  be  easily  provided  (sometimes  in  hours). 
The CFTC requires every amendment to be filed, regardless of its relevance from a risk 
perspective or if it relates to the license of the CCP. This means a CCP may need about 
50  filings  a  year.  Nonetheless,  the  estimated  cost  burden  remains  lower  than  under 
EMIR; even the cost of an extended procedure with the CFTC is estimated to be 25-50% 
lower than that under EMIR.87 In the meeting with Member States on 16 June 2022, three 
Member States suggested to further look into ways that would allow CCPs to launch new 
products. However, Member States’ experts pointed to the need to carefully frame such 
approaches.  One  Member  State  particularly  highlighted  that  this  option  should  only  be 
available if non-systemic risks are concerned. 

In the UK, EMIR has been onboarded into UK law following the withdrawal of the UK 
from the European Union.88 While procedures are therefore the same as in the EU, UK 
CCPs had built up a significant position in the global clearing market already before the 
introduction  of  the  EMIR  requirements.  In  addition,  since  Brexit,  UK  CCPs  have  only 
one supervisor and there is no need to involve authorities from other Member States or 
refer  to  a  supranational  authority  such  as  ESMA,  rending  the  decision-making  process 
simpler and potentially faster. 

Due to these differences, third-country CCPs established in some jurisdictions are able to 
adapt faster to market developments, thus having a potential advantage over EU CCPs. 

3.2.2.  Limited participation in EU CCPs and concentration in incumbent CCPs 

Participation in UK-based CCPs by EU clearing members and clients is greater than that 
in EU CCPs, as shown in Section 2.1.  

As more participants bring more transactions to CCPs, differences in participation lead to 
greater  liquidity  at  UK  CCPs  than  at  EU  CCPs,  which  in  turn  undermines  the 
attractiveness  of  EU  CCPs  as  clearing  participants  consider  that  liquidity  ensures  an 
effective market with less volatility, tighter spreads and more stable prices and the ability 
to  unwind  positions  at  the  lowest  possible  cost  if  need  be.89  In  turn,  the  more  limited 
demand for clearing services at EU CCPs acts as a disincentive to develop and broaden 
their product offering, contributing to the demand and supply-side problems.  

There are three main reasons why the bulk of the activity in interest rate derivatives of 
EU clearing members and clients takes place in UK CCPs: 

84   Confidential information provided to DG FISMA services.  
85   See ESMA’s Final Report “Technical advice on third country regulatory equivalence under EMIR – US”, 
 https://www.esma.europa.eu/sites/default/files/library/2015/11/2013-

1 September 2013, 
1157_technical_advice_on_third_country_regulatory_equivalence_under_emir_us.pdf , p.  9 - 11. 

86   Confidential information provided to DG FISMA services. 
87   Confidential information provided to DG FISMA services. 
88   See https://www.fca.org.uk/markets/uk-emir/library.  
89   As advocated in the responses to the targeted consultation, see e.g. ABN AMRO Clearing. 

18 

 
                                                           
First,  clearing  tends  to  be  a  concentrated  business,  based  on  economies  of  scale  and 
scope:  the  greater  the  netting  opportunities  provided  by  a  given  CCP,  the  more  it  is 
attractive as a location for clearing. Portfolio netting through CCPs allows both parties to 
hold lower margins – either by bulking together the same type of products (e.g. interest 
rate swaps) referencing different currencies (cross-currency margining), or by grouping 
together  different  products  (e.g.  interest  rate  swaps,  interest  rate  futures  and  repos) 
denominated  in  the  same  currency  (cross-product  margining).  Most  CCPs  provide 
portfolio margining services based on cross-currency correlations, while some CCPs, e.g. 
some EU ones competing in interest rate derivatives, provide portfolio margining based 
on  cross-product  correlations.90  For  example,  LCH  Ltd  offers  netting  opportunities  for 
the same product across different currencies, while Eurex Clearing offers netting in the 
same currency but across different products. Cross-currency and cross-product margining 
are  allowed  under  EMIR.  These  different  approaches  make  it  difficult  for  clearing 
members and clients to compare the different CCPs’, e.g. netting efficiency. 

Netting  possibilities  give  rise  to  significant  network  effects  which  drive  market 
participants  to  pool  their  clearing  activities  in  one  CCP.  As  mentioned  by  most  banks 
acting as direct clearing members in the targeted consultation, the netting advantage in 
terms  of  reduced  margin  requirements  is  a  much  more  decisive  factor  for  market 
participants’ choice of a CCP than the respective direct costs of clearing. 

Second, stakeholders stated that the operational efficiency of a CCP was a key factor in 
their choices where to clear.91 In this regard, it has been mentioned that EU CCPs should 
improve  the  procedures  to  accept  new  participants  to  make  them  comparable  to  those 
offered  of  non-EU  CCPs.  All  things  equal,  if  it  takes  double  the  time  for  a  given 
participant to finalise all the checks and paperwork to access an EU CCP than it would 
take  to  access  a  non-EU  CCP  offering  the  same  services,  that  participant  is  likely  to 
favour  the  CCP  where  it  is  easier  and  faster  to  start  clearing.  Also,  some  stakeholders 
mentioned that greater efficiency is needed in the procedures which are now in place to 
ensure  that,  in  case  a  clearing  member  defaults,  its  clients’  positions  are  successfully 
transferred to another clearing member.92 

Third, considerations around liquidity are also key in driving participation as the more 
liquidity in a given CCP, the cheaper it is to clear in it, all things equal. 

In  the  meeting  with  Member  States  on  30  March  2022,  Member  States  generally 
supported the overall objective to reduce exposures to Tier 2 CCPs, with three asking for 
more analysis on the stability risks.  

3.2.3.  Interconnectedness of EU financial system 

CCPs operating in the EU are highly interconnected through a range of channels. 

First, CCPs are interconnected via their clearing members. Many of the largest global 
banks  are  members  of  multiple  CCPs,  illustrating  the  potential  for  contagion.  For 
example, BNP Paribas is a member of at least five EU CCPs. In addition, some clearing 
members are particularly dominant in a given CCP as illustrated in Figure 2 below. 

Another way to  highlight  the degree of interconnectedness  between market  participants 
in  the  OTC  derivatives  market  is  to  focus  on  "who  trades  with  whom".  The  ESRB 

90   See Commission Staff Working Document, SWD/2017/0246 final – 2017/0136 (COD), p.  63-65. 
91   See Annex 2. 
92   E.g. successful handling of the Lehman Brothers failure at LCH Ltd is often mentioned as a case in point to 

confirm the soundness and good performance of the CCP. 

19 

 
                                                           
published  a  paper  in  September  2016  illustrating  the  network  structure  of  the  OTC 
derivatives  market  through  a  visualisation  of  the  outstanding  interest-rate  swap  (IRS) 
positions in the market.93 The study shows that CCPs, big clearing members (referred to 
as  G16  dealers94)  and  banks,  are  connected  to  a  lot  of  counterparties,  with  many 
connections between them, suggesting a high potential for system-wide contagion. This 
indicates  the  central  role  of  CCPs  and  the  importance  of  client  and  indirect  clearing 
through the clearing members, as the latter serve as "gateways to clearing" for buy-side 
counterparties and create interconnections between CCPs and the wider system. 

Figure 2 - CCP-bank nexus: highly concentrated banks and CCPs interact closely95 

Second,  CCPs  can  be  interconnected  via  so-called  interoperability  arrangements 
which  allow  clearing  members  of  one  CCP  to  clear  securities  and  money  market 
transactions with clearing members of another CCP. This is the case for EuroCCP, LCH 
Ltd.  and  SIX  x-clear  in  various  equities  markets,  for  LCH  S.A.  (established  in  France) 
and Euronext Clearing (established in Italy) in various bond markets.96  
Finally,  as  shown  in  ESMA’s  2020  stress  test  report97  CCPs  are  connected  through 
liquidity  providers  and  custodians.98  If  CCPs  were  to  trigger  their  committed  or 
uncommitted liquidity lines99 at the same time due to a major market stress, it is possible 
that  those  “commitments”  cannot  be  fulfilled  altogether  or  that  pressure  is  put  on  the 
liquidity  providers  to  grant  liquidity  to  CCPs  in  one  jurisdiction  over  another.  For 
custodians,  the  dependency  can  be  characterised  as  a  “one-to-many”:  a  custodian’s 
failure is likely to have a repercussion over all CCPs using its services. 

93   https://www.esrb.europa.eu/pub/pdf/occasional/20160922_occasional_paper_11.en.pdf . 
94   The group of G16 dealers includes Bank of America, Barclays, BNP Paribas, Citigroup, Crédit Agricole, 
Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Nomura, Royal 
Bank of Scotland, Société Générale, UBS, and Wells Fargo. 

ESRB 

Report, 

95   BIS Bulletin No 13, 11 May 2020. 
96   A description of the interoperability arrangements existing in the EU and their functioning is available at 
the 
2019, 
interoperability 
https://www.esrb.europa.eu/pub/pdf/reports/esrb.report190131_CCP_interoperability_arrangements~99908
a78e7.en.pdf . See also ESMA, Final report, Possible systemic risk and cost implications of interoperability 
ESMA/2016/328, 
arrangements, 
https://www.esma.europa.eu/sites/default/files/library/2016-328.pdf.  A 
interoperability 
arrangements and the products, trading venues and Central Securities Depositories and Security Settlement 
Systems affected can be found in the annex (p.  30 to 33). 

arrangements”, 

table  of  EU 

1 March 2016, 

January 

“CCP 

97   https://www.esma.europa.eu/press-news/esma-news/esma%E2%80%99s-third-eu-wide-ccp-stress-test-

finds-system-resilient-shocks . 

98   See  right-hand panel of  Figure 4, i.e. end-2019 ICE Group had around USD 12.5 billion in  secured cash 

deposited at commercial banks, mostly reverse repos. 

99   Most jurisdictions, including the EU, do not require CCPs to have committed liquidity arrangements only 

that they establish a robust liquidity risk management framework. 

20 

 
 
                                                           
The  various  degrees  of  interconnectedness  of  CCPs  are  partly  addressed  through  the 
supervisory  structure  enshrined  in  EMIR  as  amended  by  EMIR  2.2.  This  framework 
allows for supervisors of clearing members, CSDs, trading venues or other CCPs linked 
with  an  interoperability  link  to  be  informed  of  developments  and  potential  risks 
stemming from a particular CCP (see Sections 2.2 and 3.1.3). This supervisory structure 
allows  for  ESMA  and,  to  a  lesser  extent,  the  central  banks  of  issue  to  foster  the 
harmonisation of practices across NCAs. Recent events, e.g. the Covid crisis of 2020 or 
the war in Ukraine in 2022, have hit markets in a shock. While CCPs have proven to be 
resilient,  supervisors  and  policy  makers  were  partially  blind  as  to  the  potential 
weaknesses  experienced  by  clearing  members,  clients  or  CCPs,  lacking  an  eagle-eye 
view  on  the  market  and  suffering  from  a  lack  of  information  from  third-country 
jurisdictions but also across Member States in the EU. It is thus beneficial to strengthen 
the EU-level  insight  into cross-border risks  which can emerge in  such scenarios,  as the 
powers and tasks granted to ESMA and the central banks under the current framework do 
not  appear  sufficient  in  such  cases,  and    could  therefore  be  made  more  effective.  In 
particular,  recent  events  have  shown  the  importance  of  strengthening  the  EU-level 
authorities’ role in coordinating responses and gathering the overview of risks beyond the 
national level in emergency situations. Other jurisdictions, such as the US or Japan, have 
put  in  place  other  mechanisms  to  protect themselves from  financial stability risks from 
the interconnectedness  of their own financial systems,  including,  e.g. a more expansive 
approach  to  supervision  (see  Section  3.3.2).  This  illustrates  the  fact  that  the  issue  is 
widespread,  albeit  different  in  nature,  and  cannot  be  adequately  addressed  by 
international standards. 

3.2.4.  Inefficient framework for supervisory cooperation 

Despite the amendments introduced relating to the supervision of EU CCPs following the 
adoption  of  EMIR  2.2  (see  Section  2.2),  the  framework  for  supervisory  cooperation 
remains  inefficient.  First,  multiple  actors  are  involved  at  multiple  levels  (EU  and 
national)  in  the  adoption  of  decisions  on  the  same  supervisory  issues,  leading  to 
duplication  of  assessments,  longer  procedures  (see  Section  3.2.1)  and  increasing 
compliance  costs  (see  Section  3.1.1).  Second,  NCAs  need  ESMA’s  opinion  before 
adopting  a  limited  number  of  supervisory  decisions,  leading  to  divergent  supervisory 
approaches  and  an  insufficient  consideration  of  cross-border  risks  (see  Section  3.1.3). 
Third, central banks of issue are insufficiently involved on EU CCP supervisory matters 
that are of direct relevance to the conduct of monetary policy and the smooth operation of 
payments systems, leading to insufficient consideration of cross-border risks (see Section 
3.1.3).  According  to  ESMA,  this  creates  a  “complex,  inconsistent  and  sometimes 
duplicative system resulting in long procedures and possible uncertainties regarding the 
expected outcome of supervisory processes”100. 

Regarding  the  first  two  points,  EMIR  2.2  introduced  a  structure  where  while  NCAs 
remain  responsible  for  the  adoption  of  supervisory  decisions,  for  some  supervisory 
issues, the opinion of ESMA or the college (or, in certain cases, both) are required (see 
Table 3, Annex 5). In practice, this means that for a new application by a CCP: the home 
NCA needs to prepare a risk assessment of the CCP and a draft decision; the ESMA CCP 
Supervisory  Committee  is  then  asked  to  adopt  a  draft  Opinion  on  the  NCA’s  decision 
where  necessary  to  promote  a  consistent  and  coherent  application  of  the  EMIR 

100  ESMA 

response 

to 

the  Commission 

targeted 

consultation,  para.  100,  1  April  2022, 

https://www.esma.europa.eu/sites/default/files/library/esma91-372-
2125_letter_chair_esma_response_to_ec_consultation_on_targeted_emir_review.pdf 

21 

 
                                                           
requirement concerned by the application; and the college is asked to adopt an Opinion 
determining whether the applicant CCP complies with all the requirements under EMIR. 
While ESMA’s Board of Supervisors, the CCP Supervisory Committee, and the college 
have each a different composition which partially justifies the requirement to consult all 
these bodies, the current structure leads to inefficient cooperation  as the same matters 
are discussed in three fora. This effectively increases costs for the authorities involved 
and for CCPs (see Section 3.2.1).  

NCAs do not have to consult ESMA or other NCAs on most supervisory decisions and 
hence  get  little  input  on  potential  cross-border  impacts  of  their  decisions.  This  raises 
financial  stability  concerns  (see  Section  3.1.3)  and  inconsistencies  as,  e.g.  ESMA  is 
consulted  on  a  limited  number  of  areas,  any  recommendations  are  non-binding,  market 
participants are generally not aware that the NCA or the CCP in question has elected not 
to  implement  them.  Similarly,  there  is  no  effective  mechanism  to  ensure  that  a  similar 
approach is adopted by all NCAs. 

On  the  third  point,  central  banks’  involvement  in  EU  CCP  supervision  is  limited  (see 
Section  2.2)  despite  the  direct  impact  of  CCP’s  activities  on  the  implementation  of 
monetary policy and the smooth operation of payment systems  (as basic tasks entrusted 
to the European System of Central Banks under the Treaty on the Functioning of the EU 
(TFEU)  (Article  127(2)).  In  addition,  there  are  inconsistencies  in  the  involvement  of 
central banks in the supervision of EU and third-country CCPs. While for third-country 
CCPs, central banks can participate as non-voting members to all discussions of the CCP 
Supervisory Committee, for EU CCPs they do so  only in  two instances:  EU-wide CCP 
stress tests and the discussion of market developments concerning EU CCPs. In addition, 
central  banks  are  not  involved  in  the  adoption  of  many  decisions  that  affect  EU  CCPs 
(which  the  EU  legislators  explicitly  acknowledged  as  of  direct  relevance  to  them),  i.e. 
liquidity  risk  controls  and  four  key  areas  with  embedded  liquidity  risk,  namely  margin 
requirements,  collateral,  settlement  and  approval  of  interoperability  arrangements.  The 
lack  of  input  from  central  banks  in  these  areas  makes  the  cooperation  between 
supervisors less efficient and hinders the full assessment of the cross-border risks raised 
by EU CCPs’ activities from a central bank of issue perspective.  It is also a concern as 
adequate  CCP  self-insurance  against  liquidity  risk  is  a  prerequisite  for  central  banks  to 
consider any potential requests for access to central bank liquidity. Considering as well 
that the risk implications of EU CCPs for EU currencies are expected to further rise with 
the envisaged growth of central clearing in the EU, it should be assessed how the role of 
central banks of issue in the monitoring and supervision of EU CCPs could be potentially 
enhanced.  

The vast majority of stakeholders replying to the targeted consultation (90%, i.e. 20 out 
of 22 respondents) supported the idea of improving the ability of EU CCPs expand their 
offer  and  speeding  up  the  approval  process  for  new  products.  Respondents  (mainly 
CCPs,  but  also  two  business  associations,  a  central  bank  and  a  national  supervisory 
authority  of  a  Member  State)  expressed  concerns  about  the  governance  as  well  as  the 
requested  documentation,  which  were  viewed  as  too  complex  with  unclear  timelines, 
resulting in high regulatory compliance costs were high. Three public authorities agreed 
that there is room for a faster approval process for certain initiatives. In the meeting with 
Member States on 16 June 2022, Member States agreed in general that procedures under 
Article 15 and 49 EMIR should be more efficient and the processes improved.  

22 

 
3.3.  How likely is the problem to persist? 

This  section  considers  the  potential  impacts  if  no  measures  are  taken  to  address  the 
identified problems. For the purposes of the analysis, it is assumed that equivalence for 
the UK remains until it expires on 30 June 2025: as such, it is assumed that the regulatory 
framework  of  the  UK  will  remain  aligned  with  EMIR  until  2025.  In  such  a  scenario, 
which presents the baseline scenario for the assessment of options (see Section 6.1), the 
problems are likely to remain, and indeed, even grow. Market participants will continue 
to clear in incumbent Tier 2 CCPs, and  where liquidity in EU CCPs is likely to remain 
unchanged.  Consequently,  absent  any  intervention,  the  over-reliance  on  non-EU  CCPs 
will continue and cross-border risks will rise not just in the EU financial sector but also 
in the wider economy. Relying on existing tools, such as capital buffers for banks, would 
not  address  the  problems  to  a  sufficient  extent:  even  though  it  is  possible  to  address 
excessive  concentration  of  exposures  towards  CCPs  under  the  current  banking 
framework,  such  tools  are  not  sufficiently  prominent  to  induce  the  desired  behavioural 
change.  

3.3.1.  Limited attractiveness of EU CCPs and over-reliance on non-EU CCPs 

The limited international attractiveness of EU CCPs and over-reliance on non-EU CCPs 
stem  from  two  main  problems:  supply-side  problems  (see  Section  3.1.1)  and  demand-
side problems (see Section 3.1.2).  

As  regards  supply-side  problems,  if  nothing  is  done  EU  CCPs  will  continue  to  face 
long,  burdensome  and  complex  procedures  when  trying  to  launch  new  products  or 
services.  This  will  limit  their  ability  to  respond  quickly  to  market  developments,  bring 
new  products  to  the  market  and  meet  the  demands  of  market  participants.  As  long  as, 
amongst  other  things,  EU  CCPs  are  perceived  by  market  participants  as  less  able  to 
quickly offer solutions to specific needs than third-country CCPs recognised by ESMA, 
market participants will continue to clear at non-EU CCPss. EU CCPs will also continue 
to  be  less  able  to  respond  quickly  to  market  developments  through  changes  in  risk 
models. CCPs established in jurisdictions where this can happen more quickly are likely 
to be better able to attract business. The options below therefore explore how to facilitate 
a quicker provision of new services and adaptations of models by EU CCPs.  

As  regards  demand-side  problems  (see  Section  3.1.2),  clearing  is  a  concentrated 
industry  where  economies  of  scale  matter  and  where  market  participants  tend  to  clear 
their  trades  at  the  same  CCP  to  gain  from  operational  and  margin  efficiencies.  The 
problem tree also shows the circular relationship between supply and demand at a given 
CCP. In this regard, in several Communications, as well as in the equivalence decisions 
adopted  to  avoid  cliff-edge  Brexit  scenario,101  the  Commission  urged  EU  market 
participants to reduce their excessive exposures to Tier 2 CCPs, but such calls have led to 
limited  results.  Participants  continue  clearing  mostly  in  non-EU  CCPs  and,  while  a 
certain  amount  of  short-term  interest  rate  derivatives  have  seen  higher  volumes  in  the 
EU,  the  bulk  of  the  exposure  remains  outside  of  the  EU.102  Absent  any  uptake  in  the 
liquidity at EU CCPs, market participants would be unlikely to shift their positions inside 
the EU substantially.  

101  See Communication on open strategic autonomy (see footnote 8), equivalence decisions for UK CCPs (see 

footnote 7). 

102  A  rebalancing  of  positions  between  LCH  Ltd  and  Eurex  has  been  observed  over  recent  years,  but  they 
mostly  concern  short  dated,  low  risk  interest  rate  derivatives  e.g.  Forward  Rates  Agreements,  and  not 
riskier long-dated interest rate swaps (or at least to a much lesser extent). 

23 

 
                                                           
Market  participants  claimed  that  EU  CCPs  do  not  offer  a  sufficiently  wide  range  of 
products  to  compete  effectively  with  non-EU  CCPs.  EU  CCPs  in  turn  claimed  that, 
absent  any  firm  interest  and  commitment  to  shift  business  inside  the  EU,  the  return  on 
investment  would  not  be  certain  enough  to  take  the  risk  to  launch  new  products,  also 
given the substantial sunk costs of the procedures to extend services. Market participants 
also  stated  that  it  would  not  be  efficient  and  cost-effective  for  them  to  split  their 
portfolios between two or more CCPs offering the same products and that the incentive 
to move should solely be based on an economic interest to do so. 

The central clearing obligation will apply to Pension Scheme Arrangements (PSAs) from 
June 2023, as provided for under EMIR.103 This will broaden the clearing base and would 
benefit  EU  CCPs  if  PSAs  clear  in  the  EU.  However,  PSAs  that  already  clear  on  a 
voluntary basis do so in greater proportion at UK CCPs at the moment, like the rest of the 
market.104  Absent  regulatory  intervention,  PSAs  are  likely  to  continue  clearing  to  a 
greater extent in the UK than in the EU, in spite of efforts made by EU CCPs in recent 
years to step up their offer to facilitate clearing by these entities. 

All  in  all,  absent  any  changes,  exposures  to  third-country  CCPs  are  likely  to 
increase,  presenting  increasing  risks  to  the  EU’s  financial  stability  in  the  medium 
term.  In  essence,  the  problems  identified,  and  thus  the  risks  stemming  from  the 
excessive exposure to third-country CCPs, are likely to worsen. 

3.3.2.  Risks to EU financial stability 

Risks  to  financial  stability  stem  from  the  level  of  exposure  and  the  insufficient 
consideration  of  cross-border  risks  (see  Section  3.1.3).  Absent  any  regulatory 
intervention, cross-border risks would rise in the EU financial sector but also in the wider 
economy. 

In the case of non-EU CCPs, the risks of inaction for financial stability are twofold. 
First,  in  a  stress  scenario,  e.g.  due  to  the  default  of  clearing  members  or  operational 
failures105, ,involving a non-EU CCP on which EU clients and clearing members rely to a 
high  degree,  certain  consequences  have  been  identified  by  ESMA,  “In  times  of  crisis, 
changes  to  the  eligible  collateral,  margins  or  haircuts  may  create  feedback  loops  that 
negatively  impact  sovereign  bond  markets  of  one  or  more  Member  States,  and  more 
broadly  the  EU  financial  stability.  Disruptions  in  markets  relevant  to  monetary  policy 
implementation  may  hamper  the  transmission  mechanism  critical  to  CBIs.  During 
recovery  and  resolution  events,  the  Tier  2  CCPs,  or  the  UK  resolution  authority,  may 
take  discretionary  measures  directly  adversely  impacting  EU  clearing  members”.106 
Similar  aspects  were  highlighted  by  the  ESRB.107  In  its  report,  ESMA  further  outlines 

103  According to Articles 89(1) and 85(2) of EMIR. 
104  See  ESMA  Letter  to  the  Commission  on  “Clearing  obligation  for  pension  scheme  arrangements”, 

25 January 2022. 

105  CEPS  mentions  16  episodes  of  clearing  member  defaults  between  1985  and  2018  in  various  countries 
the  world.  See  https://www.ceps.eu/ceps-publications/setting-eu-ccp-policy-much-more-than-

around 
meets-the-eye/. 

106  See 2021 ESMA report on UK CCPs (see footnote 9 above), p.  6. 
107  See ESRB response to the targeted consultation on the review of the EU central clearing framework (see 
footnote 25): "the main risks to financial stability associated with continued recognition of these clearing 
services relate to a situation where a UK CCP offering the service(s) (i) takes procyclical measures during 
a  period  of  market  strain  or  (ii)  enters  into  a  recovery  phase  or,  ultimately,  into  resolution.  The  ESRB 
therefore  proposed  in  its  response  to  ESMA  that  any  extension  of  the  recognition  of  the  two  UK  Tier  2 
CCPs should be temporary and should go hand in hand with measures designed to reduce risks to financial 
stability. These measures would, for example, be designed to increase the offer of clearing solutions from 

24 

 
                                                           
 
various  scenarios  in  which  the  EU  financial  stability  may  be  impacted  due  to  events 
affecting a Tier 2 CCP (see also Section 3.1.3). The report highlights that such scenarios 
may  be  relevant  for  EU  CCPs  as  well,  however  “the  EU  regulatory  regime  provides 
stronger mitigating factors to address the risks posed by EU CCPs”108.  

Hence,  even  though  Tier  2  CCPs  are  supervised  by  ESMA,  any  enforcement  of 
supervisory decisions relies on the cooperation of the foreign supervisor to enforce such 
supervisory  decisions.109  In  addition,  ESMA  has  no  formal  powers  as  regards  Tier  2 
CCPs crisis management . Additionally, third-country authorities are not part of the EU 
common regulatory, supervisory and enforcement framework (i.e. they are not subject to 
the Court of Justice of the EU nor bound by its interpretation of EU law), with the related 
potential  consequences  in  terms  of  coordination.  Supervisors  also  have  more  direct 
access to information over entities located in their jurisdiction. In the current framework, 
in case of crisis at a UK CCP, no EU body or authority would be in the driving seat for 
decisions that could have significant impacts on EU firms. 

Second, the over-reliance on non-EU CCPs creates an unsustainable dependency – if the 
critical services provided by those CCPs become unavailable, there is in some cases no 
viable substitute, inside or outside the EU. For example, for the three services provided 
by the Tier 2 CCPs which were identified as of substantial systemic importance, ESMA 
noted that “The three CCP services identified as being of substantial systemic importance 
perform  functions  critical  to  EU  market  participants.  They  support  capital  formation, 
risk transition, central risk management and market liquidity in interest rate and credit 
markets  through  their  provision  of  clearing  services  to  EU  banks,  investment  funds, 
insurance companies, pension funds and corporates. The large dependencies of the EU 
stem from the size of the clearing services, in combination with their interconnectedness 
with EU clearing members and clients in multiple Member States, their dominant nature, 
and the current lack of viable alternatives. In addition, they are of relevance for financial 
stability  in  the  EU  and  for  EUR  monetary  policy  implementation,  with  SwapClear 
services  for  PLN  interest  rate  derivatives  being  relevant  for  the  financial  stability  in 
Poland”.110  Importantly,  in  ESMA’s  assessment  the  existing  alternatives  to  LCH  Ltd 
(within  EU  and  in  another  third  country)  are  expected  to  only  partially  be  able  to  take 
over LCH Ltd’s role at present.111 

In the case of EU CCPs, under the baseline scenario they remain mainly supervised 
by  their  NCA  and  there  is  an  identified  insufficient  consideration  of  cross-border 
risks. The college and ESMA are involved, but they can only influence the supervision 
of  EU  CCPs  to  a  limited  extent.  As  shown in  Section  3.2.4,  the  current  framework  for 
supervisory  cooperation  in  the  EU  remains  complex  and  at  times  inefficient  or 
inconsistent. This is sub-optimal in terms of the ability of the EU supervisory system to 
properly identify and oversee cross-border risks, including the risks which cut across the 
clearing ecosystem with its multiple actors.  

Absent any changes, exposures to third-country CCPs are likely to rise, presenting 
more  risks  to  the  EU’s  financial  stability.  In  essence,  the  problems  identified  are 
likely  to  worsen  as  exposures  to  third-country  CCPs  continue  to  rise.  Risks  could 

EU  CCPs,  thus  enabling  EU  authorities  to  achieve  a  gradual  reduction  in  exposures  of  EU  clearing 
members to Tier 2 CCPs”. 
108 See 2021 ESMA report on UK CCPs (see footnote 9 above), p. 35. 

109  See 2021 ESMA report on UK CCPs (see footnote 9 above). 
110  See 2021 ESMA report on UK CCPs (see footnote 9 above), p.6. 
111  See 2021 ESMA report on UK CCPs (see footnote 9 above), p. 46. 

25 

 
                                                                                                                                                                            
even  rise  further  should  UK  authorities  decide  to  diverge  from  the  current  regulatory 
framework.  

The  level  of  exposure  to  UK  CCPs  by  EU  market  participants  is  without  precedent 
however the issue of reliance to foreign entities are considered by other countries where 
different  jurisdictions  have  chosen  different  ways  to  implement  the  international 
principles  for  financial  market  infrastructures  in  their  legal  frameworks.  Within  these 
frameworks, they have also opted to manage their exposure to foreign entities to protect 
their financial and economic system from undue risks, but the type and nature of the risks 
faced varies considerably between jurisdictions. US market participants are active at UK 
CCPs  such  as  LCH  Ltd,  which  holds  a  substantial  market  share  also  in  the  clearing 
market for certain US dollar-denominated products. However, in contrast to the EU, the 
US reliance on UK CCPs is lower112 and US CCPs offer a sizeable clearing alternative. 
The US also has strict rules under which, for example, all CCPs which wish to provide 
services  to  US  firms  must  be  directly  registered  and  supervised  by  the  CFTC. 
Interestingly, the proportion of US dollar-denominated interest rate derivatives cleared in 
US CCPs vs. UK CCPs varies significantly over time, minimising the arguments brought 
forward by market participants that having two CCPs competing on the same asset class 
creates  inefficiencies  and  undue  fragmentation.113  In  Japan,  Yen-denominated  interest 
rate derivatives entered into by Japanese financial institutions and subject to the clearing 
obligation are mostly cleared at the local CCP114.  

4.  WHY SHOULD THE EU ACT? 

4.1.  Legal basis 

EMIR sets out the regulatory and supervisory framework for CCPs established in the EU 
and  third-country  CCPs  that  provide  clearing  services  to  clearing  members  or  trading 
venues established in the EU. The legal basis for EMIR is Article 114 of the TFEU as it 
aims at establishing common rules for OTC derivatives, CCPs and trade repositories to 
avoid divergent national measures or practices and obstacles to the proper functioning of 
the  internal  market  while  ensuring  financial  stability.  Considering  that  this  initiative 
proposes further policy actions to ensure the achievement of these objectives, the related 
legislative proposal would be adopted under the same legal basis. 

4.2. 

Subsidiarity: Necessity of EU action  

The  problems  identified  (Section  3.1)  cannot  be  addressed  by  Member  States  acting 
alone and necessitate EU action. The review could amend certain provisions of EMIR, in 
particular to enhance the attractiveness of EU CCPs by  facilitating their ability to bring 
new  products  to  market  and  reducing  compliance  costs,  strengthening  EU-level 
supervision of EU CCPs and incentivising clearing in the EU. EU action would therefore 
lead to reducing our over-reliance on third-country CCPs and thus limit the risks to EU 
financial stability. Efficient and competitive clearing markets contribute to deeper, more 

112  For example, in terms of clearing of USD interest rate swaps, the balance between LCH Ltd in the UK and 
CME in the US stood at around 55% vs 45% over the period 2014-2016. See BIS Working Paper No. 826, 
“The cost of clearing fragmentation”, 2019.  

113 Confidential information provided to DG FISMA services. 
114  According  to  CEPS,  the  majority  of  JPY  IRS  (63%,  in  terms  of  notional  traded)  are  cleared  by  CCPs 
located  in  the  Asia-Pacific  region  (mainly  the  Japanese  CCP),  with  only  20%  cleared  in  UK  CCPs, 
particularly  LCH’s  SwapClear.  See  CEPS,  2021,  ”Setting  EU  CCP  policy  –  much  more  than  meets  the 
eye”. 

26 

 
                                                           
liquid markets in the EU and are one of the foundation stones for the development of the 
CMU. 

4.3. 

Subsidiarity: Added value of EU action  

Member States and national supervisors cannot solve on their own the systemic risks of 
highly  integrated  and  interconnected  CCPs  that  operate  on  a  cross-border  basis  beyond 
the  scope  of  national  jurisdictions  or  mitigate  risks  arising  from  diverging  national 
supervisory practices. Member States cannot on their own enhance the attractiveness of 
EU CCPs, incentivise clearing in the EU and address the inefficiencies of the framework 
for the  cooperation of national  supervisors  and  EU authorities. As such,  EMIR aims  to 
increase the safety and efficiency of CCPs in the single market while ensuring financial 
stability and this cannot be sufficiently achieved by Member States, as the co-legislators 
acknowledged in 2012 when adopting EMIR (and in 2019 when adopting EMIR REFIT 
and  EMIR  2.2).  Therefore,  by  reason  of  the  scale  of  actions,  these  objectives  can  be 
better achieved at EU level in accordance with the principle of subsidiarity as set out in 
Article 5 of the TEU.  

5.  OBJECTIVES: WHAT IS TO BE ACHIEVED? 

5.1.  General objectives 

The  general  objective  of  EMIR  is  to  reduce  systemic  risk  by  increasing  the  safety  and 
efficiency  of  the  OTC  derivatives  market  within  the  EU  and  globally.  The  general 
objective  of  this  initiative  is  therefore  to  reduce  the  over-reliance  on  Tier  2  CCPs  to 
address the potential risks to the EU financial stability, as highlighted in ESMA’s 2021 
report on UK CCPs (see Section 3.3.2). The policy options should provide incentives for 
market participants to clear in EU CCPs and adjust their exposures to Tier 2 CCPs to the 
point  where  over  time,  EU  CCPs  have  built  up  sufficient  capacity.  This  would  help 
address  the  financial  stability  risks  identified,  including  by  ESMA,  and  would  offer  a 
credible  and  rapid  way  to  on-shore  the  activities  of  those  CCPs  in  case  of  need.  In 
parallel,  the  policy  options  should  ensure  that  those  EU  CCPs  are  attractive  and 
appropriately supervised. 

The aim would be to  reduce the  excessive exposures to  a level  where the “substantial” 
systemic  importance,  as  identified  by  ESMA  in  its  report,  achieves  a  level  where  the 
framework  set  out  in  EMIR  to  manage  risks  from  third-country  CCPs  is  sufficient  to 
preserve the EU’s financial stability. This means at least bringing the CCPs in question to 
a Tier 2 category within EMIR, and not exceeding that as it is currently the case for some 
clearing  services.  The  announcement  of  these  measures  should  already  prompt  market 
participants to take action, which will help reduce exposures before 2025. .  

The  overarching  policy  objective  can  be  achieved  by  pursuing  the  following  specific 
objectives:  enhance  the  attractiveness  of  EU  CCPs,  by  making  it  easier  to  bring  new 
products to market and reducing compliance costs; encourage clearing in EU CCPs; and 
enhance the assessment and management of cross-border risks.  

In ESMA’s conclusion, that certain clearing services are currently of substantial systemic 
importance for the financial stability of the EU or one or more of its Member States, the 
measures to be taken to mitigate this were also considered. ESMA is required to assess 
under  Article  25(2c)  EMIR  if  a  CCP  or  some  of  its  clearing  services  are  of  such 
substantial  systemic  importance  that  that  CCP  should  not  be  recognised  to  provide 
certain  clearing  services.  As  part  of  this,  ESMA  concluded  that  a  potential  non-
recognition  with  a  shorter  transition  period,  would  be  disruptive  for  all  three  clearing 
services,  maximising  transfer  costs  including  the  cost  of  breaking  netting  sets.  ESMA 

27 

 
noted  that  a  longer  adaptation  period  would  reduce  this  cliff-edge  effect,  helping  to 
minimise  costs  for  EU  market  participants.  It  would  also  provide  time  to  incentivise  a 
move to EU CCPs, e.g. EU CCPs will be able to widen their product offering.  

Hence, whilst EU clients benefit from efficient clearing today, it comes at a cost, and a 
potential significant cost in the future. Uncovered financial risk is not a visible daily cost 
but  could  materialise  in  a  stress  scenario.  This  would  be  detrimental  to  the  entities 
clearing as the costs for a defaulting CCP will be borne by clearing members and clients, 
without  EU  supervisors  being  able  to  manage  those  effects.  The  alternative  is  equally 
detrimental to clearing members and clients, notably if ESMA in reassessing the situation 
concludes that the clearing services identified in their 2021 report are still considered of 
substantially  systemic  importance,  and  recommends  such  clearing  services  not  to  be 
recognised.  

Achieving  the  objectives  set  out  below  would  help  adjust  the  balance  of  costs  and 
benefits  for  market  participants,115  reducing  excessive  exposures  to  a  level  where  the 
framework for third-country CCPs introduced by EMIR 2.2 may be considered sufficient 
to mitigate risks to the EU’s financial stability while preserving access to global clearing 
in  combination  with  adequate  access  to  clearing  through  competitive  EU  clearing 
members. This should be achieved to the largest extent possible by June 2025, when the 
current  equivalence  decision  for  UK  CCPs  expires.  It  is  envisaged  that  market 
participants  anticipate  the  implementation  and  start  preparing  in  advance.  Many  banks, 
for  example,  already  have  accounts  established  at  EU  CCPs  in  order  to  anticipate 
Commission and ESMA decisions, as such, it is likely that the market will not wait for 
the full legal implementation of the proposed measures (including, e.g. the application of 
any  level  2  acts)  to  clear  more  in  EU  CCPs.  Furthermore,  efficient  and  resilient 
derivatives  markets  are  essential  for  the  functioning  of  CMU,  an  important  building 
block  of  an  economy  that  works  for  people,  in  line  with  the  Commission’s  strategic 
priorities. 

Figure 3: objectives tree 

5.2. 

Specific objectives 

There are three specific objectives, relating to the four problem drivers: 
  Improve the attractiveness of EU CCPs: CCPs are catalysts of financial stability and 
need to respond to the needs of the market dynamically. To enable them to do this, the 

115  ESMA concluded that while substantial risks for the EU and its Member States exist for certain products 
and  services  offered  in  UK  CCPs,  at  this  point  in  time,  the  costs  of  a  de-recognition  outweighed  the 
benefits. See footnote 9 above. 

28 

 
 
                                                           
initiative  aims  to  improve  the  ability  of  EU  CCPs  to  quicker  adopt  to  changes  in 
market demand and therefore be more competitive.  

  Encourage  clearing  in  EU  CCPs:  This  initiative  aims  to  encourage  clearing  in  EU 
CCPs  and  to  reduce  certain  over-reliance  on  Tier  2  CCPs,  and  thereby  preserving 
financial stability, increasing choice in the EU, increasing liquidity and participation, 
and contributing to the EU’s open strategic autonomy.  

  Enhance the assessment and management of cross-border risks: This initiative aims to 
address  gaps  in  the  way  cross-border  risk  is  assessed  and  managed  in  the  EU  and 
thereby  ensuring  a  level  playing  field  and  avoiding  EMIR  rules  being  applied 
differently depending on the place of establishment of EU CCPs.  

6.  WHAT ARE THE AVAILABLE POLICY OPTIONS? 

6.1.  What is the baseline from which options are assessed? 

The  baseline,  against  which  policy  options  are  assessed,  is  the  scenario  under  which 
EMIR  and  other  relevant  EU  legislations  are  left  unchanged,  and  thereby  leaving  the 
problems  to  evolve  as  described  in  Section  3.3.  That  is  the  ‘do-nothing’  option  against 
which the policy options are assessed (Option 1 in the options below).  

6.2.  Description of the policy options 

This  chapter  sets  out  the  policy  options  considered  to  achieve  the  three  specific 
objectives described in Section 5.2.  

6.2.1.  Improve the attractiveness of EU CCPs  

The objective is to enhance the CMU and to enhance the attractiveness of EU CCPs and 
to  mitigate  certain  identified  issues  with  long,  burdensome  and  complex  application 
processes and allow EU CCPs to quickly  respond to market developments,  and thereby 
swiftly  bring  new  products  to  the  market  to  meet  the  demands  of  market  participants 
thereby  safeguarding  financial  stability.  In  the  table  below,  options  A2  and  A3  are 
complementary; option A4 considers implementing both. 

29 

 
Policy option 

Description 

Option A1 – Do nothing   This is the baseline scenario (see Section 6.1). 

Option A2 – Simplify 
procedures for launching 
new products and 
changing risk models 
and parameters 

Option A3 – Introduce 
an ex-post procedure for 
certain changes  

Option A4 – 
Combination of Options 
2 and 3 

This  would  be  achieved  by  targeted  changes  to  EMIR  and  empowerments  to 
ESMA to establish draft RTSs and ITSs specifying the required documents and 
their  content  for  EU  CCPs’  applications.  Those  changes  would  simplify  the 
current  procedures  for  extension  of  activities  and  approval  of  significant 
changes  in  models  by  (individually  or  complementarily):  i)  shortening  the 
deadlines  provided  for  in  EMIR;  ii)  achieving  greater  standardisation  of  the 
documents to be submitted by CCPs in their applications;  iii)  streamlining the 
involvement  of  the  different  actors  in  the  procedures;  and  iv)  facilitating 
decision-making through new IT tools.  

EU  CCPs  would  be  allowed  to  launch  certain  new  activities/products  and 
implement certain model changes subject to an ex-post approval/non-objection 
review by the relevant authorities in a certain period. Targeted changes could be 
introduced  to  allow  EU  CCPs  to  launch  certain  new  activities/products  and 
implement  certain  model  changes  that  do  not  increase  the  risks  for  the  CCP 
before  supervisors  approve  such  measures.  The  Commission  could  also  be 
empowered  to  adopt  a  delegated  act,  to  change  the  list  of  activities  that  could 
benefit from the ex post/non-objection procedure. 
The  current  procedures  would  be  simplified  as  per  Option  2  and  an  ex-post 
approval/non-objection period for certain initiatives would be introduced, as per 
Option 3.  

6.2.2.  Encourage clearing in EU CCPs 

The aim is to foster clearing at EU CCPs, to create a credible and robust alternative for 
market participants and reduce the over-reliance on Tier 2 CCPs, thus better preserving 
financial  stability.  Initiatives  should  tackle  the  problems  affecting  the  demand  for 
clearing  services  at  EU  CCPs.  In  the  table  below,  options  2  to  5  are  complementary; 
option 6 considers implementing a combination of them.  

Policy option 
Option B1 - 
Do nothing  

Option B2 – 
Limit/ dis-
incentivise 
banks’ 
excessive 
exposures to 
CCPs 

Option B3 – 
Active 
account at EU 
CCPs 

This is the baseline scenario (see Section 6.1). 

Description 

The  Capital  Requirements  Regulation  (CRR)  would  be  amended  to  contain  excessive 
exposures to third-country or EU CCPs by banks acting as clearing members or as clients. 
This  option  includes  3  alternative  sub-options:  (B2.1)  to  introduce  a  new  specific 
concentration limit under the large exposure framework: where exposures towards a CCP 
would be limited to a certain threshold and breaching such a threshold, if not addressed in 
a  certain  timeframe,  would  lead  to  higher  capital  requirements;  (B2.2)  to  build  on  the 
Pillar 2 framework, whereby risks created by excessive exposures towards CCPs would be 
subject 
including  possible  additional  capital 
requirements; (B2.3) to consider macro prudential tools to account for the aggregated risks 
of EU banks’ exposures to systemic CCPs.  

to  specific  supervisory  measures, 

An obligation to keep an active account at EU CCPs would be imposed on all EU market 
participants  subject  to  the  clearing  obligation.  Such  EU  market  participants  would  be 
obliged to clear a portion of their new trades in relation to certain clearing services at EU 
CCPs  and  to  report  such  trades  to  the  CCP’s  competent  authority.  The  measure  should 
apply to those  services  which have been identified as systemically important by ESMA. 
The specific features of the active account could be defined in a level 2 measure, which 
would  be  subject  to  a  public  consultation  and  cost-benefit  analysis,  taking  into  account 
certain  criteria,  notably  that  the  measure  must  ensure  a  reduction  in  exposures  to  those 
clearing  services  offered  by  Tier  2  CCPs  which  are  considered  of  substantial  systemic 
importance.  More  specifically,  ESMA  could  be  empowered  to  prepare  a  draft  RTS 
specifying the proportion of activity in the derivative contracts subject to the requirement 
to be cleared in EU CCPs and the reporting methodology. The Commission could also be 
empowered  to  make  changes  to  the  list  of  instruments  subject  to  the  requirement  to  be 
cleared at a certain proportion in an EU CCP; this would ensure that EMIR is future-proof 

30 

 
Option B4 - 
Broaden the 
scope of 
clearing 
participants116 
Option B5 – 
Facilitate 
clearing by 
clients 

in  case  ESMA  were  to  identify  pursuant  to  Article  25(2c)  of  EMIR  any  other  clearing 
services as of substantial systemic importance. In preparing the draft RTS, ESMA should 
cooperate with the ESRB, the other European Supervisory Agencies and consult with the 
ESCB.  Under  the  ESMA  Regulation,  ESMA  is  also  required  to  conduct  an  open  public 
consultation and analyse the potential costs and benefits. 
Public entities in the EU or some of them  (e.g.  national debt  management office, public 
development  and  promotional  banks),  which  currently  are  not  obliged  to  clear  centrally 
according to EMIR, could clear their derivative transactions at EU  CCPs. This  could be 
encouraged  by  recommending  that  they  clear  at  EU  CCPs  if  they  voluntarily  decide  to 
clear centrally. 

This option would introduce changes to support central clearing, including amendments in 
the  relevant  pieces  of  sectorial  primary/secondary  legislation  (UCITS  Directive,  MMF 
Regulation,117 Solvency II delegated act118) to grant appropriate treatment to exposures to 
CCPs, where the role of a CCP as a counterparty is not always taken into account. While 
the amendments of the UCITS Directive and MMF Regulation concern central clearing by 
funds  in  general,  whether  directly  or  indirectly,  the  amendments  to  the  Solvency  II 
delegated  regulation  would  address  in  particular  the  case  of  an  insurance  company 
wishing to become a direct clearing member of a CCP.  In addition, the relevant clearing 
members  and  clients  offering  clearing  services  could  also  be  required  to  inform  their 
clients  of  the  possibility  to  clear  at  an  EU  CCP  to  ensure  that  clearing  members  offer 
clients the possibility to clear at an EU CCP where an offer is available. 

Option B6 – 
Combination 
of all options 

A variant of Option 2 (Pillar 2) could be applied, together with an active account (Option 
3),  to  reduce  excessive  exposures  to  third-country  CCPs  to  protect  the  EU’s  financial 
stability. Options 4 and 5 would also be put in place.  

6.2.3.  Enhance the assessment and management of cross-border risks 

The  objective  is  to  strengthen  the  framework  for  assessing  and  managing  cross-border 
risks, thus ensuring financial stability. All options are alternatives. 

Policy Option 
Option C1: 
Do nothing 

Option C2: 
Targeted 
amendments 
to the current 
supervisory 
framework 

This is the baseline scenario (see Section 6.1). 

Description 

NCAs  would  remain  responsible  for  adopting  supervisory  decisions,  with  greater  input 
from  EU  bodies. Targeted  amendments  could  include  (individually  or  complementarily): 
(1)  strengthening  EU  input  in  the  adoption  of  decisions  by  NCAs  (e.g.  by  extending  the 
supervisory  areas  for  which  an  ESMA  opinion  is  required,  such  as  withdrawal  of 
authorisation, annual review and evaluation without affecting the overall timeframe of the 
process,  empowering  ESMA  to  publish  the  fact  that  a  NCA  has  not  complied  with  an 
ESMA  opinion  and  giving  the  right  to  central  banks  of  issue  to  participate  to  the  CCP 
Supervisory  Committee  meetings  on  more  topics);  (2)  establishing  joint  supervisory 
teams;  (3)  strengthening  the  role  of  ESMA  in  cross-sectoral  emergency  situations;  (4) 
establishing  a  Joint  Monitoring  Mechanism  (comprising  amongst  others  the  ESAs,  the 
ECB, the SSM, the ESRB and the Commission) to , e.g. monitor at EU level the transfer of 
EU  firms’  exposures  from  Tier  2  CCPs  to  EU  CCPs  and  client  clearing  relationships; 
contribute  to  the  development  of  Union-wide  assessments  of  the  resilience  of  CCPs  
focussing  on  liquidity  risks  concerning  CCPs,  clearing  members  and  clients;  identify 
concentration  risks,  in  particular  in  client  clearing,  due  to  the  integration  of  Union 
financial markets, including where several CCPs, clearing members or clients use the same 
service  providers;  monitor  the  effectiveness  of  the  measures  aimed  at  improving  the 
attractiveness  of  EU  CCPs,  encouraging  clearing  at  EU  CCPs  and  enhancing  the 
monitoring of cross-border risks. ESMA, in cooperation with the other bodies participating 

116  PSAs will be subject to the clearing obligation from June 2023 at the latest. 
117  Regulation  (EU)  2017/1131  of  the  European  Parliament  and  of  the  Council  of  14  June  2017  on  money 

market funds, OJ L 169, 30.6.2017, p.  8 – 45 (MMFR). 

118  The changes to support central clearing by clients in the Solvency II delegated act (see footnote 4) could be 
made together with changes announced in the context of the Solvency II Review (see COM(2021)580). 

31 

 
                                                           
Option C3: 
Centralise EU 
CCP 
supervision 

to the Joint Monitoring Mechanism, could be requested to submit an annual report on the 
results  of  the  monitoring  activity.  In  addition,  if  ESMA  were  to  identify  that  competent 
authorities fail to ensure compliance with potential requirements on clearing at EU CCPs, 
ESMA could have the option to issue guidelines or recommendations or to take any other 
action. Finally, ESMA could also be requested to review the proportion of the activity to 
be cleared in active accounts. 

A single supervisor would be established for EU CCPs; it could be ESMA, considering its 
current involvement in the supervision of EU CCPs and that it is the EU supervisor of Tier 
2 CCPs under EMIR 2.2. There are two possibilities (mutually exclusive) as to the  scope 
of ESMA’s direct supervision: all  EU CCPs  or certain  EU  CCPs, on the  basis of certain 
criteria (e.g. size, interconnectedness). ESMA’s powers could include the power to grant/ 
withdraw authorisation, approve the extension of services or activities, validate changes to 
models.  For  those  CCPs  for  which  ESMA  would  be  the  single  supervisor,  NCAs  would 
have  no  powers.  In  its  tasks,  ESMA  could  be  required  to  cooperate  closely  with  other 
bodies,  e.g.  the  ESCB.  No  authority  would  have  binding  powers  over  the  single 
supervisor.  

6.3.  Options discarded at an early stage 

The following options were discarded at an early stage as inconsistent with the EU legal 
framework or with financial stability considerations, which are at the heart of EMIR and 
of  this  initiative:  on  the  supply  side,  granting  all  EU  CCPs  the  same  access  to  central 
bank liquidity facilities, irrespective of the need for a banking licence and extending the 
operating hours of payment systems (Target 2) beyond the current closing time, as these 
fall  under  the  competence  of  central  banks;  and  on  the  demand  side,  broadening  the 
scope of products under the clearing obligation and introducing an obligation to clear all 
derivative  transactions  at  EU  CCPs  and/or  Tier  1  CCPs.  Also  the  options  of  global 
coordination and a permanent equivalence decision for UK CCPs have been discarded at 
an early stage. Annex 6 explains the rationale for not further assessing these options.  

7.  WHAT ARE THE IMPACTS OF THE OPTIONS AND HOW DO THEY COMPARE? 

This section describes the impacts of each policy option and compares them in terms of 
effectiveness  in  meeting  the  three  specific  objectives  (supply  side,  demand  side, 
consideration  of  cross-border  risks),  coherence  with  the  EU  framework  and  efficiency 
(cost effectiveness). It also provides the rationale for selecting each preferred option. 

7.1.  A - Measures to improve the attractiveness of EU CCPs 

7.1.1.  Option A2 – Simplify the procedures for launching products and changing models 

and parameters 

Effectiveness in meeting the specific objectives  

Simplifying  the  procedures  for  launching  new  products  and  changing  risk  models  and 
parameters would contribute to ensuring shorter time to market.  

In  the  targeted  consultation,  CCPs  were  of  the  view  that  regulatory  compliance  costs 
were  high  and  procedures  time  consuming  due  to  the  current  structure  of  the 
authorisation process.119The majority of stakeholders (90%, i.e. 20 out of 22 respondents) 
supported  facilitating  and  speeding  up  the  approval  process  for  new  products. 
Respondents  (mainly  CCPs,  but  also  two  business  associations,  a  central  bank  and  a 
national  supervisory  authority  of  a  Member  State)  pointed  to  the  need  to  clarify  the 
procedures as well as the requested documentation, underling the complexity and lack of 
clear  timelines.  Three  public  authorities  agreed  that  there  is  room  for  a  faster  approval 

119  See Annex 2, section on Supervision of CCPs. 

32 

 
 
                                                           
process  for  certain  initiatives.  In  the  meeting  with  Member  States  on  16  June  2022, 
Member States agreed in general that procedures under Article 15 and 49 EMIR should 
be more efficient and the processes improved.120  

Before  EMIR  2.2,  Article  49,  for  example,  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. The Commission EMIR 2.2 proposal 
sought  to  clarify  the  conditions  under  which  a  CCP  may  obtain  the  validation  of 
significant  changes to its adopted models and parameters, simplifying the process. This 
proposal  was  however  amended  in  the  negotiations  by  the  co-legislators,  and  the  end 
result  gives  rise  to  multiple  consecutive  processes,  assessing  first  if  the  change  is 
significant  or  not  to  determine  the  appropriate  process  and  then  another  process  to 
validate  the  change.  The  process  for  launching  new  products  faces  similar,  but  not 
identical  challenges,  in  particular  the  lengthy  procedures  for  the  determination  of  the 
completeness  of  an  application  which  can  last  for  several  years  before  the  official 
approval procedure starts. 

Under  this  option,  the  process  for  extending  a  CCP’s  services  or  activities  and 
introducing changes to risk models would be simplified, and shortened. This would offer 
CCPs  greater  certainty  and  predictability.  Technical  rules  (draft  RTS  and  ITS  prepared 
by  ESMA  to  be  adopted  by  the  Commission)  could  specify  the  precise  content  and 
format of the exact documents to be provided for an application, reducing the number of 
questions that need to  be asked and  consequently, reducing the timeframe further.  This 
should  reduce  the  number  of  cases  where  additional  documents  are  requested  and/or 
applications  are  refused  and  have  to  be  re-submitted,  avoiding  delays.  New  IT  tools 
would facilitate information-sharing among relevant authorities, the college and ESMA, 
allowing them to do their assessments in parallel (instead of in sequence) and coordinate 
requests  for  additional  information.  Streamlining  the  involvement  of  the  various  actors 
would also  simplify the process  and enable EU CCPs to  bring their products  to  market 
quicker, and at lower cost, and to react faster to changing market conditions. Similarly, 
this option would bring greater certainty to CCPs about which model changes need to be 
approved and which ones not, saving CCPs time and investments.  

In the meeting with Member States on 16 June 2022, most representatives who expressed 
their view favoured exploring the setting up of a single point of contact  where all CCP 
submissions  could  take  place  via  a  single  digital  platform  and  be  immediately  shared 
with the national competent authority (NCA), ESMA and the other authorities involved 
in  that  CCP’s  supervision  (e.g.  college  members).  This  would  ensure  work  can  be 
conducted in parallel, possibly shortening the process considerably. Another option that 
most Member States who expressed an opinion considered worth exploring further was 
to standardise more the documentation to be submitted by EU CCPs.   

All those changes would enhance the ability of EU CCPs to compete internationally and 
would not compromise financial stability, as the necessary checks would remain in place, 
but  more  proportionate  and  efficient  where  justified.  However,  this  option  does  not 
address  new  activities  or  changes  that  are  of  lower  impact/less  significant,  which  may 
deserve an even simpler procedure as highlighted in the targeted consultation.121 

120  See Annex 4.2, in particular section 2.1 and section 3.2.1 for more details. 
121 Some stakeholders (i.e. CCPs, ESMA) mentioned that a fast-track procedure for certain changes could be 

designed, while maintaining the full authorisation for more complex cases. 

33 

 
                                                           
EU  CCPs  that  can  compete  for  business  more  efficiently  should  be  able  to  attract 
business,  as  a number of market participants underlined that the  availability of a wider 
range of products in EU CCPs.122 The increased market offer could with time contribute 
to  achieving  the  second  specific  objective  of  encouraging  clearing  in  EU  CCPs,  and 
could  indirectly  lead  to  a  reduction  of  the  over-reliance  on  third-country  CCPs  and  the 
ensuing risks to financial stability.  

In  terms  of  the  third  specific  objective  (i.e.  consideration  of  cross  border  risks),  this 
option  could  broaden  the  choice  of  market  participants  for  where  to  clear,  offering 
alternatives to the benefit of financial stability  and possibly helping to reduce the over-
reliance on third-country CCPs. However, this option would not address directly the need 
to enhance the assessment and management of cross-border risks. 

Coherence 

This  option  would  streamline  the  procedures  for  CCPs  to  launch  new  activities  and 
change risk models and parameters. As such, it also fully contributes to the objective of 
strengthening the CMU by building efficient market infrastructures. In addition, fostering 
digitalisation  of  procedures  is  consistent  with  EU  policies  in  the  field  of  digitalisation. 
This  option  is  coherent  with  financial  stability  objectives:  CCPs’  proposed  initiatives 
should not endanger financial stability as they will be reviewed by the supervisors.  

Assessment of the impacts by stakeholder group 

EU CCPs could launch new initiatives and change risk models quicker, increasing their 
ability to expand business and compete internationally. They would have more certainty 
about  the  approval  procedures,  including  documents  needed  and  timelines.  This  would 
increase  efficiency  in  the  use  of  resources  by  CCPs,  freeing  up  capital  and  human 
resources for other projects and tasks, and putting them in a better position to bring new 
products  to  market.  They  would  also  benefit  from  more  certainty  on  the  timelines  to 
operationalise  their  products,  reducing  disincentives  to  bring  new  products  to  market. 
This would lower the risk of losing business to third-country competitors which can go 
through faster procedures. There will be also some administrative cost savings from the 
simplified  processes,  although  these  are  expected  to  be  smaller  in  comparison  with  the 
reduction  of  opportunity  costs  described  above.  They  can  be  estimated  to  0.5  FTE  per 
CCP on average (some CCPs being smaller and less prone to launching new products on 
a  regular  basis).  These  benefits  would  be  ongoing.  Additionally,  shortening  the 
procedures  may  contribute  to  safer  CCPs:  time  is  key  when  CCPs  have  to  adjust  their 
risk models to changes of external market conditions.  

Clearing members could benefit from greater offer by CCPs, in a faster way, and would 
thus  have  more  choices  where  to  clear.  More  competition  could  be  spurred  amongst 
CCPs,  thus  potentially  triggering  a  virtuous  circle  with  increasing  opportunities  for 
clearing  members.  In  addition,  the  reduction  of  regulatory  costs  incurred  by  CCPs  and 
the increased competition could lead to a reduced cost of clearing for clearing members. 
Clarity  over  CCPs’  launch  dates  for  a  specific  service  or  activity  would  reduce  legal 
uncertainty  and  implementation  costs  (e.g.  IT  adaptations,  need  to  maintain  dual  CCP 
set-up,  adjustment  of  procedures  and  contracts  with  customers)  for  clearing  members. 
These benefits would be ongoing. Like clearing members, clients too could benefit from 
greater offer by CCPs and would have more choices where to clear, with reduced costs. 
These benefits would be ongoing. 

122  See Annex 2. 

34 

 
                                                           
CCPs’  NCAs  would  benefit  from  more  efficiencies  by  using  new  IT  tools  and  from 
standardised  requirements  for  the  application  documents.  These  benefits  would  be 
ongoing. At the same time, they could be more restrained in the time they have at their 
disposal to assess applications for extension of activities and changes to  models, which 
may imply further resources. Shorter timelines may be even harder to meet in case more 
requests for the approval of new projects are submitted by CCPs, as a result of a greater 
trend  towards  innovation  which  would  be  spurred  by  the  measures  included  in  this 
option. These costs would be ongoing. As regards the new IT tools, NCAs would have to 
bear costs of setting up specific IT facilities, or connecting to central IT facilities which 
could  be  established  jointly,  e.g.  using  ESMA  as  a  central  IT  hub.  Doing  so  could 
mitigate the cost impact on individual national supervisory authorities. The cost of the IT 
tools would be mainly one-off (development), with a smaller part ongoing (maintenance 
and updating).  

As regards ESMA, the procedures should be shorter and simpler and more standardised 
documents should be submitted, which should help to reduce or simplify ESMA’s work. 
ESMA would also benefit from greater efficiencies by using new IT tools. These benefits 
would be ongoing. More requests by CCPs to extend services may ensue as an indirect 
impact which may somewhat increase ongoing costs. As regards the new IT tools, ESMA 
would have to bear costs related to the technical and operational setup only if it used the 
same  tools  for  its  own  purposes.  Should  ESMA  operate  IT  tools  on  behalf  of  national 
supervisory  authorities,  such  authorities  would  have  to  refund  ESMA’s  expenditures. 
This cost would be one-off, but maintenance costs would be ongoing. 

7.1.2.  Option  A3  –  Introduce  an  ex-post  approval/non-objection  procedure/review  for 

certain changes  

Effectiveness in meeting the specific objectives  

Certain new activities (e.g. new products or services in an asset class a CCP is authorised 
to offer; new EU currency in case of an already multi-currency CCP) and changes in risk 
models which do no not qualify as significant, could be assessed in accordance with non-
objection  procedures  or  validations,  where,  within  a  certain  period  of  time,  the 
application will be deemed to have been approved unless the NCA (and ESMA for risk 
models) objects to the change.  

An  extension  of  services  or  model  changes  qualifying  for  an  ex-post  review/non-
objection procedure or validation would be notified by the CCP to the NCA, the college 
and ESMA. In some of those cases, where the change is very likely not significant or not 
raising  the  risk  within  the  CCP,  the  CCP  could  be  allowed,  to  provide  the  services  or 
apply  the  model  changes  as  soon  as  it  submits  its  application.  However,  if  the  NCA 
objected by the end of the non-objection period, the CCP would have to stop offering this 
clearing services or using the new model. 

To  implement  those  changes  different  options  could  be  used,  including  a  combination 
between targeted changes under EMIR and empowerments in the form of a delegated act: 
targeted  changes  could  be  included  in  EMIR  to  provide  for  the  ex-post/non-objection 
procedure and complemented by level 2 acts (RTS and ITS) to further specify the list of 
non-material  changes  for  which  the  ex-post/non-objection  procedure  could  apply.  The 
cost  and  risks  to  the  CCP  in  that  case  would  appear  to  be  limited.  This  is  due  to  the 
understanding that a CCP would only start offering clearing or applying a model change, 
without an approval, when the CCP is sure that the offer would clearly fall under the non-
objection  procedure  or  validation,  and  if  unsure, the  CCP  would  wait  a  short  period  of 
time for this to be confirmed.  

35 

 
This  option  would  simplify  the  framework  and  clarify  which  changes  require  a  full 
procedure  and  which  ones  do  not,  thus  also  fostering  harmonisation.  It  would  avoid 
unnecessarily burdensome procedures  and ensuing administrative  and opportunity costs 
and  thus  contribute  to  enhancing  the  attractiveness  of  EU  CCPs.  However,  this  option 
alone  would  not  simplify  procedures  in  all  cases,  but  only  where  changes  are  less 
significant  from  a  CCP  risk  and  financial  stability  perspective:  as  such,  it  would  only 
partially  meet  the  specific  objective  of  improving  the  attractiveness  of  EU  CCPs.  By 
increasing the attractiveness of EU CCPs, this option could indirectly lead to a reduction 
of  the  over-reliance  on  third-country  CCPs  and  the  related  risks  and  to  an  increase  in 
clearing  activity  at  EU  CCPs.  However,  it  would  not  specifically  address  the  need  for 
better  consideration  of  cross-border  risks  that  such  increased  intra-EU  clearing  activity 
would necessitate.  

In the targeted consultation, there was broad support for an ex-post approval with 65% of 
stakeholders  supporting  its  introduction,  at  least  for  some  types  of  changes.  On  the 
details of how to operationalise such an approach, views differed considerably: two CCPs 
proposed that changes should be classified ex ante into minor/medium/big and the level 
of involvement of the authorities should follow as a consequence; 2 other respondents (an 
NCA  and  a  CCP)  proposed  that  assessment  of  the  introduced  changes  takes  place  ex 
post;  another  NCA  proposed  that  the  NCA  deals  with  the  procedures  and  ESMA 
validates  ex  post  and  possibly  issues  recommendations  to  the  CCPs.  Another  public 
stakeholder,  who  provided  feedback  on  a  confidential  basis,  stated  that  an  ex-post 
approval for risk models should only be available for changes which clearly enhance risk 
management.  However,  one  association  did  not  support  ex-post  approval,  preferring 
instead  an  earlier  involvement  of  the  authorities  in  the  development  of  the  proposed 
changes.  

In the meeting with Member States on 16 June 2022, several Member States suggested 
exploring  an  ex-post  approval/review  as  done  in  other  jurisdictions  to  allow  CCPs  to 
launch  new  products  in  asset  classes  already  cleared  under  an  ex-post  approval/review 
process as well as a self-certification process for some rules changes. Member States also 
pointed to  the need to  carefully frame such approaches. One Member State highlighted 
that this option should only be available if non systemic risks are concerned. 

Coherence 

This  option  fully  contributes  to  strengthening  the  CMU  by  relying  on  efficient  and 
competitive  CCPs,  while  remaining  coherent  with  financial  stability  objectives  as  it 
would  concern  initiatives  for  which  a  full  approval  procedure  has  been  identified  as 
disproportionate.  In  addition,  it is  expected to  better allow CCPs  to  update risk models 
timely, which is key for proper management of risks.  

Assessment of the impacts by stakeholder group 

EU CCPs  could  launch  new  non-major initiatives and bring non-significant  changes to 
risk  models  much  faster123,  increasing  their  potential  to  expand  their  business  and 
compete  internationally.  This  option  would  also  enhance  clarity  as  to  when  faster 
procedures  are  appropriate  and  applicable:  in  this  way,  the  time  and  resources  used  by 
CCPs to assess whether a change is significant or not would be reduced if not completely 
saved, and resources would not be wasted to follow long procedures when not necessary. 

123  E.g. this could be the addition of a new currency by an already multi-currency CCP. Specific cases could 
be identified in the level 1 text, while ESMA could be mandated to report and identify additional cases. 

36 

 
                                                           
In addition, like option A2, this option would reduce the probability of losing business to 
competitors  while  waiting  for  regulatory  approvals.  These  benefits  would  be  ongoing. 
CCPs estimate that an ex-post approval process could lead to economies of at least 25% 
compared to the current procedures.124 While the current cost of procedures is unknown, 
the cost reduction can be estimated to be between EUR 5 million and EUR 15 million per 
year over all EU CCPs. 

As under option A2, clearing members could benefit from improved offer by CCPs in a 
faster way and would have better choices where to clear. Even though this would be true 
for  certain  types  of  initiatives/changes  only,  such  initiatives  could  encompass,  e.g.  the 
addition  of  a  new  currency,  which  is  an  important  aspect  when  comparing  the  offer  of 
EU CCPs with the offer of other third-country CCPs. The reduction of regulatory costs 
incurred  by  CCPs  could  also  lead  to  reduced  cost  of  clearing  for  clearing  members. 
Clarity  over  CCPs’  launch  dates  for  a  specific  service  or  activity  would  reduce  legal 
uncertainty  and  additional  implementation  costs  (e.g.  IT  adaptations,  need  to  maintain 
dual  CCP  set-up,  adjustment  of  procedures  and  contracts  with  customers)  for  clearing 
members.  These  benefit  would  be  ongoing.  Clients  would  benefit  similarly  as  clearing 
members (also ongoing). 

CCPs’  NCAs  would  benefit  from  more  clarity  as  to  when  a  proposed  initiative  can  be 
considered  as  minor/less  significant.  A  more  harmonised  approach  is  likely  to  save 
NCAs’  resources  and  time  spent  in  assessing,  e.g.  if  an  extension  of  authorisation  is 
required.  This  benefit  would  be  ongoing.  ESMA  would  also  have  similar  ongoing 
benefits in terms of resources. 

7.1.3.  Option A4 – Combination of Options A2 and A3 

Effectiveness in meeting the specific objectives  

Combining Options A2 and A3 would simplify the current procedures to a greater extent 
while preserving financial stability. It would thus achieve the first specific objective to a 
fuller extent than those options individually.  

The approximate range of related cost savings of combined options A2 and A3 has been 
estimated  based  on  interactions  with  stakeholders  and  several  assumptions  which  were 
needed to extrapolate the effects to the whole EU. This cost saving is of an administrative 
nature and thus counts under the “one in, one out” approach as an “out” in the range of 
approx. EUR 5 million to EUR 15 million (EU total). This is likely to be concentrated in 
few EU CCPs (as few EU CCPs might bring new products to the market in a given year; 
for more details on the estimates, see Annex 3, Table I).  

Both options can be combined seamlessly and the positive impacts on the attractiveness 
of EU CCPs are considered additive. As regards the objective of encouraging clearing in 
the EU, this option would also contribute to it as it would increase the attractiveness of 
EU CCPs for market participants (as evidenced by stakeholder replies). Finally, in terms 
of the third specific objective (i.e. consideration of cross border risks), while this option 
could  broaden  the  choice  of  financial  market  participants  as  to  where  to  clear,  thus 
offering  alternatives  also  to  the  benefit  of  financial  stability,  it  would  not  specifically 
address the need to enhance the assessment and management of cross-border risks.  

Coherence 

124  According to confidential information provided to DG FISMA services.   

37 

 
                                                           
This  option  contributes  to  strengthening  the  CMU  through  efficient  and  competitive 
CCPs. It also contributes to financial stability, as illustrated above. In addition, fostering 
digitalisation of procedures and setting up a “single point of contact” would be consistent 
with EU policies in the field of digitalisation.  

Assessment of the impacts by stakeholder group 

EU CCPs could launch new initiatives and change risk models sooner, as well as benefit 
from a faster approval for certain initiatives, reducing their compliance costs in the range 
of EUR 5 million to EUR 15 million per year (see Annex 3) and increasing their potential 
to expand their business and compete internationally. They would have greater certainty 
about  the  whole  procedure,  including  the  documents  needed.  This  would  increase  the 
efficient use of CCPs’ resources. CCPs would also benefit from greater certainty as to the 
time necessary for their planned initiatives to become operational,  which is expected to 
reduce existing  disincentives  to  bring new products  to  the market. All  this  could rather 
significantly reduce opportunity costs for EU CCPs, i.e. the probability of losing business 
to the benefit of third-country competitors. These benefits would be ongoing. 

Clearing members could benefit to a large extent from the enhanced offering capacity 
by EU CCPs and the quicker time to market for new clearing services over time. More 
competition  could  be  stimulated,  thus  potentially  triggering  a  virtuous  circle  with 
increasing opportunities for clearing members. The reduction of regulatory costs incurred 
by CCPs, combined with higher competition, could also theoretically lead to reduced cost 
of clearing for clearing members. Clarity over CCPs’ launch dates for a specific service 
or activity would reduce legal and operational uncertainty and implementation costs (e.g. 
IT adaptations, dual CCP set-up, changes to procedures and contracts with customers) for 
clearing  members.  These  benefits  would  be  ongoing.  Clients,  similarly  to  clearing 
members,  would  benefit  from  enhanced  offering  capacity  by  EU  CCPs  and  enhanced 
time to market. These benefits would be ongoing.  

CCPs’  NCAs  could  be  more  restrained  in  the  time  they  have  to  assess  extensions  of 
activities  and  changes  to  models  and  this  is  likely  to  have  some  resource  implications. 
Such shorter timelines may  also be more challenging to meet in case more requests for 
the approval of new projects are submitted by CCPs, as a result of a greater trend towards 
innovation which would be spurred by the measures included in this option. These costs 
would  be  ongoing.  As  regards  using  new  IT  tools,  national  supervisors  would  have  to 
bear  costs  of  setting  up  specific  IT  facilities  or  connecting  to  central  IT  facilities.  This 
cost  would be  mainly  one-off  (with some ongoing  costs of maintenance and updating). 
At  the  same  time,  costs  to  national  supervisors  could  be  partially  mitigated  by  greater 
efficiencies through the use of the new IT tools and clarity as to “minor” initiatives and 
these effects would be ongoing.   

Depending on the details of a proposal, this could have several impacts on ESMA. The 
procedures  should  be  shorter  and  simpler  and  more  standardised  documents  should  be 
submitted, helping reduce or simplify ESMA’s work as well. ESMA would also benefit 
from  greater  efficiencies  by  using  new  IT  tools.  These  benefits  would  be  ongoing. 
Potentially more requests  by CCPs to  extend services may ensue as an indirect  impact, 
with  the  related  costs  being  ongoing.  Should  ESMA  operate  IT  tools  on  behalf  of 
national  supervisory  authorities,  such  authorities  would  have  to  refund  ESMA’s 
expenditures. This cost would be mainly one-off, with more moderate ongoing costs of 
maintenance and updating. 

38 

 
7.1.4.  Choice of preferred option. 

Option  A2  alone  would  partially  meet  the  objective  of  enhancing  EU  CCPs’  ability  to 
compete internationally, as  it would streamline  the procedures of Articles  17 and 49 of 
EMIR, but would not set out a simplified process for proposed activities and changes that 
are clearly less significant from a financial stability perspective. Option A3 alone would 
also partially meet the objective, as it only addresses the cases of proposed activities and 
changes to  models deserving a fast  procedure.  The combination of options A2 and  A3, 
i.e.  Option  A4,  would  be  the  most  effective  in  meeting  the  first  specific  objective  and 
would  also  be  the  most  efficient  in  delivering  greater  cost  savings  than  each  option 
individually. This option could therefore be implemented by targeted changes to EMIR to 
both  streamline  procedures  and  to  introduce  an  ex-post,  fast  track  or  non-objection 
procedure  for  changes  being  considered  non-significant  or  non-material.  To  implement 
the  streamlined  procedures,  RTSs  and  ITSs  could  be  used  to  describe  the  documents 
CCPs need to submit when applying as well as those documents’ content and form. To 
ensure  the  process  evolves  with  the  market,  the  Commission  could  be  empowered  to 
adopt  a  delegated  act  to  amend  the  list  describing  non-material  changes.  The  precise 
impact of Option A4 on stakeholders will depend on which procedures (i.e. streamlined 
under option A2 or “fast-track” under option A3) will be used in practice more; for the 
purposes  of  this  assessment  it  is  assumed  that  they  are  both  used  equally.  Option  A4 
would also be coherent as it would enhance the CMU and be aligned with Commission 
aims  to  safeguard  financial  stability  and  foster  digitalisation.  Hence,  it  is  the  preferred 
policy option.  

Effectiveness 

Efficiency 
(cost-
effectiveness) 

Coherence 

Improve the 
attractiveness 
of EU CCPs 
++ 
++ 
+++ 

Encourage 
clearing in 
EU CCPs 
+ 
+ 
++ 

Enhance the assessment 
and management of 
cross-border risks 
+ 
+ 
+ 

Option A2 
Option A3 
Option A4 

Summary of winners and losers 

CCPs 

Clearing Members 

Clients 

Option A2 
Option A3 
Option A4 

++ 
++ 
+++ 

+ 
+ 
++ 

+ 
+ 
++ 

++ 
++ 
+++ 

++ 
++ 
++ 

Supervisory 
authorities 
+ 
+ 
+ 

Legend: +++ = Very positive 
0 = no effect 

++ = Positive 

- = Slightly negative 

+ = Slightly positive  
-- = Negative 

--- = very negative 

+/-  =  Mixed 

effect               

7.2.  B - Measures to encourage clearing in the EU  

7.2.1.  Option B2 - Limit/dis-incentivise banks’ excessive exposures to CCPs  

Effectiveness in meeting the specific objectives 
Banks  and  investment  firms125,  mostly  the  larger  ones,  are  the  main  clearing  members. 
Smaller  undertakings  would  be  clients,  clearing  through  clearing  members.  As  such, 

125  While this section focuses on possible modifications to the CRR/CRD, similar changes could apply to the 

IFD in the context of investment firms. 

39 

 
 
 
 
 
 
 
 
 
                                                           
requirements  targeting  banks  and  investment  firms  would  influence  the  demand  for 
clearing services and play a role in reducing the over-reliance on Tier 2 CCPs.  

The  first  sub-option  (Option  B2.1)  would  introduce  a  new  specific  large  exposure 
limit126  to  discourage  banks  from  being  heavily  exposed to  a single CCP (EU or third-
country).  This  would  be  a  Pillar  1  requirement,127  directly  applicable  to  EU  banks.  In 
case of breach, and absent adequate remediation in a certain timeframe, it  could lead to 
higher  capital  requirements128.  This  new  limit  would  incentivise  EU  banks  to  diversify 
their clearing  activities across CCPs. While  helping  reduce the  over-reliance  on certain 
systemic CCPs, this would not necessarily encourage clearing in EU CCPs, as exposures 
could be diversified among all available CCPs, including recognised third-country CCPs, 
potentially  increasing  risks  in  other  third-country  CCPs.  In  addition,  this  option  would 
introduce a hard limit that could impact the trading capacity of banks, particularly market 
makers, and have detrimental effects on the liquidity and availability of certain markets, 
in  addition  to  potentially  impacting  netting  sets.  Also,  depending  on  the  CCPs’  offer, 
adequate diversification may not be possible and may force banks to face a surcharge in 
terms  of  capital  requirements  for  those  clearing  products  where  no  (sufficient) 
substitutability is available and until the offer develops.  

In the targeted consultation views were mixed regarding whether “targets” should be set, 
however the majority of respondents to the consultation opposed “caps” on exposures to 
Tier 2 CCPs129. Considering these elements, other options may offer greater flexibility to 
accommodate  a  wider  range  of  trading  profiles  and  may  be  less  disruptive  in  terms  of 
trading activities, making this sub-option less appealing. 

The majority of respondents to the targeted consultation that expressed an opinion (70%, 
i.e. 19 out of 27 respondents) was against imposing higher capital requirements on Tier 2 
CCPs.  They  argued  that  this  could  have  negative  effects  on  the  international 
competitiveness  of  EU  players  due  to  the  increased  costs.  Some  respondents  believed 
that,  should  such  a  measure  be  considered,  it  should  only  target  the  exposures  to  the 
services of the non-EU CCPs which were determined as substantially systemic by ESMA 
and/or  certain  activities  should  possibly  be  exempted  from  the  calculation.  Others 
expressed support for higher capital requirements under the condition that they would be 
combined with other measures such as active account requirements and development of 
offer.  The  majority  of  respondents  (80%,  i.e.  16  out  of  20  respondents)  saw  a  risk  of 
participants  relocating  clearing  to  other  non-EU  jurisdictions  if  a  higher  capital 
requirement on excessive exposures to T2 CCPs is imposed.  

In  the  meeting  with  Member  States  on  16  June  2022,  five  Member  States  and  one  EU 
authority  were  not  in  favour  of  a  large  exposure  framework.  Two  Member  States  saw 
disadvantages  for  EU  clearing  members  compared  to  banks  in  other  jurisdictions. 
Another  Member  State  considered  a  large  exposure  framework  too  rigid.  One  Member 

126  Exposures to CCPs are excluded from the large exposures limit under CRR.  
127  The  Basel  Capital  Accord  is  based  on  3  Pillars:  “Pillar  1”,  setting  minimum  capital  requirements  banks 
have  to  meet;  “Pillar  2”,  establishing  a  supervisory  review  of  banks’  capital  adequacy  and  allowing 
supervisors to impose additional measures, including capital add-ons, if risks banks incur are not fully or 
adequately  addressed  under  the  “Pillar  1”;  and  “Pillar  3”  establishing  disclosure  rules  to  foster  market 
discipline.  The  Basel  framework  was  introduced  in  the  EU  through  the  Capital  Requirements  Directive 
(CRD) and the Capital Requirements Regulation (CRR). See Bank for International Settlements, the Basel 
Framework, https://www.bis.org/basel_framework/.  

128  Similar to what is currently foreseen under Article 397 of the CRR for trading book exposures. 
129  See  Annex  2.  Not  many  replied  to  this  specific  question,  but  among  those  replying  there  were  major 

banking groups, some authorities and trading associations. 

40 

 
                                                           
State was in favour of a large exposure framework which should target large users. Two 
Member  States  supported  exploring  higher  capital  charges  or  activity  targets  linked  to 
capital  penalties.  A  second  sub-option  (Option  B2.2)  could  be  based  on  the  Pillar  2 
framework. Under the CRD/CRR, the Pillar 2 framework provides competent authorities 
with  tools  to  address  risks  that  are  insufficiently  captured  by  the  minimum  (Pillar  1) 
capital requirements. However, while concentration risk arising from exposures towards 
counterparties, including CCPs, is already an area of supervisory scrutiny under the Pillar 
2, there may be a need to consider more targeted measures to explicitly address excessive 
exposures towards CCPs, in particular those Tier 2 CCPs offering services of substantial 
systemic  importance  for  the  Union  or  one  or  more  of  its  Member  States,  under  the 
Supervisory Review and Evaluation Process (SREP). An explicit Pillar 2 empowerment 
could  be  introduced  to  ensure  authorities  consistently  take  into  account  banks’  level  of 
exposures towards those CCPs when they carry  out their SREP and bring clarity to the 
use of supervisory powers to address excessive concentrations. In parallel, CRD could be 
amended to require banks to have specific plans for controlling and monitoring exposures 
towards CCPs. This would make the supervisory expectation towards firms explicit and 
increase awareness on the need to mitigate excessive concentration of exposures towards 
CCPs.  The  Pillar  2  framework  could  also  be  used  to  ensure  an  adequate  degree  of 
compliance  with  other  policy  options.  In  particular,  it  could  be  combined  with  a 
requirement to maintain an active account at EU CCPs (see Section 7.2.2), allowing for a 
supervisory response to non-compliance. The possible combination of individual options 
is  considered  in  Section  7.2.5.  On  balance,  the  flexibility  of  the  supervisory  review 
process  to  adapt  to  the  specificities  of  each  business  profile  and  the  fact  that  this  sub-
option  could  easily  be  grounded  in  the  existing  provisions  of  the  Pillar  2  framework 
underline the attractiveness of this sub-option. 

In  the  meeting  with  Member  States  on  16  June  2022,  one  Member  State  and  one  EU 
authority  argued that it  might  be difficult to  calibrate  an appropriate  exposure level  for 
large exposure capital requirements and highlighted that national supervisors are already 
allowed  to  impose  additional  requirements  under  the  current  SREP  tool.  The  EU 
authority  argued  further  that  risks  related  to  over-reliance  on  a  systemic  third-country 
CCP may be manageable on a clearing member level but not on a macro level. Therefore, 
the risk should be addressed at a macro- rather than at clearing member level. 

Finally,  as a  third  sub-option (Option B2.3), macroprudential  measures could  address 
the systemic risk  of  an excessive  exposure of the overall EU banking sector  to  a given 
CCP.  These  could  take  the  shape  of  a  capital  buffer  (i.e.  a  “Systemic  Risk  Buffer”)  or 
targeted  (temporary)  actions  under  Article  458  of  the  CRR  to  tighten  large  exposure 
limits (however, this  would require that exposures to  CCPs are brought  in  the scope of 
large  exposures  limits  in  the  CRR),  or  a  limit  to  the  aggregated  level  of  exposures 
towards CCPs as “intra-financial sector exposures”. This sub-option could help mitigate 
the  systemic  risk  from  excessive  exposure  concentration  towards  a  single  CCP,  and 
contribute  to  limiting  such  excessive  exposures.  However,  this  sub-option  alone  would 
not  ensure that clearing would  rise  at  EU CCPs: it would need to  be complemented by 
other options envisaged under Section 7.2. In addition, given that national authorities are 
entrusted  with  the  activation  and  calibration  of  the  Systemic  Risk  Buffers  and  of  the 
macroprudential  measures  under  Article  458  of  the  CRR,  ensuring  the  desired 
behavioural  changes  from  market  participants  in  a  coherent  way  is  not  obvious.130 

130 This may be tempered by ECB powers under Article 5 of the SSM Regulation (Council Regulation (EU) 
No  1024/2013  of  15  October  2013  conferring  specific  tasks  on  the  European  Central  Bank  concerning 

41 

 
                                                           
 
Furthermore,  given  the  last-resort  nature  of  the  latter  measures,  the  bar  for  their 
activation  may  not  be  met,  and  if  met,  the  measures  would  be  subject  to  a  biannual 
approval process. Ensuring coordination between national authorities on the appropriate 
calibration may also prove complex and controversial. Another option would be to set up 
stricter large exposure limits through Article 459 of CRR, which would apply at the EU 
level. However, the legal conditions for its activation may not be met unless exposures to 
CCPs are brought under the CRR large exposures; in addition, the complex procedure for 
its activation may not allow a timely intervention.  
In  general,  in  the  targeted  consultation  most  respondents  (79%131),  in  particular  the 
banking  sector,  were  negative  as  to  macroprudential  tools  and  all  respondents  were 
against macroprudential buffers. They mainly highlighted the negative consequences for 
EU players’ international competitiveness due to the increased costs associated with such 
measures.  For  these  reasons,  a  sub-option  based  on  macroprudential  tools  appears  the 
less adequate to address the problem at stake. 

To conclude, certain sub-options, such as Option B2.1 based on large exposures limits or 
B2.2 based on the Pillar 2 framework, appear to be better able to contribute to reducing 
excessive  exposures  to  CCPs,  and  therefore  contributing  to  a  better  diversification  of 
risks  and  an  overall  reinforcement  of  financial  stability.  However,  none  of  these  sub-
options  alone  would  ensure  a  reduction  of  the  identified  excessive  exposures.  As  such, 
this option contributes indirectly to the objective of encouraging clearing at EU CCPs.  

Option  B2  would  generally  promote  better  control  and  monitoring  of  the  exposures  of 
clearing  members  and  clients  towards  CCPs,  including  third-country  ones.  Excessive 
exposures would be reduced or better capitalised. Contributing to a better diversification 
of  the  exposures,  could  help  address  the  risks  arising  from  an  over-reliance  on  certain 
CCPs  more  specifically  and  contribute  to  reinforcing  financial  stability  by  ensuring  a 
better  diffusion  of  risks  in  times  of  stress.  However,  it  does  not  touch  upon  the  EU 
supervisory  framework  per  se  and  the  way  the  increased  cross-border  risks  in  the  EU 
would be managed. Depending on the increase in clearing volumes in the EU that would 
result from this measure, a need for strengthening the EU dimension of the supervisory 
framework could be further justified to ensure cross-border risks in the EU are properly 
monitored and handled. 

As regards improving the attractiveness of EU CCPs, these measures target the demand 
for  clearing  services  and  are  not  directly  suitable  to  improve  the  attractiveness  of  EU 
CCPs. However, since they  would help to diversify exposures towards CCPs, they can, 
partly132, lead to an increase, or a better allocation, of the demand for clearing services in 
the  EU  and  contribute  to  creating  a  virtuous  circle  by  which  EU  CCPs would  be  more 
incentivised to also improve their offer and become more attractive overall. 

Based on the above, CRD/CRR-related measures would help meet the policy objectives 
only when considered in combination with other options. Considered in isolation, these 
measures  may not  be  sufficiently  targeted  and  effective  to  limit  and  dis-incentivise 
banks’ excessive exposures to CCPs. In addition, the calibration of the measures relying 

policies relating to the prudential supervision of credit institutions, OJ L 287, 29.10.2013, p. 63–89) to top-
up capital based measures of Member States participating in the Banking Union. However, besides being 
politically controversial, this would only allow tightening existing measures.  

131 i.e. 15 out of 19 respondents. 
132  Insofar exposures are concentrated towards third-country CCPs and assuming that there would be sufficient 

substitutability ensured by EU CCPs to allow for the transfer of excess exposures. 

42 

 
                                                                                                                                                                            
on the large exposures framework or any macroprudential measures would be crucial in 
determining the degree of their effectiveness, but particularly complex and challenging, 
thereby  leading  to  some  residual  uncertainties  as  to  the  final  outcome.  The  measures 
based  on  the  Pillar  2  framework  would  allow  for  more  flexibility  in  terms  of 
implementation and are therefore preferred. 

Coherence 

By fostering an appropriate diversification of exposures towards CCPs, some of the sub-
options  considered  above  could  support  the  policy  objective  of  a  reduction  of  the 
excessive  exposure  of  EU  clearing  members  and  clients  towards  Tier  2  CCPs,  thus 
reducing  over-reliance  on  them.  This  option  could  however  better  contribute  to  the 
objective of encouraging clearing in EU CCPs when considered in conjunction with the 
other  options  envisaged  under  this  section.  This  would  contribute  to  the  Commission 
priorities  on  open  strategic  autonomy  and  strengthening  the  CMU.  However,  the 
potential increase in  clearing costs that would result from  this option would  have to  be 
carefully  considered  to  ensure  that  it  would  not  discourage  market  participants  from 
clearing centrally. 

Assessment of the impacts by stakeholder group 

Overall,  depending  on  where  clearing  flows  would  be  reallocated,  some  CCPs  would 
benefit  from  these  measures.  As  regards,  in  particular,  EU  CCPs,  the  effects  of  this 
option would be uncertain as clearing volumes could be diversified towards other third-
country CCPs. The resulting potential benefit would be ongoing for the concerned CCPs. 
Other  CCPs,  to  which  banks  and  investment  firms  are  excessively  concentrated,  could 
lose some business and this cost would be ongoing. 

These  measures  could  have  a  negative 
impact  on  EU  clearing  members’ 
competitiveness by increasing their capital requirements and constraining their ability to 
trade  and  clear,  including  according  to  their  (non-EU)  clients’  requests.  Higher  capital 
requirements or caps on exposures to CCPs would result in higher costs for EU clearing 
members, especially in the short term. The medium-to-long-term impact would depend to 
a large extent on how large the loss of netting effects would be and on the difference in 
fees charged by the CCPs to which part of the business would migrate in comparison to 
the original CCP. EU clearing members could also face the challenge of moving existing 
trades, which would come as a one-off transitional cost. Depending on the specific design 
of these measures, EU clearing members may lose shares of business they currently have 
with  non-EU  clients,  e.g.133  these  clients  could  move  to  non-EU  clearing  members 
(which  could  continue  accessing  freely  multiple  liquidity  pools  and  benefit  from  lower 
cost  of  clearing).  The  described  costs  might  be  more  contained  in  case  of  an  approach 
building on Pillar 2 measures, which could be more flexible and more tailored to specific 
circumstances  (i.e.  bank  by  bank,  with  consideration  of  individual  cases  in  terms  of 
implementation etc.).  

Costs  may  also  arise  in  case  clearing  in  the  EU  turns  out  to  be  more  expensive  than 
clearing  in  third-country  CCPs.  This  may  be  linked  to  the  restrictions  imposed,  which 
would  affect  the  ability  of  EU  clearing  members  to  clear  freely  at  any  CCPs134.  Such 

133  According to confidential  information  submitted to  DG FISMA, clearing by  some EU  clearing  members 
with  non-EU  clients  brings  significant  revenues,  e.g.  revenues  from  non-EEA  clients  in  the  interest  rate 
swaps segment can account for almost 50% of client clearing-related revenues. 

134  According  to  confidential  information  submitted  to  DG  FISMA,  measures  restricting  the  ability  of  EU 
clearing members to choose the clearing location and introducing some fragmentation can contribute to a 

43 

 
                                                           
 
costs however could be alleviated in a medium to longer-term perspective depending on 
market adaptations, e.g. with liquidity increasing at EU CCPs.  

These measures would contribute to a better risk diversification of EU clearing members: 
banks’  exposures  to  CCPs  would  be  allocated  in  a  way  that  is  commensurate  to  their 
capital  base,  thus  potentially  contributing  to  overall  financial  stability  objectives.  The 
diversification  created  by  these  measures  could  however  make  the  management  of 
liquidity  and  collateral  more  complex  and  less  efficient,  at  least  in  an  initial  phase,  as 
existing pools would be split. The costs will likely be significant, at least in a first phase, 
depending on the calibration of the measures. This will also depend on  how the market 
will adjust in response to requirements imposed.  

In  any  case,  these  measures  are  likely  to  result  in  more  costs  for  clients,  at  least  in  an 
initial  phase,  and  may  give  rise  to  difficulties  in  accessing  clearing.  It  could  be 
reasonably expected that clearing members would pass on (at least partly) costs to their 
clients.  In  addition,  some  clients  may  be  incentivised  to  move  to  non-EU  clearing 
members. At the same time, costs for clients could decrease in a medium to longer term 
perspective,  reflecting  the  dynamics  of  the  costs  for  clearing  members  and  market 
dynamics,  and  clients  could  benefit  from  broader  choices  where  to  clear.  All  in  all, 
whether the costs for clients would be ongoing or not also depends on several factors and 
how the market will react to the requirements imposed. The benefits would be ongoing. 

As regards impacts on supervisory authorities, considering the population of EU clearing 
members, most of the impact is expected on the competent authorities responsible for 
the  supervision  of  banks  and  investment  firms  as  they  would  need  to  monitor  that 
implemented  option  would  deliver  its  effects.  This  could  be  integrated  in  the  ongoing 
supervision  and  would  not  necessarily  constitute  an  additional  cost  for  authorities.  On 
average, the impact would be seen as neutral. 

7.2.2.  Option B3 – Active account at EU CCPs 

Effectiveness in meeting the specific objectives  

An obligation to keep an active account at EU CCPs would be imposed on all EU market 
participants  subject  to  the  clearing  obligation.  Such  EU  market  participants  would  be 
obliged to clear a portion of their new trades in relation to certain clearing services at EU 
CCPs and to  report such trades to  the CCP’s competent  authority. The  measure should 
apply to those services which have been identified as systemically important by ESMA. 
Requiring EU market participants to hold an active account at an EU CCP can contribute 
significantly  to  meeting  the  general  objective  of  this  initiative  to  enhance  EU  financial 
stability. This active account could be the only account a market participant has at a CCP, 
or an additional account. First, for market participants who want to be active at multiple 
CCPs,  this  second  account  would  need  to  be  effectively  active,  i.e.  there  could  be  a 
specific requirement to clear a portion of new trades in the EU so that the account is not 
be  “dormant”,  as  several  accounts  at  EU  CCPs  are  today).  This  would  ensure  that  EU 
market participants have a credible back-up in case of need. Second, in contrast to Option 
B2, and because of the fact that the account would need to be actively used, this measure 
would  specifically  help  increase  clearing  volumes  in  the  EU,  addressing  the  issue  of 
over-reliance  on  third-country  CCPs  which  can  now  be  a  source  of  financial  stability 
risks and at the same time support the CMU project. 

price  differential  between  CCPs,  or  increase  the  volatility  of  such  a  differential,  with  negative  cost 
repercussions on EU clearing members. 

44 

 
                                                                                                                                                                            
The  active  account  requirement  should  therefore  concern  the  services  identified  by 
ESMA  as  of  substantial  systemic  importance135,  thus  explicitly  targeting  the  excessive 
reliance  on  such  services.  It  could  be  imposed  on  all  market  participants  subject  to  the 
clearing  obligation,  thus  going  beyond  clearing  members.  The  legal  text  could  also 
require entities subject to this obligation to report on the clearing they have done in the 
relevant type of transactions in an EU CCP.  

The specific features of a requirement (e.g. volumes / percentage of clearing to ensure a 
reduction  in  exposures  to  those  clearing  services  offered  by  Tier  2  CCPs  which  are 
considered of substantial systemic importance, frequency of use, reporting methodology) 
could  be  defined  in  a  level  2  act,  e.g.  a  draft  RTS  to  be  prepared  by  ESMA,  in 
cooperation  with  the  ESAs  and  the  ESCB.  In  light  of  the  fact  that  ESMA  assesses  the 
systemic  importance  of  the  third-country  CCPs  and  their  services,  it  is  appropriate  for 
ESMA to be mandated to establish the proportion of activities that would reduce the risks 
related to their substantial systemic importance. ESMA should adopt the draft RTS after 
having  conducted  an  open  public  consultation  and  analysed  the  potential  related 
costs and benefits, as required under the ESMA Regulation. This requirement could also 
be  designed  to  increase  gradually,  to  allow  the  market  to  adapt  and  minimise  the  costs 
while the offer gradually develops.  

To ensure, where suitable, that the obligation to clear certain instruments at an EU CCP 
is  reflecting  the  most  recent  status  of  ESMA’s  assessments  identifying  services  being 
considered substantially systemically important pursuant to Article 25(2c) of EMIR, the 
Commission could also be empowered to make changes to the list of instruments subject 
to the requirement to be cleared at a certain proportion in an EU CCP.  

Moreover,  the  implementation  of  the  measures  aimed  at  encouraging  clearing  at  EU 
CCPs,  including  those  calibrated  in  a  level  2  act,  could  be  monitored  on  an  ongoing 
basis by a cross-sectoral monitoring mechanism (see Section 7.3.1), in order to allow 
for  their  quick  review  if  necessary.  The  level  2  act  can  more  quickly  be  adapted  to 
changed circumstances than EMIR, so this choice provides for an appropriate degree of 
flexibility and allows for the careful and proportionate calibration of the requirement.  

This  may  lead  to  additional  costs  relevant  for  “one  in,  one  out”,  as  there  will  be  some 
administrative  costs  related  to  the  reporting  of  active  account  requirements  as  well  as 
very  limited  paperwork  related  to  opening  an  account  with  a  CCP.  The  reporting  of 
active account requirements needs to be ensured continuously and the related costs will 
therefore be of a recurrent nature, even though presumably quite limited. The paperwork 
related  to  opening  an  account  with  a  CCP  will  be  a  one-off  cost  occurring  when  the 
account is actually opened. The magnitude of these costs depends on the specification of 
the active account requirements in the delegated act and the frequency of reporting. 

In  the  targeted  consultation,  this  was  one  of  the  more  widely  supported  measures  with 
85% of respondents finding requiring an active account a reasonable measure.136 Views 
differed  however  on  how  an  active  account  should  be  defined.  Some  stakeholders 
(including market participants and a public authority) noted that an active account should 
only  be  a  back-up  solution  for  occasional  use  in  order  to  test  the  account’s  smooth 
functioning.  Other  stakeholders  (including  two  EU  CCPs,  market  participants  and  two 
public authorities) suggested that an active account should have requirements regarding 
the  level  of  its  use.  Suggestions  varied  considerably  regarding  the  nature  of  these 

135  2021 ESMA report on UK CCPs (see footnote 9 above). 
136  See Annex 2. 

45 

 
                                                           
requirements,  ranging  from  a  discretionary  ‘reasonable’  frequency  of  use  to  fixed 
thresholds  as  well  as  having  mandatory  clearing  in  active  accounts  at  EU  CCPs  for 
certain products.137 

In the meeting with Member States on 16 June 2022, Member States who expressed an 
opinion were either supportive of an active account requirement or open to look further 
into  it,  subject  to  certain  conditions.  In  general,  Member  States  highlighted  that  the 
details were important and proportionality should be respected. 

Three  Member  States  and  one  EU  authority  supported  an  active  account  requirement. 
Two of them and the EU authority said that such a requirement should focus on systemic 
clearing  services,  especially  on  services  denominated  in  euro.  Those  Member  States 
argued  that  an  initial  target  should  be  set  at  the  active  account  and  re-evaluated  and 
potentially be increased at a later stage. One of those Member States said that no volume 
requirements should be set at the beginning. Instead, qualitative measures should be used 
with quantitative measures following in a second stage. Another Member State expressed 
the view that quantitative thresholds should start with a rather low threshold and be re-
calibrating  further  based  on  a  detailed  assessment  of  previous  experiences.  The  same 
Member  State  suggested  that  not  only  clearing  members  but  also  a  wider  range  of 
stakeholders  should  meet  active  account  requirements.  To  take  into  account  client 
clearing  and  its  impact  on  proportionality  aspects,  clients  with  low  exposures  to  third-
country CCPs could be exempted from an active account requirement. A Member State 
suggested  further  to  consider  sanctions  as  an  option  where  levels  are  not  met  and 
highlighted that it should not be supervisory authorities to set the threshold requirements. 
Five  Member  States  indicated  that  they  were  open  at  the  current  stage.  However,  they 
argued  that  an  active  account  requirement  may  mainly  affect  smaller  parties  and  be 
burdensome. Therefore, these Member State indicated that first, costs related to an active 
account requirement would need to be considered and assessed before they could express 
an opinion. However, one EU authority explained that data cannot be shared easily due to 
data  protection  reasons.  Two  Member  States  expressed  concerns  that  complexity  may 
increase  without  much  effect  if  only  a  qualitative  requirement  was  introduced.  One  of 
these Member States highlighted the importance of appropriate supervision. One Member 
States  explained  that  smaller  market  participants  may  be  forced  out  of  the  EU  by  an 
active account requirement potentially leaving only big players in the market and causing 
concentration  issues.  The  Member  State  explained  that  market  making  and  clients  of 
clearing members would need exceptions. One EU authority supported the introduction 
of  active  accounts  and  highlighted  that  active  accounts  as  a  backup  plan  would  be 
insufficient to address elevated exposure levels to third-country CCPs and not lead to a 
risk reduction.138 

As regards the specific objective to improve financial stability in the EU by reducing the 
excessive  exposure  to  third-country  CCPs,  this  option  would  not  directly  improve  the 
attractiveness of EU CCPs, but could support its achievement in the long term. Indeed, it 
would oblige market participants to clear some of their trades at an EU CCP. EU CCPs 
would therefore face greater demand for their services and increase their liquidity. This 
could trigger a virtuous circle by which EU CCPs would be more pro-active in improving 
their  offer  and  better  tailor  it  to  the  needs  of  participants.  Also,  in  potentially  bringing 
more participants to EU CCPs and greater volumes, this option would improve liquidity 
at EU CCPs thus fostering their attractiveness and robustness. This option would be very 

137  See Annex 2, section on Active account. 
138  For Member States views see Annex 4.2 on Active accounts. 

46 

 
                                                           
effective with respect to encouraging clearing in the EU, as it would require clearing at 
least a certain portion of trades in the EU. 

This measure is therefore likely to promote better control of the risks  related to market 
participants’  excessive  exposures  to  third-country  CCPs,  as  it  would  ensure  more 
clearing  at  an  alternative  EU  CCP.  However,  it  does  not  concern  the  EU  supervisory 
framework  directly  and  the  way  the  increased  cross-border  risks  in  the  EU,  linked  to 
incoming larger clearing volumes, would be managed. It would increase the need for an 
improved  supervisory  framework  in  the  EU,  due  to  the  interconnectedness  of  the 
financial system in the EU as well as higher risks to be managed in the EU. 

Coherence 

This option explicitly requires market participants to clear some of their trades in the EU: 
it is thus fully coherent with the objective of this initiative to enhance clearing in the EU 
as a means to strengthen the prudential framework and financial stability. In addition, this 
measure actively supports financial stability objectives as it addresses directly the over-
reliance on third-country CCPs, which is a possible source of financial stability issues. It 
also  fully  contributes  to  the  objective  of  strengthening  the  CMU  by  developing  more 
central clearing in the EU and with the Commission policy on open strategic autonomy.  

Assessment of the impacts by stakeholder group 

EU CCPs would benefit from this option as it would bring more clearing to the EU thus 
boosting revenues. This benefit would be ongoing. Third-country CCPs are likely to lose 
some business and this cost would be ongoing.  

Most clearing members already have active accounts at EU CCPs, so there would not be 
additional  operating  costs  for  them.  Also,  according  to  some  estimates  EU  clearing 
members can open an account for a client at an EU CCP in roughly 24 hours139. At the 
same  time,  the  need  to  gradually  increase  the  volumes  cleared  through  the  EU  active 
account would require clearing members to plan accordingly to distribute their exposures 
between Tier 2 CCPs and EU CCPs in the most efficient way. Relocating a proportion of 
clearing  activities  will  lead  to  a  loss  in  netting  benefits,  at  least  in  an  initial  phase. 
Nonetheless,  the  precise  operationalisation  of  this  requirement  would  be  specified  in  a 
level  2  act  that  would  be  subject  to  a  public  consultation  and  cost-benefit  analysis  as 
required  by  the  ESMA  Regulation140  in  order  to  ensure  careful  calibration  as  well  as  a 
flexible approach. Other costs for clearing members may arise where direct clearing costs 
in  the  EU  are  higher  than  clearing  in  third-country  CCPs.  As  discussed  for  banking 
measures, this aspect is currently difficult to predict and quantify as they depend on the 
level  2  calibration,  which  will  be  subject  to  a  public  consultation  and  cost  benefit 
analysis.  Furthermore,  additional  volumes  cleared  through  EU  CCPs  are  expected  to 
increase  efficiencies  and  thus  lower  direct  clearing  costs.  Whether  or  not  the  costs 
identified would be ongoing will depend on how clearing members, CCPs and the overall 
clearing ecosystem will react and adjust to the requirements and what the long-term level 
of  market  fragmentation  will  be.  Increased  choice  in  clearing  options  will  strengthen 
clearing members’ resilience to market shocks and presents an ongoing benefit. 

Clients that do not currently clear in the EU are likely to bear the costs of the obligation 
to keep an active account at an EU CCP. Roughly 60% of the EU clients of EU clearing 
members  already  have  an  account  for  clearing  interest  rate  swaps  at  an  EU  CCP,  and 

139  DG FISMA services estimates based on confidential information provided to DG FISMA. 
140  Article 10(1) of the ESMA Regulation, and in particular the third subparagraph thereof. 

47 

 
                                                           
roughly 85% have one for credit default swaps141. For these clients opening an account at 
an EU CCP for these types of products would not be an additional cost. In addition, any 
cost  could  depend on which CCP they participate: in  some EU CCPs, for example, the 
costs of an account per se are zero under certain conditions.142 Nevertheless, there may 
be costs related, e.g. to the need for keeping accounts at two CCPs instead of one and for 
gradually increasing activity in the EU account. Clearing members are also likely to pass 
on  any  fees  for  participating  in  two  CCPs  to  clients.  Whether  these  costs  would  be 
ongoing  or  not  depends  also  on  the  way  clients  would  adjust  to  the  requirements:  e.g. 
such costs may prompt certain clients (particularly smaller ones) to decide to clear in the 
EU  only,  to  decrease  the  burden;  in  such  a  case,  the  identified  costs  could  be  reduced 
overtime. Clients would also likely face increased costs due to lost netting benefits and 
are  likely  to  bear  any  other  costs  faced  by  clearing  members.  Similar  to  clearing 
members, there would be an ongoing benefit for clients in terms of increased resilience. 

National  supervisory  authorities  will  need  to  ensure  firms’  compliance  with  the 
requirement to have an active account. Such costs are likely to be limited though as they 
would be integrated in ongoing supervision, so the overall impact is neutral. 

ESMA, and potentially the other ESAs, would need to be informed on firms’ compliance 
with  the  requirement  to  have  an  active  account  at  an  EU  CCP.  While  this  may  lead  to 
limited  additional  costs  (e.g.  national  supervisors  reporting  to  ESMA/the  ESAs 
information the former obtain through their ongoing supervisory activities), the provision 
of  this  additional  information  to  these  EU  bodies  will  greatly  facilitate  performance  of 
their tasks aimed at ensuring the EU financial stability. 

7.2.3.  Option B4 – Broaden the scope of clearing participants, i.e. public entities 

Effectiveness in meeting the specific objectives  

Some  public  entities,  such  as  public  debt  management  offices,  are  currently  exempted 
from EMIR while others are only subject to reporting requirements. They can, however, 
clear centrally on a voluntary basis. Requiring public entities to clear centrally in the EU 
could  contribute  to  increasing  liquidity  at  EU  CCPs,  as  it  would  broaden  the  base  of 
clearing participants and would support the specific objective of encouraging clearing at 
EU CCPs.  

As  regards  the  specific  objective  of  improving  EU  CCPs’  attractiveness,  more  clearing 
by public entities could have a “signalling” effect for the markets: public entities clearing 
at EU CCPs would implicitly transmit to market participants confidence in EU CCPs, as 
the  public  sector  would  be  relying  on  those  infrastructures  for  clearing.  In  addition,  by 
furthering  liquidity  at  EU  CCPs,  public  entities  could  contribute  to  making  EU  CCPs 
more  attractive.  CCPs  and  market  infrastructures143  responding  to  the  targeted 
consultation  pointed 
liquidity,  further 
diversification  in  participation  to  CCPs144,  strong  signal  to  the  market,  contribute  to 
harmonisation  and  consolidation).  These  arguments  were  supported  by  other  market 
participants.145  

these  benefits  (potential 

increase 

to 

in 

141  According to DG FISMA services’ estimates based on confidential information. 
142  According to confidential information provided to DG FISMA services. 
143  5 out of 7 respondents to the targeted consultation. See Annex 2. 
144  In the targeted consultation, 2 highlighted diversification and 2 harmonisation as a benefit. 
145  See Annex 2. 

48 

 
                                                           
An  important  question  to  be  considered  is  if  public  entities  should  be  required  to 
contribute to the default fund and to pay margins. Some stakeholders argued that public 
entities’ special status may prohibit them from contributing to the default fund, as it may 
imply  participation  in  mutualisation  of  losses  stemming  from  the  private  sector.146  In 
addition,  if  they  were  to  post  collateral,  this  could  lead  to  wrong-way  risk  or  even  an 
increase in third-country collateral in EU CCPs. Also, posting collateral may  counteract 
their  public  purpose,  as  collateral  provision  would  add  to  their  costs  and  that  money 
could not be spent on their public purpose. Furthermore, public entities may be unable to 
assume  liability  for  default  fund  contributions  due  to  their  specific  mandate.  Other 
stakeholders  however  claimed  that  if  public  entities  do  not  post  initial  margins  and 
default fund contributions, the private sector participating in a given CCP could be called 
on paying in case of the default of a participating public entity. While this argument may 
be  of  limited  practical  relevance,  it  shows  that  if  public  entities  do  not  post  collateral 
there  may  also  be  CCP  participants  which  would  not  necessarily  see  public  entities’ 
participation in the CCP as an attractive feature as it may lead to an important amount of 
“unbalanced”  exposure.  In  this  case,  clearing  by  public  entities  may  not  bring  all  the 
expected benefits in terms of increasing attractiveness of EU CCPs. 

Concerning the specific objective of ensuring more robust consideration of cross-border 
risks,  clearing  by  public  entities  would  not  specifically  address  this  aspect,  however  it 
can indirectly contribute to reducing over-reliance on third-country CCPs. 

Whilst  a  clearing  obligation  could  be  introduced  under  EMIR  with  some  targeted 
changes,  this  could  be  challenged  based  on  the  aspects  identified  above.  Hence,  also 
other non-binding measures, such a Communication of Recommendation, could be used 
to communicate the aim for public entities to clear at EU CCPs to the extent possible to 
achieve a wider range of clearing participants and would support the specific objective of 
encouraging clearing at EU CCPs.  

In the targeted consultation, Member States’ public authorities were generally in favour 
of  public  entities  centrally  clearing  if  it  remains  voluntary147.  The  same  holds  true  for 
most public entities148 that would be concerned by a potential clearing obligation. They 
argued that market needs should prevail and – because of public entities’ special mandate 
and status  - a  clearing obligation may bring  additional risks and higher costs while not 
providing additional value. Moreover, due to  their special mandate, public entities may 
be unable to assume liability for default fund contributions requiring specific conditions 
for  public  entities’  access  to  central  clearing  which  could  increase  risks  for  financial 
stability. Other stakeholders, notably banks, securities markets associations and pension 
scheme  arrangements  expressed  the  view  that  central  clearing  of  public  entities  would 
not only improve liquidity but also give a clear and strong signal to the market about the 
confidence  that  EU  public  actors  have  in  the  robustness  and  reliability  of  the  EU 
derivatives clearing eco-system. They underlined that a successful EU onshoring of the 
clearing  of  euro-denominated  derivatives  implies  public  support  and  incentives.  Some 
suggested making central clearing mandatory depending on the size and mandate of the 
public entity. Other highlighted also that public entities may be unable to assume liability 

146  See Annex 2. 
147  5 public authorities replied of which 3 mentioned explicitly that it should remain voluntary while one said 
that the impact would probably be limited and one argued that it would add to the attractiveness but that 
first the conditions would need to be assessed properly. 

148  5 replied to the first question of the public entity section of which 4 expressed explicitly being in favour of 

central clearing to remain voluntary.  

49 

 
                                                           
for default fund contributions and specific conditions for their participation may need to 
be  considered.  CCPs  and  market  infrastructures  also  pointed  to  the  benefits  of  public 
entities to centrally clear. Most, i.e. five out of seven respondents, highlighted an increase 
in  liquidity  and  some149  argued  further  that  it  would  diversify  clearing,  give  a  strong 
signal  to  the  market  and  contribute  to  harmonisation  and  consolidation  and  –  as  a 
consequence - improve financial stability. 

In the meeting with Member States on 16 June 2022, four Member States expressed the 
view  that  clearing  for  public  entities  should  stay  voluntary.  Three  Member  States 
favoured  a  recommendation  for  public  entities  that  clear  voluntarily  to  do  so  at  an  EU 
CCP.  One  EU  authority  supported  this  option  too,  but  elaborated  further  that  in  their 
view  only  EU  currency  business  should  be  captured.  One  Member  State  showed 
openness  to  this  proposal  and  another  Member  State  supported  certain  public  entities 
being  covered  by  the  clearing  obligation  under  EMIR.  One  Member  State  stated  that 
collateral is the most important issue to consider in this context, pointing out that public 
entities  posting  their  own  collateral  would  lead  to  wrong  way  risk.  Public  entities  not 
posting collateral at all would create an imbalance between clearing members and in both 
cases other clearing members would have to cover sovereign risks. Furthermore, it might 
force  certain  countries to  buy assets from other  countries for collateralisation purposes. 
Two other Member States supported this view. 

Coherence 

Clearing by public entities would  contribute to the objective of  encouraging clearing in 
the EU and making EU CCPs more attractive. This is also consistent with the objectives 
of the CMU. At the same time, requiring certain types of public entities that clear to post 
default  fund  contributions  may  be  at  odds  with  other  EU  policies,  e.g.  those  aiming  at 
minimising the costs to  taxpayers stemming from private entities’ defaults and more in 
general at minimising moral hazard. 

Given  the  benefits  and  challenges  mentioned  regarding  whether  public  entities  should 
contribute  to  CCP  default  funds,  the  preferred  option  is  to  encourage  public  entities  to 
centrally  clear  in  EU  CCPs  rather  than  obliging  them.  To  allow  these  bodies  to 
accomplish  their  mission  in  the  public  interest.  The  Commission  is  aware  that  some 
public entities have chosen over the years to start clearing centrally their contracts on a 
voluntary  basis.  Central  clearing  brings  with  it  greater  safeguards  in  terms  of 
counterparty credit risk, improves markets liquidity and adds transparency. Therefore, the 
Commission  strongly  encourages  public  authorities  in  the  EU  to  clear  at  EU  CCPs, 
should  they  decide  to  clear  and  where  the  products  sought  are  available.  Given  this 
approach,  the  current  rules  on  default  fund  contributions  for  public  entities  would 
continue to apply. 

Assessment of the impacts by stakeholder group 

EU CCPs would benefit from a larger clearing base, which would include public entities 
with high creditworthiness profiles and more liquidity. These benefits would be ongoing. 
However,  CCPs  may  be  perceived  less  safe  if  public  entities  were  exempted  from 
collateral provision regardless of their extent of public support, potentially creating high 
amounts of unidirectional exposure. 

149  2 highlighted diversification and 2 harmonisation as a benefit. 

50 

 
                                                           
Clearing members could see as an added value that public entities clear at EU CCPs, as 
this would be a signal of confidence in those CCPs. They could also be attracted and take 
advantage of the broader liquidity base public entities would contribute to creating (even 
if  such  a  benefit  could  be  somewhat  reduced  if  public  entities  were  exempted  from 
participating  in  the  CCPs’  default  management  process).  These  benefits  would  be 
ongoing. The benefits for clients would be similar to those for clearing members. 

Broadening the scope of clearing participants means that national supervisors will have 
to  supervise  additional  participants’  compliance  with 
the  clearing  obligation. 
Participation of public entities to CCPs may also require the setting up of specific rules 
and procedures, by CCPs and national supervisors, to take into account the specificities 
clearing by such entities entails. These costs would be ongoing. 

Public  entities  may  face  costs  if  they  were  to  clear  at  a  CCP.  Central  clearing  could 
require them to post collateral: public entities may be exempted (as they currently are, at 
least  in  certain  cases)  from  the  requirement  to  post  initial  margins  and  default  fund 
contributions,  however  they  will  need  to  post  variation  margins  on  their  derivatives 
contracts. This situation is different from the current state of play in the bilateral space, 
where  public  entities  clearing  derivatives  are  not  generally  required  to  post  margins 
because of their high creditworthiness;150 in bilateral trades some public entities receive 
variation margins if the value of the contract changes in a favourable way for them, so 
that  they  are  protected  from  the  default  of  the  counterparty,  but  they  do  not  post 
themselves  variation  margins  to  the  counterparty,  because  of  their  creditworthiness.  As 
such,  public  entities  would  need  to  have  appropriate  liquidity  management  capacity  to 
meet variation margin calls, including access to liquidity to an extent they may not have 
for  the  time  being,  or  that  may  imply  costs  for  the  public  (e.g.  liquidity  lines  from 
Member States’ central governments). This would be an ongoing cost. This cost could be 
transferred,  e.g.  to  borrowers  in  the  case  of  multilateral  development  banks.  Public 
entities, especially if they do not already voluntarily clear at a CCP, would also face costs 
related to the operational setup to be put in place to clear derivatives at a CCP, including 
the development of the necessary IT infrastructure and expertise. This cost would be to a 
large extent one-off, but will require ongoing investments to ensure that the operational 
setup runs smoothly, e.g. for IT services in order to avoid cyber-attacks. 

Public  entities  would  need  to  prepare  for  central  clearing,  set-up  appropriate 
arrangements  and  liquidity  management  strategies,  possibly  post  margins  and  default 
fund contributions. If the costs from a clearing obligation were transferred to the public, 
citizens  may  bear  costs  which  may  be  ongoing.  In  addition,  should  public  entities  be 
required  to  post  default  fund  contributions,  citizens  may  ultimately  bear  the  cost  of 
financing private entities’ defaults. This cost would materialise only where a CCP would 
default, so it would be a contingent cost. 

7.2.4.  Option B5 – Facilitate clearing by clients 

Effectiveness in meeting the specific objectives  

This option would target entities subject to the clearing obligation which generally clear 
as  clients,  i.e.  insurance  companies,  investment  funds.  It  would  facilitate  or  encourage 
clearing centrally at a CCP, as it would fix certain inconsistencies in the relevant sectoral 
legislation which today may hamper clearing by these entities.  

150  According to confidential information provided to DG FISMA services. 

51 

 
                                                           
As  regards  insurance  companies,  risk-based  capital  requirements  would  be  set  out 
specifically  for  CCP  exposures  where  they  are  direct  clearing  members  at  a  CCP,  thus 
making  the  approach  in  the  Solvency  II  delegated  acts151  more  consistent  with  the 
approach of banking legislation. Currently, the direct exposures of insurance companies 
to  CCPs  fall  into  a  residual  category  of  derivatives  exposures.  As  the  capital 
requirements for that residual category tend to be higher than for indirect CCP exposure 
(i.e.  exposure  to  a  CCP  through  a  clearing  member),  the  current  approach  impedes 
insurers from becoming a direct clearing participant in a CCP  benefitting, e.g. from the 
access models set up in recent years by some EU CCPs to facilitate clearing by buy-side 
firms (including, e.g. PSAs).  

As  regards  investment  funds,  facilitating  clearing  by  clients  would  imply  better 
consideration of the role of CCPs in reducing counterparty risks to which funds can be 
exposed.  UCITS  and  MMF  funds  are  allowed  to  invest  in  exchange-traded  derivatives 
(ETDs)  and  OTC  derivatives.  Today,  OTC  derivatives  are  -  unlike  ETDs  -  subject  to 
regulatory investment limits to mitigate counterparty risk. For example, Article 52(1) of 
Directive 2009/65/EC originates from 2009 and does not take into account the benefits of 
central  clearing152.  Two  options  were  considered  to  promote  central  clearing  in  funds’ 
derivative  investments:  (1)  Replacing  the  previous  distinction  based  on  trading  (ETD 
versus  OTC)  by  a  distinction  based  on  the  type  of  clearing  (bilaterally  versus  centrally 
cleared  via  an  authorised  CCP)  and  adjust  the  regulatory  limits  to  the  reduced 
counterparty  risks  associated  with  central  clearing;  (2)  Keeping  the  current  criteria  and 
adjusting  only  the  counterparty  risk  limits  associated  with  centrally-cleared  OTC 
derivatives  in  accordance  with  the  reduced  risk.  At  this  stage,  option  (1)  would  be 
preferred since it reflects the clearing system set out EMIR. It is most likely also easier to 
understand and to comply with, thus potentially reducing compliance costs for funds.  

In  addition,  AIFM  and  UCITS  management  companies  already  have  to  establish  risk 
management systems that include counterparty risks. As a general principle, it could be 
required  that  the  use  of  central  clearing  and  its  precise  design  in  the  individual  trade 
should be considered when measuring and mitigating counterparty risks.  

This  option  would  also  require  amending  EMIR  to  require  that  relevant  clearing 
members and clients, offering clearing services, could be required to inform their clients 
of the possibility to clear at an EU CCP to ensure that clearing members offer clients the 
possibility to clear at an EU CCP where an offer is available. Also, targeted changes to 
improve  transparency  could  be  achieved  by  requiring  clearing  members  and  clients  to 
provide details on, e.g. collateral requirements, to their clients. Level 2 standards, notably 
an  RTS  could  complement  changes  to  EMIR  to  ensure  a  degree  of  standardisation  and 
comparability.  

All  these  measures  are  likely  to  facilitate  and  encourage  clearing  by  clients,  thus 
contributing to financial stability and potentially to the specific objective of encouraging 
clearing  in  the  EU;  however,  these  measures  alone  do  not  guarantee  that  increased 
clearing by clients takes place in the EU. As regards the specific objective of improving 

151  See footnote 4. 
152  Under  Article  52  of  the  UCITS  Directive,  exposures  to  a  counterparty  in  an  OTC  derivative  shall  not 
exceed 5% of the assets of a UCITS, or 10% if the counterparty is a credit institution. Under Article 17(4) 
of  the  MMFR,  the  counterparty  risk  stemming  from  OTC  derivatives  shall  not  exceed  a  limit  of  5%. 
Notwithstanding  these  limits,  the  maximum  exposure  to  the  same  entity  acting  as  an  issuer  or  a 
counterparty  shall  not  exceed  20%  pursuant  to  UCITS  (Article  52(2)  of  UCITS  Directive)  and  15%  for 
MMFs (this can be extended to 20% at Member States’ discretion pursuant to Article 17(6) of MMFR). 

52 

 
                                                           
the  attractiveness  of  EU  CCPs,  as  discussed  for  previous  options,  this  one  would  not 
directly  address  this issue but  can indirectly contribute to  a virtuous  circle. Concerning 
strengthening  the  framework  to  ensure  better  consideration  of  cross-border  risks, 
similarly to previous options targeting the demand for clearing services, this one does not 
directly address this objective. At the same time, any increase in clearing volumes in the 
EU  linked  to  the  activity  of  clients  should  be  better  assessed  and  managed  through  an 
enhanced supervisory framework. 

In  the  targeted  consultation,  respondents  provided  detailed  views  on  the  interaction  of 
EMIR  with  other  regulations/directives,  including  UCITS  and  MMFR,  however  on 
different  aspects,  not  allowing  for  an  extrapolation  or  generalisation.  Examples  of 
suggestions are the following: an industry association representing European CCPs, and 
an  EU  CCP,  suggested  amending  Article  52  of  the  UCITS  Directive  to  exclude  CCP 
cleared  transactions  from  counterparty  exposure  and  diversification  requirements, 
reflecting  the  risk  reducing  nature  and  systemic  importance  of  CCPs.  An  industry 
association representing the funds industry of a Member State and an industry association 
representing  the  asset  management  and  investment  fund  industry  in  another  Member 
State called for an amendment of the ESMA Guidelines on ETFs and other UCITS issues 
so that UCITS can use the cash obtained via a repo transaction for the collateralisation of 
CCP clearing eligible OTC derivatives. 

In the meeting with Member States on 16 June 2022, one Member State supported both 
options, for insurance companies as well as for UCITS. One EU authority expressed – in 
line  with  its  opinion  from  2015  -  support  for  revising  the  exposure  limits  for  OTC 
derivatives  that  are  cleared  centrally  for  UCITS.  Two  Member  States  were  open  to 
exploring both options further. 

Coherence 

These  measures  are  fully  coherent  with  the  objectives  of  EMIR,  which  imposes 
prudential rules for CCPs and a clearing obligation as a way to reduce counterparty risk: 
in  this  sense,  they  contribute  to  promoting  financial  stability  through  central  clearing. 
This is already clearly reflected in banking regulation (CRD/CRR), while not entirely so 
in insurance and funds regulation (the UCITS, AIFM, MMF  and Solvency  II  delegated 
act).  They  also  contribute  to  the  objectives  of  the  CMU,  in  that  they  would  address 
certain impediments to efficiently use CCPs by clients. Finally, they would increase the 
overall consistency of the EU financial services acquis. 

Assessment of the impacts by stakeholder group 

CCPs  would  benefit  from  these  measures  as  they  would  facilitate  central  clearing  by 
clients.  CCPs which have set  up  specific access  models  to  facilitate  clearing  by market 
players that usually clear as clients (e.g. insurance companies) should benefit, as certain 
obstacles to the take-up of such models should be reduced or eliminated. These benefits 
would be ongoing. 

Clearing members would not bear meaningful costs due to this measure. So the impact 
is  seen  as  neutral.  Clients  would  benefit  from  such  measures  as  they  would  facilitate 
clearing  and  offer  more  opportunities  to  them,  including  through  direct  clearing 
membership.  Exposures  to  CCPs  would  be  treated  more  consistently  in  the  relevant 
sectoral  legislations,  reflecting  better  the  actual  risk  of  such  exposures.  These  benefits 
would be ongoing. 

For  national  supervisory  authorities  and  ESMA,  no  significant  costs  or  benefits  are 
identified. 

53 

 
7.2.5.  Option B6 – Combination of all options 

Effectiveness in meeting the specific objectives  

Combining options 2, 3, 4 and 5 would allow to address over-reliance on Tier 2 CCPs, 
increase clearing in the EU and remove obstacles to clearing by market participants. The 
best combination of all options would include the following aspects: i) requiring clearing 
members and clients to hold an active account at EU CCPs; ii) clarifying the applicability 
of  the  Pillar  2  framework  to  manage  identified  excessive  concentrations  to  CCPs  and 
ensure  compliance  with  the  new  requirements  on  clearing  activities;  iii)  encouraging 
public entities that clear voluntarily to do so in the EU; iv) facilitating clearing by clients.  

These  measures  would  be  implemented  through  targeted  changes  to  the  relevant  legal 
instruments, with the exception of encouraging public entities to clear voluntarily at EU 
CCPs,  where  this  measure  could  be  better  implemented  by  encouraging  such  public 
entities to clear in EU CCPs voluntarily, rather than by mandating this under EMIR. In 
addition, some of these measures may entail level 2 acts setting out the specific aspects, 
which would be subject to public consultations and individual cost/benefit analyses. One 
of  those  measures  that  would  benefit  from  an  RTS  would  be  the  obligation  to  clear 
certain transactions identified as substantially systemically important. The calibration and 
the  specific  features  of  the  active  account  could  be  defined  in  an  RTS  where  such 
calibration  would  aim  to  ensure  a  reduction  in  exposures  to  those  clearing  services 
offered by Tier 2 CCPs which are considered of substantial systemic importance pursuant 
to  Article  25(2c)  of  EMIR.  The  RTS  could  also  provide  for  a  and  further  specify  the 
reporting  methodology  to  enable  the  monitoring  of  a  reduction  and  to  ensure  that  any 
measures  are  limited  to  what  is  necessary  to  achieve  the  objective,  thus  avoiding 
unintended  side  effects.  Further,  to  ensure,  where  suitable,  that  the  obligation  to  clear 
certain  instruments  at  an  EU  CCP  is  reflecting  the  most  recent  status  of  ESMAs 
assessments  identifying  services  being  considered  substantially  systemically  important 
pursuant to Article 25(2c) of EMIR, the Commission could also be empowered to make 
changes  to  the  list  of  instruments  subject  to  the  requirement  to  be  cleared  at  a  certain 
proportion in an EU CCP. Due to the evolvement of clearing and to ensure the measures 
taken  are  proportionate  to  the  concern  identified,  the  implementation  of  the  measures 
aimed at enhancing clearing at EU CCPs, including those calibrated in an RTS, could be 
monitored on an ongoing basis. 

This option would achieve the specific objective of encouraging clearing in the EU to a 
greater  extent  than  individual  options  thus  reducing  the  risks  to  EU  financial  stability 
while considering the costs and other impacts on all actors concerned. It would gradually 
increase  clearing  volumes  in  EU  CCPs,  through  mainly  the  active  account  measure 
foreseen  under  option  B3.  It  would  also  establish  a  credible  framework  for  ensuring 
compliance  with  the  requirements  by  banks  and  investment  firms  -  which  are  the  most 
important  financial  counterparties,  thereby  supporting  and  reinforcing  the  effects 
expected through the implementation of option B3 by providing the necessary incentive 
structure to encourage the best possible use of multiple active accounts.  

This  option  B6  is  also  the  most  suitable  among  those  considered  to  avoid  disruptive 
impacts on the business of EU clearing members and could be adapted to consider cost 
impacts for smaller clients if necessary. In particular, the portion of activity to be cleared 
through  the  active  account  could  be  designed  to  increase  gradually,  allowing  the 
appropriate balance  between  financial stability  and costs  for businesses to  be  achieved. 
Similarly, the Pillar 2 framework offers the necessary flexibility to clearing participants 
into 
and 

implemented  proportionally, 

their  competent  authorities 

to  be 

taking 

54 

 
consideration  the  nature,  size  and  complexity  of  the  business  model  deployed  by  each 
participant. This would allow to spread the costs and help contain them. In this way, any 
costs  related  to  losses  in  netting  benefits  (which  would  concern  in  particular  market 
participants active in multiple currencies) could be mitigated overtime, access to clearing 
would be better preserved and the measures targeting the supply of clearing services in 
the EU could help this process. This will imply, though, that a rebalancing of exposures 
between  EU  and  third-country  CCPs  takes  place  over  time,  during  which  it  will  be 
crucial  that  private-led  initiatives  accompany  and  reinforce  the  regulatory  ones. 
Furthermore,  by  leading  to  greater  clearing  volumes  at  EU  CCPs,  this  combination  of 
options should enhance liquidity at EU CCPs and in turn foster their attractiveness  and 
ability to compete. 

As  regards  the  specific  objective  of  strengthening  the  framework  to  ensure  better 
consideration of cross-border risks, as discussed in the previous sections, the increase in 
clearing  volumes  in  the  EU  as  a  result  of  this  option  will  need  to  be  accompanied  by 
enhanced assessment and management of cross-border risks.  

Coherence 

A  discussed  above,  this  option  would  fully  contribute  to  the  EU’s  policies  on  open 
strategic  autonomy,  CMU  and  preserve  financial  stability,  as  it  would  reduce  over-
reliance on third-country CCPs, enhance EU’s capital markets and encourage clearing in 
the EU.  

Assessment of the impacts by stakeholder group 

EU CCPs would benefit from this option as it could bring more clearing to the EU. EU 
CCPs that have set up specific access models for buy-side firms could also benefit from 
initiatives  facilitating  clearing  by  clients.  These  benefits  would  be  ongoing.  Third-
country CCPs may lose some business and this cost would be ongoing. 

Most clearing members already have active accounts at EU CCPs, so there would not be 
significant  additional operating costs for them.  At the same time, the need to  gradually 
increase  the  volumes  cleared  through  the  EU  active  account  would  require  clearing 
members to plan accordingly to distribute their exposures between Tier 2 CCPs and EU 
CCPs  in  the  most  efficient  way.  This  is  likely  to  lead  to  some  loss  in  netting  benefits. 
Other costs for clearing members may arise in case clearing in the EU is more costly than 
clearing in third-country CCPs. This aspect is currently difficult to predict and quantify. 
Whether  or  not  the  costs  identified  would  be  ongoing  also  depends  on  how  clearing 
members,  CCPs  and  the  overall  clearing  ecosystem  will  react  and  adjust  to  the 
requirements. Benefits for clearing members would relate to increased diversification of 
exposures  to  CCPs  and  reduced  over-reliance  on  third-country  CCPs.  This  would 
strengthen their resilience and would be an ongoing benefit. 

Clients would also benefit from measures facilitating central clearing and these benefits 
would  be  ongoing.  Roughly  60%  of  the  European  clients  of  EU  clearing  members 
already have an account for clearing interest rate swaps at an EU CCP, and roughly 85% 
do have one for credit default swaps.153 So for these clients opening an account at an EU 
CCP  for  these  types  of  products  would  not  be  an  additional  cost.  In  addition,  any  cost 
could depend on which CCP they participate: in some EU CCPs, for example, the costs 
of  an  account  per  se  are  zero  under  certain  conditions.154  Nevertheless,  there  may  be 

153  According to DG FISMA services’ estimates based on confidential data provided to DG FISMA services. 
154  According to confidential information provided to DG FISMA services. 

55 

 
                                                           
costs related, e.g. to  the need for keeping  accounts  at  two CCPs instead of one and for 
gradually increasing activity in the EU account. Clients are also likely to bear the costs of 
clearing members any fees for participating in two CCPs. Whether these costs would be 
ongoing  or  not  depends  also  on  the  way  clients  would  adjust  to  the  requirements:  e.g. 
such costs may prompt certain clients (particularly smaller ones) to decide to clear in the 
EU  only,  to  decrease  the  burden;  in  such  a  case,  the  identified  costs  could  be  reduced 
overtime.  Clients  are  also  likely  to  bear  any  other  costs  faced  by  clearing  members,  at 
least as long as clearing members face such costs. Similar to clearing members, benefits 
for clients  would relate to  reduced over-reliance  on third-country CCPs. This  would be 
an ongoing benefit. Finally, clients will benefit from the specific option targeting them, 
i.e. the changes in funds and insurance frameworks, as discussed above. These benefits 
would be ongoing. 

As  in  other  cases  that  new  requirements  are  imposed,  limited  costs  for  supervisors 
(including  the  SSM)  would  arise  in  terms  of  checking  that  such  requirements  are  met. 
However, the overall effects are likely to be small as such costs would be integrated in 
ongoing supervision, so overall the impact is seen as neutral.  

ESMA and the ESAs may have a role in the general monitoring of developments linked 
to  these  measures  through  a  cross-sectoral  monitoring  mechanism  (see  Section  7.3.1). 
These costs would be ongoing. 

7.2.6.  Choice of preferred option 

Option B2 would only partially meet the objective of encouraging clearing in the EU, as 
while the relevant measures would limit or dis-incentivise banks’ excessive concentration 
of exposures towards CCPs, but would not be sufficient to ensure that over reliance on 
third-country CCPs is reduced. In addition, while this option targets the most important 
clearing  members,  the  related  costs  need  to  be  carefully  considered.  Consequently,  the 
sub-option  relying  on  the  Pillar  2  framework  is  considered  to  be  the  most  suitable  and 
flexible  enough  to  take  into  account  individual  circumstances.  Option  B3  would 
contribute to meeting the objective, as it would require EU participants to hold an active 
account  at  an  EU  CCP  with  increasing  volumes.  While  this  option  could  imply  some 
costs for market participants, its actual cost impact will depend on the calibration and on 
how the market will adjust to the requirement overtime. Options B4 and B5 would also 
help meet the specific objective of encouraging clearing in the EU by requiring clearing 
member  and  clients  offering  clearing  services  to  inform  clients  about  the  possibility  to 
clear  in  an  EU  CCP  and  to  improve  transparency  towards  clients  on  collateral 
requirements.  However,  they  would  not  be  sufficient  on  their  own  to  fully  meet  the 
objective,  as  they  target  only  certain  actors,  are  measures  merely  designed  to  improve 
and  enable  clearing  in  EU  CCPs,  and,  as  regards  the  measures  targeting  insurance 
companies  and  investment  funds,  they  would  not  be  sufficient  per  se  to  ensure  that 
clearing happens at EU CCPs. The impact of these options in terms of costs is expected 
to be limited. The combination of options B2 (Pillar 2 sub-option) to B5, i.e. Option B6, 
would be the most effective in meeting the specific objective of encouraging clearing in 
the  EU  and  is  likely  to  have  the  lowest  costs  among  all  options  assessed,  as  discussed 
above. Such costs and their evolution (i.e. possible decrease) overtime will depend on the 
calibration of the demand measures (through a level 2 measure. i.e. an RTS to be adopted 
by  the  Commission  on  the  basis  of  the  draft  RTS  submitted  by  ESMA,  for  the  active 
account), which will need to strike the balance between achieving the financial stability 
objectives  and  minimising  costs  for  market  participants  (e.g.  by  requiring  a  gradual 
increase overtime of the activity in the account). The use of level 2 technical rules, which 
are subject to public consultations and cost-benefit analysis, would also provide a degree 

56 

 
of  flexibility;  the  impact  of  these  measures  would  be  subject  to  close  monitoring  by  a 
Joint Monitoring Mechanism, consisting of the ESAs, ECB, SSM and ESRB, to ensure 
that there are no unintended side effects. In the event such unintended side effects ensue, 
the technical requirements could be easily adjusted at the initiative of ESMA to mitigate 
any  unintended  side  effects.  This  option  would  also  contribute  to  the  CMU  and  open 
strategic  autonomy  initiatives,  as  well  as  financial  stability  objectives.  Hence,  it  is  the 
preferred policy option. 

Effectiveness 

Improve 
attractive
ness of 
EU CCPs 

Encourage 
clearing in 
EU CCPs 

0/+ 
+ 
+ 
+ 
+ 

+ 
+++ 
++ 
0 
+++ 

Enhance the 
assessment and 
management of 
cross-border 
risks 
+ 
+ 
0 
0/+ 
+ 

Efficiency (cost- 
effectiveness) 

Coherence 

-/-- 
- 
- 
++ 
-- 

+ 
++ 
+/- 
++ 
++ 

Summary of winners and losers 

CCPs 
+/- 
+/- 
+ 
++ 
+ 

Clearing Members 
-- 
0 
0 
0 
- 

Clients 
- 
- 
0 
++ 
- 

Supervisory authorities 
0/+ 
0/+ 
0/- 
0/+ 
0/+ 

Option B2 
Option B3 
Option B4  
Option B5  
Option B6  

Option B2 
Option B3 
Option B4 
Option B5 
Option B6 

Legend: +++ = Very positive 

++ = Positive 

+ = Slightly positive  

+/- = Mixed effect 0 = no 

effect 

- = Slightly negative 

-- = Negative 

--- = very negative 

7.3.  C  -  Measures  to  enhance  the  assessment  and  management  of  cross-border 

risk 

7.3.1.  Option C2: Targeted amendments to current supervisory framework 

Effectiveness in meeting the specific objectives  

This  initiative  should,  over  time,  lead  to  additional  volumes  of  clearing  in  the  EU, 
increased  activities  in  certain  EU  CCPs  and  thus  increased  cross-border  activity  in  the 
EU. This option would effectively meet the specific objectives of ensuring a more robust 
consideration  of  cross-border  risks,  and  thus  enhanced  EU  financial  stability,  for  three 
reasons.  

First, it would provide EU authorities with an increased say in the ongoing supervision of 
EU  CCPs  by  NCAs  who  retain  the  supervisory  responsibility  for  CCPs  authorised  in 
their  jurisdiction.  This  could  be  done  by  strengthening  EU  input  in  the  adoption  of 
decisions by NCAs (e.g. by extending the supervisory areas for which an ESMA opinion 
is  required, such as withdrawal  of  authorisation,  annual  review and  evaluation). ESMA 
could also be given the possibility to publish the fact that an NCA has not complied with 
an ESMA opinion. Another option would be to give the right to central banks of issue to 
participate  to  the  CCP  Supervisory  Committee  meetings  on  more  topics.  As  such,  EU 
authorities could better ensure that the same financial stability considerations are applied 
in  the  supervision  of  all  EU  CCPs;  at  the  same  time,  it  would  be  clear  that  the  CCP’s 
competent authority remains responsible for the CCP’s supervision. To have ESMA (and 
the college) assessing relevant aspects, with a particular focus on cross-border elements 

57 

 
 
 
 
 
 
at  the  same  time  as  the  CCP’s  competent  authority,  would  ensure  convergence  in 
supervision and that the overall timeline of the overall procedures does not increase.  

Second, joint supervisory teams consisting of the competent authority, ESMA and certain 
members  of  the  college  could  be  set  up  to  assist  on  certain  aspects,  such  as  providing 
input on specific supervisory matters and participating to onsite inspections. In meetings 
with  Member  States,  a  few  Member  States  expressed  concerns  due  to  potential 
challenges of ensuring clearly defined roles and responsibilities.  

Third, ESMA’s powers in case of emergency situations could  be enhanced;  it could  be 
entrusted  with  coordinating  responses  to  a  crisis  and  empowered  to  request  relevant 
information  directly  from  market  participants  and  to  establish  effective  practices  to 
address  and share information  on  emerging risks.  This  would  also help to  speed up the 
EU response, clarify expectations regarding data sharing and availability for the relevant 
authorities and supervised CCPs, reduce the potential risk of conflicting approaches and 
promote convergence of crisis management responses. ESMA could also be provided the 
possibility  to  issue  recommendations  if  certain  conditions  are  met,  e.g.  the  emergency 
affects more than one CCPs or in  case of Union-wide events  destabilising cross-border 
cleared  markets.  Several  Member  States  indicated  their  support  for  strengthening 
ESMA’s coordinating function in emergency situations.155 

Fourth, the establishment of a Joint Monitoring Mechanism (comprising amongst others 
the ESAs, the ECB, the SSM, the ESRB and the Commission) to monitor at EU level the 
transfer of EU firms’ excessive exposures from Tier 2 CCPs to EU CCPs; contribute to 
the  development  of  Union-wide  assessments  of  the  resilience  of  CCPs  focussing  on 
liquidity  risks  concerning  CCPs,  clearing  members  and  clients;  identify  concentration 
risks,  in  particular  in  client  clearing,  due  to  the  integration  of  EU  financial  markets, 
including  where  several  CCPs,  clearing  members  or  clients  use  the  same  service 
providers;  monitor  the  effectiveness  of  the  measures  aimed  at  improving  the 
attractiveness  of  EU  CCPs,  encouraging  clearing  at  EU  CCPs  and  enhancing  the 
monitoring  of  cross-border  risks.  ESMA,  in  cooperation  with  the  other  bodies 
participating to the Joint Monitoring Mechanism, could be requested to submit an annual 
report on the results of their monitoring activity. In addition, if ESMA were to identify 
that national authorities fail to ensure compliance with potential requirements on clearing 
at EU CCPs, it could issue guidelines or recommendations or launch a breach of Union 
law procedure. Finally, ESMA could also be requested to monitor and keep under review 
the  proportion  of  the  activity  to  be  cleared  in  active  account  at  EU  CCPs.  In  meetings 
with  Member  States,  several  indicated  their  support  for  introducing  a  stronger  cross-
sectoral monitoring mechanism for the EU’s exposures to Tier 2 CCPs. 156 In addition, by 
streamlining  procedures  and  clarifying  the  roles  of  various  authorities  involved  in  the 
supervision of EU CCPs, this option would render the framework simpler and less costly 
for  all  actors  involved,  and  improve  the  attractiveness  of  EU  CCPs  by  addressing  the 
drivers linked to these objectives.  

Coherence 

This option is coherent with the current EMIR framework, as it builds upon the already 
foreseen  arrangements  under  EMIR  2.2  and  with  the  2020  CMU  Action  Plan,  which 
highlights the need for a more integrated post-trading landscape in the EU while noting 
that  the  Commission  will  consider  proposing  measures  for  stronger  supervisory 

155  See Annex 2. 
156  See Annex 2. 

58 

 
                                                           
coordination  or  direct  supervision  by  the  ESAs.  Finally,  it  would  increase  the  overall 
consistency in the application of the EU rules on financial services. 

Assessment of the impacts by stakeholder group 

By streamlining the procedures and various authorities’ role, EU CCPs would be subject 
to  more  effective,  convergent  and  thus  efficient  supervisory  arrangements.  The  option 
would decrease the costs that CCPs incur due to duplicative or contradicting rules and the 
lack  of  supervisory  convergence.  As  such,  they  would  be  more  able  to  compete 
internationally and in the EU. A more efficient and effective supervisory framework also 
contributes  to  enhanced  EU  financial  stability.  These  benefits  would  be  ongoing.  In 
addition,  the  changes  aimed  at  enhancing  the  authorities’  capacity  to  monitor  cross-
border risks, cooperate and act in emergency situations would benefit EU CCPs as their 
operations would be safer. 

Through  this  option’s  benefits  for  EU  CCPs,  clearing  members  could  benefit  from 
greater offer by CCPs in a faster way, and would thus have more choices where to clear. 
The  reduction  of  regulatory  costs  for  CCPs  could  imply  a  reduction  of  the  costs  for 
clearing also for clearing members. In addition, clearing members would benefit from a 
safer  environment  for  their  operations,  including  because  of  the  changes  aimed  at 
ensuring better monitoring of cross-border risks. These benefits would be ongoing. 

As  for  clearing  members,  clients  would  also  be  able  to  benefit  from  greater  offer  by 
CCPs in a faster way, and would thus have more choices where to clear. The reduction of 
regulatory  costs  for  CCPs  would  imply  a  reduction  of  costs  also  for  clients,  provided 
there is competition between CCPs in the medium term and cost benefits are passed on. 
In addition, they would benefit from a safer environment for their operations, including 
those  changes  aiming  to  improve  the  monitoring  of  cross-border  risks.  These  benefits 
would be ongoing. 

The proposed new arrangements  would take more account  of the mandates of  national 
supervisory  authorities  and  central  banks  of  issue  by  strengthening  their  input  to  the 
supervisory process, relative to the situation today. This option would help to clarify the 
different roles of ESMA and the colleges, which had been criticised as being unclear or 
duplicative  by  respondents  to  the  targeted  consultation.  The  establishment  of  joint 
supervisory  teams  would  further  enhance  supervisory  convergence  and  would  ensure 
knowledge  sharing  between  supervisors  at  national  and  EU  level.  By  having  ESMA, 
national  supervisors  and  central  banks  share  responsibilities  in  a  more  coherent 
arrangement,  this  option  would  allow  for  a  more  holistic  supervision  of  CCPs  which 
responds  better  to  the  increasingly  systemic  nature  of  these  infrastructures  in  the  EU 
financial  system.  These  benefits  would  be  ongoing.  Finally,  this  option  ensures  that 
Member  States,  that  are  ultimately  responsible  for  helping  financially  a  failing  CCP 
established  in  their  jurisdiction,  continue  to  be  ultimately  responsible  also  for  taking 
decisions  in  relation  to  its  ongoing  supervision.  Regarding  costs,  one-off  adjustment 
costs  to  modify  the  procedures  and  tools  used  at  national  level  when  cooperating  with 
ESMA and other supervisors may be needed. In addition, recurring costs may stem from 
NCAs’  staff  cooperation  with  other  authorities  (e.g.  in  joint  supervisory  teams). 
However, the simplification of procedures should help reduce these costs.  

This  option  would  strengthen  ESMA’s  input  in  the  ongoing  supervision  of  EU  CCPs, 
allowing  it  to  further  build  its  supervisory  capacity.  ESMA  may  incur  additional  costs 
from  the  revised  supervisory  arrangements,  one-off  (e.g.  setting  up  of  procedures  and 
tools for the cooperation of authorities in the context of the joint supervisory teams and 
the  cross-sectoral  monitoring  mechanism)  and  recurring  (e.g.  participation  to  joint 

59 

 
supervisory  teams,  increase  of  the  supervisory  areas  for  which  an  ESMA  opinion  is 
required, or operation of the cross-sectoral monitoring mechanism). For example, under 
the  existing  budgetary  arrangements,  ESMA  estimates  that  to  make  the  process  more 
efficient and effective for its current tasks it needs 2.5 FTEs per year for the issuance of 
approximately 9 opinions; 3 FTEs per year for model validations; 2.5 FTEs per year for 
participation to CCP colleges.157 If ESMA’s tasks are expanded or increased in number, 
it can be expected that additional resources may be required. However, considering that 
ESMA has already experience in the supervision of CCPs and that its regulatory work in 
this  area  to  a  significant  extent  is  completed,  it  can  be  expected  that  such  additional 
resources can be addressed by  reallocating existing staff. One option could  be to  cover 
some of these additional costs through fees to EU CCPs.  

This  option  would  strengthen  the  input  of  central  banks  of  issue  in  the  ongoing 
supervision of EU CCPs, thereby ensuring that they have more adequate information on 
the operation of CCPs which is essential considering the role of the latter in the conduct 
of  monetary  policy.  While  this  option  might  entail  some  additional  costs  for  central 
banks  of  issue  (e.g.  if  they  are  granted  with  the  right  to  participate  to  the  CCP 
Supervisory Committee on a broader range of topics), these could be counterbalanced by 
the  increased  knowledge-sharing  and  elimination  of  the  need  to  submit  duplicative 
requests for information to supervised entities. 

7.3.2.  Option C3: Centralise EU CCP supervision 

Effectiveness in meeting the specific objectives  

A  single  authority,  ESMA,  would  responsible  for  the  supervision  of  some  or  all  EU 
CCPs.  While  ESMA  could  be  required  to  cooperate  closely  with  other  bodies,  e.g.  the 
ESCB,  none  of  them  would  have  binding  powers  over  the  single  supervisor.  For  those 
CCPs under ESMA’s direct supervision, this option would eliminate the problems arising 
from  authorities’  inefficient  supervisory  cooperation  and  ensure  full  supervisory 
convergence  throughout  the  EU.  As  such,  it  would  simplify  the  current  burdensome 
procedures and reduce costs for EU CCPs, directly contributing, and to a greater extent 
than  option  2,  to  the  objective  of  enhancing  EU  CCPs’  attractiveness.  In  addition,  a 
single supervisor would have direct access to all necessary supervisory information and 
would  be  competent  to  take  all  supervisory  decisions;  consequently,  cross-border  risks 
would  be  considered  and  effectively  addressed  more  than  in  option  2,  ensuring  EU 
financial stability. This option would require changes under EMIR as this would change 
the  supervision  model  currently  set  out  therein.  There  could  also  be  a  need  for  level  2 
acts, such as RTSs and ITSs, to further establish details as to such supervisory approach. 

The  final  responsibility  for  managing  an  ailing  CCP  remains  at  national  level:  while 
under  the  CCP  Recovery  and  Resolution  Regulation  a  CCP  failure  first  needs  to  be 
addressed  by  using  the  CCP’s  own  resources  as  well  as  contributions  from  its  clearing 
members which may be located throughout the EU (and beyond), Member States may in 
specific  circumstances  support  financially  failing  CCPs.  As  such,  this  option  may  be 
perceived at this point as splitting supervisory and fiscal responsibilities. To address this, 
it may be necessary to also review the CCP Recovery and Resolution Regulation. 

In the meeting with Member States on 16 June 2022, several Member States argued that 
that supervision should not be fundamentally changed by granting ESMA with the power 
to supervise directly some or all EU CCPs. Two of them stated that fiscal responsibility 

157  See footnote 55. 

60 

 
                                                           
should go hand in hand with supervisory responsibility and therefore were clearly against 
the  supervision  of  all  or  certain  EU  CCPs  at  EU  level.  According  to  stakeholders 
responding to the targeted consultation (including a public authority and a non-EU CCP), 
the  benefits  of  a  stronger  EU  supervision  could  be  uniformity  of  supervisory  practices 
and  outcomes.  Those  against  a  stronger  EU  supervision  (two  public  authorities,  an  EU 
CCP, a central bank) argued that it would not reduce costs, as costs were a result of the 
EMIR regulatory requirements and therefore unrelated to the level at which supervision 
is  exercised.  In  addition,  it  was  mentioned  that  ESMA  may  not  be  best  placed  to  deal 
with interpretation of national law. 

Coherence 

This  option  is  coherent  with  the  CMU  2020  Action  Plan,  which  highlights  the  need  to 
develop  a  more  integrated  EU  post-trading  landscape  and  states  that  if  there  are 
indications  that  the  supervisory  set-up  is  inadequate  for  the  desired  level  of  market 
integration, stronger supervisory coordination or direct supervision by the  ESAs should 
be  considered.  It  is  also  coherent  with  the  approach  for  third-country  CCPs,  and 
particularly Tier 2 CCPs over which ESMA has direct supervisory powers, and for other 
financial  institutions  for  which  ESMA  has  already  been  granted  direct  supervisory 
powers  (e.g.  for  credit  rating  agencies  and  trade  repositories).  Nonetheless,  it  may  be 
seen  as  inconsistent  with  the  architecture  under  the  CCP  Recovery  and  Resolution 
Regulation,  whereby  decisions  for  CCPs  in  distress  are  taken  at  national  level  and 
Member  States  may  be  called  upon  to  contribute  for  failing  CCPs;  a  review  of  that 
Regulation may also be required.  

Costs and benefits by stakeholder group 

By  addressing  inefficiencies  of  the  supervisory  framework,  mainly  the  complex 
arrangements  between  authorities  that  lead  to  long  and  burdensome  procedures,  CCPs 
could  launch  new  products  or  adapt  their  models  quicker.  They  would  no  longer  face 
divergent  supervisory  practices  and  an  increased  level  playing  field  amongst  all  CCPs 
would be ensured. CCPs would thus benefit from a reduction of costs when operating in 
the  EU.  There  would  also  be  a  better  management  of  cross-border  risks,  which  would 
make  CCPs’  operations  safer.  These  benefits  would  be  ongoing,  and  greater  than  in 
Option 2. If however the costs of EU supervision were passed to CCPs, they could face 
higher costs (to the extent that they are not subject to national supervisory fees or where 
national  supervisory  fees  are  lower)  which  could  impact  their  attractiveness.  EU  CCPs 
who are currently subject  to  national fees may  however potentially profit from  reduced 
fees;  as  only  one  or  two  CCPs  are  established  in  a  single  Member  State,  a  single 
supervisor  should  be  able  to  reduce  the  supervisory  costs  for  each  CCP  because  of  its 
economies of scale. 

Clearing members and  clients could  benefit from  a wider offer by CCPs  quicker, and 
would  have  more  choices  where  to  clear.  They  would  also  benefit  from  a  safer 
environment for their operations following the changes to ensure a better monitoring of 
cross-border  risks.  These  benefits  would  be  ongoing  and  greater  than  in  Option  2. 
Nonetheless, should EU CCPs be required to pay supervisory fees,  such costs could be 
passed on to clearing members; these costs would be ongoing.  

The  costs  for  NCAs  would  be  significantly  reduced,  as  authorisation  and  supervisory 
powers would be moved at EU level. Staff from national authorities could also move to 
the EU supervisor, either permanently or on a seconded basis. 

This option would imply significant costs for ESMA, one-off (e.g. setting up procedures 
and  tools  to  assume  the  role  of  the  single  supervisor  and  for  cooperating,  to  the  extent 

61 

 
necessary,  with  other  authorities)  and  recurrent  (significant  extension  of  supervisory 
capacity  in  ESMA,  operation  of  the  single  supervisor).  These  costs  would  be  ongoing 
and  could  be  covered  via  fees  on  EU  CCPs  that  could  potentially  range  from  EUR 9 
912 000  to  EUR 23  260 000  for  all  of  them  depending  on,  e.g.  each  CCP’s  size, 
complexity of activities, etc.158  

This  option  would  strengthen  the  input  of  central  banks  of  issue  in  the  ongoing 
supervision of EU CCPs, thereby ensuring that they have more adequate information on 
the operation of CCPs which is essential considering the role of the latter in the conduct 
of  monetary  policy.  While  this  option  might  entail  some  additional  costs  for  central 
banks  of  issue  (e.g.  if  they  are  granted  with  the  right  to  participate  to  the  CCP 
Supervisory Committee on a broader range of topics), these could be counterbalanced by 
the  increased  knowledge-sharing  and  the  elimination  of  the  need  for  them  to  submit 
separate requests for information to the supervised entities. 

7.3.3.  Choice of preferred policy option 

In  view  of  the  political  priority  of  the  review  to  strengthen  the  framework  for  robust 
consideration  of  cross-border  risks,  and  enhance  EU  financial  stability,  as  well  as 
improve  the  attractiveness  of  EU  CCPs,  while  acknowledging  that  resolution  decisions 
impacting  CCPs,  clearing  members  and  clients  are  taken  at  national  level  and  Member 
States remain eventually responsible for supporting financially CCPs authorised in their 
jurisdiction, Option 2 is deemed more appropriate and proportionate at this point in time 
as it attains the right balance between achieving the aforementioned objectives. 

Effectiveness 

Improve the 
attractiveness 
of EU CCPs 

Encourage 
clearing in 
EU CCPs 

Option C2 
Option C3 

++ 
++ 

+- 
+- 

Enhance the 
assessment and 
management of 
cross-border 
risks 
++ 
+++ 

Summary of winners and losers 

CCPs 

Clearing Members 

Clients 

Option C2 
Option C3 

++ 
+- 

++ 
++ 

++ 
++ 

Efficiency 
(cost-
effectiveness) 

Coherence 

++ 
+/- 

++ 
+- 

National supervisory 
authorities 
++ 
-- 

Legend: +++ = Very positive 
0 = no effect 

++ = Positive 

- = Slightly negative 

+ = Slightly positive  
-- = Negative 

--- = very negative 

+/-  =  Mixed 

effect                

8.  PREFERRED OPTIONS 

8.1. 

Summary of the preferred package 

Section 7 analyses and compares the policy options and establishes a preferred option for 
each  objective  considered  in  this  impact  assessment.  This  section  considers  why  the 
preferred  options  strike  the  appropriate  balance  between  effectiveness  and  costs,  hence 
are the most proportionate and efficient one in the long run. 

Supply side measures: Option A4 (combination of Options A2 (simplify procedures) 
and  A3  (introduce  ex-post  procedures)  is  the  preferred  option.  It  helps  achieve  the 
specific  objectives  of  improving  the  attractiveness  of  EU  CCPs  by  allowing  them  to 

158  FISMA estimates based on confidential information provided to DG FISMA services. 

62 

 
 
 
 
 
 
                                                           
expand their offer or adjust their risk models in a faster and more efficient manner. These 
will reduce expenses linked to regulatory compliance without compromising the safety of 
CCPs’ operations. By enabling EU CCPs to respond sooner to market demands, it could 
help attract clearing business to the EU, particularly in new products and/or asset classes, 
reinforcing demand side measures. These options would require an amendment of EMIR, 
the  relevant  procedures.  They  should,  however,  be 
which  currently  sets  out 
complemented by technical rules to, e.g. specify the documentation to be provided and its 
format  in  order  to  provide  legal  certainty  to  CCPs  and  offer  greater  clarity  and 
predictability, thus further shortening the processes. 

Demand  side  measures:  Option  B6  (combination  of  all  options,  i.e.  disincentivise 
participants’  excessive  exposures  to  CCPs  through  Pillar  2  measures,  require  an 
active  account  at  EU  CCPs,  broaden  the  scope  of  market  participants  clearing  in 
the  EU,  facilitate  clearing  by  clients)  is  the  preferred  option.  It  will  foster  greater 
demand for clearing in EU CCPs and a corresponding reduction in the over-reliance on 
systemic  third-country  CCPs,  contributing  to  the  overarching  goal  of  preserving  EU 
financial  stability  while  leaving  enough  flexibility  to  minimise  the  measures’  potential 
costs  through  a  proportionate  approach.  The  greater  demand  for  clearing  services 
provided  by  EU  CCPs  would  be  reinforced  by  the  aforementioned  measures  on  the 
supply  side  paving  the  way  for  market-led  initiatives.  This,  together  with  the  specific 
design of the active account measure (e.g. gradual increase) can contribute to minimising 
costs for clearing participants. Simultaneously, this increases the need to strengthen EU 
CCP supervision in the single market.  

These  measures  would  require  a  combination  of  different  tools.  Legislative  changes 
would be required in EMIR and CRR to introduce the active account requirement and the 
Pillar  2  measures  as  well  as  technical  rules  (level  2  acts,  RTS  to  be  adopted  by  the 
Commission  following  a  draft  proposed  by  ESMA)  to  specify  the  operational 
implementation  of  certain  rules.  Measures  to  facilitate  client  clearing,  would  also,  in 
some cases, require targeted modifications of level 1, notably the UCITS Directive, the 
MMF  Regulation  and  EMIR.  ESMA,  and  the  other  EU  bodies,  will  consult  before 
proposing  the  relevant  rules.  It  is  understood  that  those  entities  would  have  access  to 
more data than the Commission, and thus would be able to ensure careful and appropriate 
calibrations in the level 2 acts to ensure they would have the desired impact, while at the 
same  time  mitigating,  to  the  extent  possible,  costs  and  benefits.  Finally,  as  concerns 
measures to broaden the scope of clearing by public entities, this is something that could 
be  implemented  in  a  binding  form  through  legislation,  however  it  may  be  more 
appropriate,  as  a  first  step,  to  communicate  in  a  non-binding  manner  on  the  needs  for 
such action.  

Strengthened  supervision:  Option  C2  (targeted  amendments  to  the  current 
supervisory  framework)  is  the  preferred  option.  The  analysis  shows  it  is  the  most 
efficient, albeit not necessarily the most effective, option to enhance the assessment and 
management  of  cross-border  risks.  It  is  also  politically  more  feasible  and  reduces 
concerns of certain Member States that their powers may be reduced and that centralised 
EU supervision would not be consistent with the fact that ultimately the responsibility for 
potentially  supporting  a  CCP  in  a  crisis  remains  with  that  CCP’s  Member  State  of 
establishment. These options would require an amendment of EMIR, which currently sets 
out  the  supervisory  framework  for  EU  CCPs  to  introduce  targeted  changes  on 
supervision  and  emergency  management,  and  to  include  the  new  functions  of  the  joint 
supervisory teams to assist on certain aspects of the supervision and the joint monitoring 
mechanism  established  to  assess  the  overall  clearing  in  EU  CCPs,  aspects  related  to 

63 

 
client clearing and union-wide assessment. ESMA, in cooperation with the other bodies 
participating to the Joint Monitoring Mechanism, could be requested to submit an annual 
report on the results of their monitoring activity to the European Parliament, the Council 
and the Commission.  

8.2.  Combined impacts 

8.2.1.  Overall impact of the package on relevant stakeholders  

The  overall  package  of  options  will  have  a  positive  effect,  by  improving  the 
attractiveness of EU CCPs and safeguarding EU financial stability and in a cross-border 
context, reducing the over-reliance on third-country CCPs and contributing to deepening 
the CMU. 

EU  CCPs  will  benefit  first  from  the  increased  clearing  flows  from  existing  and  new 
participants due to the measures boosting the demand for EU clearing. Such a rise in the 
liquidity might attract flows that are not targeted as part of this initiative but for which a 
spiral  effect  could  be  spurred:  more  liquidity  at  EU  CCPs  will  make  them  more 
attractive,  thus  in  turn  potentially  attracting  further  market  participants.  Second,  the 
measures aimed at addressing the supply side will allow EU CCPs to bring new products 
to  the  market  and  adapt  their  risk  models  quicker  than  today.  This  will  benefit  CCPs’ 
revenues  and  enable  their  timely  reaction  to  changed  risk  situations.  It  will  also  help 
CCPs  in  facing  and  adapting  to  the  incoming  pressure  of  new  business  from  third-
country  CCPs.  CCPs  will  also  benefit  from  lower  compliance  costs  as  approval 
procedures will be streamlined and more clarity on the overall process will be provided 
while  they  will  have  greater  certainty  as  to  the  time  required  for  their  initiatives  to 
become  operational,  reducing  existing  disincentives  to  offer  new  products.  Moreover, 
some CCPs may profit from lower supervisory fees by their NCAs and overall costs as a 
result of the possibility to follow a fast-track procedure for the authorisation/validation of 
certain  initiatives.  Competition in  and outside the EU will  thus  be improved. Third, by 
strengthening the supervisory framework, EU CCPs would be subject to more effective 
and  convergent  arrangements.  This  would  decrease  the  costs  CCPs  incur  due  to 
duplicative  or  contradicting  rules  and  the  lack  of  supervisory  convergence.  In  addition, 
changes  aimed  at  enhancing  the  authorities’  capacity  to  monitor  cross-border  risks, 
cooperate  and  act  in  emergency  situations  would  benefit  EU  CCPs  as  their  operations 
would be made safer. All benefits would be ongoing. 

Clearing  members  will  benefit  from  greater  offer  by  CCPs,  in  a  faster  way,  and  will 
have  more  choices  where  to  clear.  The  increased  competition  amongst  CCPs  could 
trigger  a  virtuous  circle  with  increasing  opportunities  for  clearing  members.  The 
reduction  of  regulatory  costs  incurred  by  CCPs  may  also  lead  to  a  reduced  cost  of 
clearing for clearing members, provided that there is competition between CCPs and cost 
savings are passed on to members. Clarity over CCPs’ launch dates for a specific service 
or  activity  would  reduce  legal  uncertainty  and  additional  implementation  costs  (e.g.  IT 
changes,  maintaining  a  dual  CCP  set-up,  changes  of  procedures  and  contracts  with 
clients)  for  clearing  members.  Increased  competition  amongst  CCPs,  either  on  a  cross-
border basis or within the EU, shall contribute to lower clearing prices. It is unlikely that 
the  measures  taken  under  this  initiative  lead  to  disruptive  and  inefficient  market 
fragmentation given their progressive and proportionate nature as well as the reasonable 
objective  set.  One  can  again  note  that,  e.g.  for  the  clearing  of  US  dollar-denominated 
interest  rate  derivatives,  clearing  members  are  satisfied  with  the  existence  of  two 
competing  CCPs  sharing the market  in a  fluctuating  and balanced manner.  In a similar 
manner, it is unlikely that the proposal leads to undue concentration in EU CCPs. Were 

64 

 
this to happen, the proposed measures also increase the supervisory framework within the 
EU, making it an  even better place to  be concentrated in  than in  third countries.  These 
benefits would be ongoing.  

The  measures  aimed  at  increasing  the  demand  side  for  EU  clearing  services  (Pillar  2 
measures, requirement to have an active account at an EU CCP) will also entail costs for 
EU  clearing  participants.  The  size  of  those  costs  will  depend  on  whether  a  clearing 
member, and even more so a client, is already set up to clear in EU CCPs or not. The vast 
majority  of  clearing  members  already  seem  to  have  accounts  at  EU  CCPs.  As  regards 
clients,  estimates  are  that  around  60%  of  European  clients  of  EU  clearing  members 
already have accounts ready to use in the EU for interest rate swaps and around 85% do 
for  credit  default  swaps.159  In  addition,  depending  on  the  EU  CCP  where  the  account 
needs to be open, costs may vary as, e.g. some EU CCPs are offering to open an account 
for free160.  Other running costs,  which  can  arise in  the form  of  lower liquidity and  lost 
netting benefits, will depend on the calibration and design of the demand-side measures. 
There is a key trade-off between the effectiveness of measures to increase clearing at EU 
CCPs and the cost impact on clearing participants, and this trade-off can be considered in 
the calibration and design of the measures themselves, so as to make costs proportionate 
(e.g. the further specification of certain requirements through RTSs ensures that ESMA 
makes  the relevant  proposals  after consulting, where relevant,  other EU  bodies such  as 
the  ESCB  and  the  ESAs  that  have  access  to  relevant  supervisory  data  and  after  having 
conducted  a  public  consultation  and  a  cost-benefit  analysis).  There  will  be  a  benefit 
however  in  the  form  of  increased  diversification  of  exposures  to  CCPs,  greater  choice 
where to clear, reduced over-reliance on third-country CCPs and, as such, from increased 
financial  stability  in  the  EU.  Finally,  measures  aimed  at  strengthening  the  EU 
supervisory framework would also allow clearing members to benefit from greater offer 
by  CCPs  in  a  faster  way,  and  would  thus  have  more  choices  where  to  clear.  The 
reduction of regulatory costs for CCPs could imply a reduction of the costs for clearing 
also  for  clearing  members.  In  addition,  clearing  members  would  benefit  from  a  safer 
environment  for  their  operations  following  the  changes  to  improve  the  monitoring  of 
cross-border risks. These benefits would be ongoing. 

Clients will benefit from the package in various ways. First, the preferred policy options 
will give them an alternative offer to non-EU CCPs. This will provide more choice and 
increased competition which may result overall in reduced costs. Moreover, the options 
retained will ensure clients have better access to EU CCPs by giving them a transparent 
EU CCP offer by direct and indirect clearing members and allowing them to benefit from 
new CCPs’ access models more easily. The proposed approach is also proportionate and 
avoids  disproportionate  costs  to  end  clients  while  preserving  financial  stability  and 
deepening  CMU,  given  that  estimates  are  that  around  60%  of  EU  clients  already  have 
account at an EU CCP. Options to address the demand side of the problem are expected 
to  facilitate  central  clearing  and  reduce  over-reliance  on  third-country  CCPs,  thereby 
strengthening clients’ resilience. However, in particular clients that do not currently clear 
in  the  EU,  or  who  clear  in  the  EU  but  not  to  the  extent  required  for  an  account  to  be 
considered active, will bear some costs under the obligation to keep an active account at 
an  EU  CCP.  Whether  these  costs  would  be  ongoing  or  not  depends  on  the  precise 
calibration of the requirements and on the way market participants would adjust to them, 
which will also impact netting efficiencies at EU CCPs. More in general, clients are also 

159  Confidential data provided to DG FISMA services. 
160  Confidential information provided to DG FISMA services. 

65 

 
                                                           
likely  to  bear  any  additional  costs  faced  by  clearing  members  under  the  proposed 
measures, at least as long as clearing members do face such costs. 

Under the preferred policy options, ESMA may incur limited additional costs but would 
benefit from a strengthened supervisory environment due to additional responsibilities it 
will  be  given.  In  terms  of  costs,  ESMA  would  mainly  be  impacted  by  the  additional 
supervisory tasks provided for under the policy options as well as the various pieces of 
secondary  legislation  it  might  be  empowered  to  develop.  On  the  one  hand,  certain 
preferred policy options should lead to the reduction or simplification of ESMA’s work 
(e.g. streamlining of procedures, standardisation of documentation submitted to ESMA). 
Overall, ESMA would benefit from having a clearer overview on EU CCPs and relevant 
financial stability risks. 

The  impact  of  the  preferred  options  on  NCAs  would  be  limited  but  generally  positive. 
Some  of  their  supervisory  tasks  will  be  simplified,  and  some  of  the  procedures  will  be 
streamlined  and  specified,  therefore  authorities  will  benefit  from  reduced  interactions 
with  CCPs  for  additional  documentation  and  a  better  flow  of  communication  between 
CCPs, the college and ESMA. The initial costs of setting up the new procedures, e.g. the 
development of new IT tools, will be minimal compared to the benefits provided. Some 
costs  may  be  shared  across  authorities  and  ESMA.  Some  limited  costs  for  supervisors 
(including  the  SSM)  could  arise  from  checking  that  compliance  with  requirements 
introduced to address the demand-side of the problem. As such costs are expected to be 
small and would be integrated in ongoing supervision, the overall impact could be seen 
as neutral. The use of IT tools is also coherent with the “digital by default” principle. 

Finally, the measures taken to reduce the over-reliance on systemically important third-
country  CCPs  are  likely  to  have  a  negative  impact  on  these  CCPs  as  some  of  the 
clearing  business,  at  least  from  EU  market  participants,  is  meant  to  move  away  from 
them.  It  could  however  as well be a benefit for other non-systemically important third-
country CCPs which could inherit those flows, including by proactively attracting them. 

8.2.2.  Impact on financial stability  

The combination of preferred options has a positive impact on financial stability which is 
a  societal  benefit.  By  making  EU  CCPs  more  attractive  while  ensuring  appropriate 
supervision,  the  EU’s  overreliance  on  third-country  CCPs  can  be  reduced.  This  has  a 
positive  impact  on  financial  stability  by:  (i)  reducing  CCPs’  concentration  rates  (ii) 
ensuring  effective  alternative  clearing  solutions  are  available  in  case  of  market  stress, 
with  reduced  frictional  costs  in  case  this  would  require  a  massive  shift  of  positions 
towards EU CCPs, and (iii) ensuring that EU supervisors are given adequate powers and 
monitoring capabilities. 

More  specifically,  by  increasing  the  attractiveness  of  the  EU  as  a  clearing  hub,  the 
preferred  policy  options  address  the  financial  stability  risks  that  arise  from  EU  firms’ 
overreliance on Tier 2 CCPs. EU authorities have limited means for protecting EU firms 
that use a third-country  CCP’s services in  times  of stress, as they have no control over 
the  situation.  Reducing  EU  firms’  overreliance  on  Tier  2  CCPs  will  have  a  directly 
positive impact on financial stability, especially as this will be combined with changes in 
the  EU  supervisory  framework  aiming  at  ensuring  better  consideration  of  cross-border 
risks in the EU. Indeed, the introduction of targeted amendments in the EU supervisory 
framework  to  ensure  increased  input  of  EU  authorities  in  the  supervision  of  EU  CCPs 
and the granting of powers to ESMA in emergency situations aim at making certain that 
supervisory decisions are taken, more than today, with a systemic pan-EU perspective. 

66 

 
8.2.3.  Impact on small and medium sized enterprises 

This  initiative  does  not  have  any  direct  or  specific  impacts  on  SMEs.  Like  other 
businesses, SMEs will benefit from the greater consideration of cross-border risks in the 
EU.  By  enhancing  financial  stability,  this  initiative  would  reduce  the  potential  for 
negative knock-on effects of a crisis affecting the financial sector, e.g. reduced capacity 
of the banking sector to provide financing to the real economy, recessions etc. that tend 
to  more  heavily  impact  SMEs.  SMEs  may  also  indirectly  benefit  from  the  increased 
attractiveness of EU CCPs. This initiative should help promote further the use of central 
clearing and facilitate SMEs’ ability to  hedge their transactions or invest. The proposal 
will  thus  contribute  to  deepening  the  CMU.  There  will  be  some  negative  impacts  on 
SMEs in  the short-to-medium  run; they are  similar to  those for financial  counterparties 
(e.g. less netting benefits) but will be smaller in absolute terms for SMEs than for larger 
corporates given the limited outstanding positions of most SMEs. These costs would be 
smaller  in  absolute  terms  for  SMEs  than  for  larger  corporates  given  the  limited 
outstanding positions of most SMEs – although this does not necessarily imply that such 
impacts would be negligible.  

8.2.4.  Social and environmental impact 

The proposed options are not expected to have any material negative social impact. Some 
indirect positive social impacts  are  also  expected. First,  the enhancement  of EU CCPs’ 
attractiveness will contribute to the CMU. As a result, more jobs could be created, e.g. at 
EU CCPs, which would have greater business flows and potentially increase the scope of 
their activities. The broader development of EU markets may lead to positive effects on 
employment.  Second,  the  improved  level  of  financial  stability  following  better 
consideration of cross-border risks will contribute to better protection of the EU economy 
from  contagion  and  feedback  loops  in  case  of  a  crisis,  contributing  to  minimising  the 
impact of a shock on jobs. No impact on fundamental rights is expected and only limited 
impact on SDG no. 8 (see Annex 3, “Relevant sustainable development goals”).  

This  initiative  has  no  direct  and/or  identifiable  impacts  leading  to  significant  harm  or 
inconsistencies  with  the  climate-neutrality  objectives  and  the  obligations  arising  out  of 
the European Climate Law.  

8.2.5.  Impact on the EU budget 

The preferred package should  not  have any  implications  for the  EU budget.  Additional 
tasks  may  arise  for  ESMA  (e.g.  technical  standards,  stronger  role  in  emergency 
situations, opinions in additional areas, participation in joint supervisory teams) and the 
other ESAs (e.g. establishment of a cross-sectoral mechanism monitoring the transfer of 
excessive  exposures  from  Tier  2  to  EU  CCPs).  Due  to  reduced  regulatory  work  for 
ESMA  on  other  CCP  files  (e.g.  under  the  CCP  Recovery  and  Resolution  Regulation), 
ESMA  should  be  able  to  achieve  efficiencies  through  the  internal  reallocation  of  its 
resources.  Any  additional  tasks  under  this  initiative  therefore  should  be  manageable 
under ESMA’s current resources, also given the reduction of administrative costs for all 
stakeholders  involved  in  the  supervision  of  EU  CCPs  thanks  to  the  streamlining  of 
procedures. Some costs may however be covered by fees on EU CCPs. 

8.3.  REFIT (simplification and improved  efficiency) and application of the ‘one 

in, one out’ approach 

The  initiative  aims  to  reduce  the  over-reliance  of  EU  market  participants  on  non-EU 
CCPs and safeguard EU financial stability. As such, it does not aim at reducing costs per 
se. However, the preferred policy option related to the objective of increasing EU CCPs’ 

67 

 
attractiveness  will  lead  to  a  simplification  of  procedures  for  EU  CCPs,  reducing 
administrative  burdens  and  making  their  operations  more  efficient,  thus  also  bringing 
about a reduction of costs.  

The  approximate  range  of  these  cost  savings  has  been  estimated  based  on  interactions 
with stakeholders and several assumptions which were needed to extrapolate the effects 
to the whole EU161. This cost saving is of an administrative nature and thus counts under 
the  “one  in,  one  out”  approach  as  an  “out”  in  the  range  of  approx.  EUR 5 million  to 
EUR 15 million (EU total). This is likely to be concentrated in few EU CCPs (as few EU 
CCPs  might  bring  new  products  to  the  market  in  a  given  year)  and  is  likely  to  be 
beneficial in  terms  of their attractiveness.  These  reduced  administrative costs related to 
simplified  procedures  for  launching  products  and  changing  models  and  parameters  as 
well as the ex-post approval/non-objection procedure/review for certain changes will be 
of a recurrent nature as CCPs benefit from leaner processes every time they ask for the 
introduction of new products or risk models. The estimates assume a reduction of costs 
related  to  staff,  legal  opinions  and  external  consultants  as  a  greater  standardisation  of 
documents as well as greater clarity on what needs to be submitted is introduced and less 
interaction with supervisors is needed. The magnitude of related cost savings will depend 
on the number and complexity of new products brought to the market as well as model 
and parameter changes asked for (for more details on the estimates, see Annex 3, Table I 
of  this  impact  assessment).  There  are  no  one-off  administrative  cost  savings  as  the 
general  requirement  for  these  procedures  remains  in  place.  As  regards  potential 
additional  costs  relevant  for  “one  in,  one  out”,  there  will  be  some  administrative  costs 
related to the reporting of active account requirements as well as very limited paperwork 
related to opening an account with a CCP. The reporting of active account requirements 
needs  to  be  ensured  continuously  and  the  related  costs  will  therefore  be  of  a  recurrent 
nature. However, the limited paperwork related to opening an account with a CCP will be 
a  one-off  cost  occurring  when  the  account  is  actually  opened.  The  magnitude  of  these 
costs depends on the specification of the active account requirements in the delegated act 
and the frequency of reporting.   

9.  HOW WILL ACTUAL IMPACTS BE MONITORED AND EVALUATED? 

The measures aim at improving the attractiveness of EU CCPs, incentivising business to 
clear in the EU and enhancing the supervision of cross-border risks in the EU. As such, 
several changes to EMIR are considered and, in some cases, amendments to other pieces 
of EU legislation. The proposal should ensure that the relevant EU bodies can access the 
relevant  information,  while  not  giving  rise  to  undue  costs.  The  proposal  should  also 
include a provision that an evaluation of EMIR in its entirety should be carried out, with 
a focus on its effectiveness and efficiency in meeting its original aims (i.e. improving the 
efficiency  and  safety  of  EU  clearing  markets  and  preserving  financial  stability).  The 
evaluation  should  consider  all  aspects  of  EMIR,  but  especially  elements  in  the  table 
below to monitor and evaluate progress to meeting the specific objectives. In principle, 
this evaluation should take place at least 5 years after application. The evaluation would 
seek  to  collect  input  from  all  relevant  stakeholders,  but  particularly  CCPs,  clearing 
members  and  clients.  Input  would  also  be  sought  from  ESMA  as  well  as  national 
authorities and central banks. Statistical data for the analysis would be sought primarily 
from ESMA and the ESRB. 

161  It is assumed that there  will  be 10 relevant procedures for all EU CCPs per  year. Since there are 14 EU 

CCPs, this implies 1.4 procedures per CCP per year, which seems rather conservative.  

68 

 
                                                           
Specific 
objective to 
measure 

Improve 
attractiveness 
of EU CCPs 

Monitoring indicators 

% of contracts cleared by EU clearing 
participants in EU and third-country CCPs 

No. of new EU CCP products approved 

Incentivise 
clearing in 
the EU 

Enhance the 
assessment 
and 
management 
of cross-
border risks 

Time taken on average to approve new 
CCP products and validate model changes 
Transactions cleared in EU CCPs in 
different currencies (absolute value and 
compared to global markets) 
Volume of contracts cleared outside EU 
CCPs by EU actors or for EU-currency 
denominated contracts 
No. of opinions issued by ESMA per year 
and cases where NCAs deviate from 
ESMA opinions 
No. of joint supervisory teams established 
and tasks performed 
No. of times ESMA coordinated 
information requests or asked information 
directly from CCPs in emergency situations 

When will 
monitoring 
start? 
1 year after 
application. 

1 year after 
entry into force 
1 year after 
entry into force 
1 year after 
application. 

1 year after 
application. 

1 year after 
application 

1 year after 
application 
3 years after 
application 

By whom? 

Source of 
information 

ESMA with 
ESRB, EBA, 
SSM 
ESMA 

ESMA, 
ESRB, EBA, 
SSM. 
ESMA 

ESMA 

ESMA 

ESMA with 
the ESRB, 
EBA, SSM 
ESMA with 
the ESRB, 
EBA, SSM 
ESMA 

ESMA, 
ESRB, EBA, 
SSM. 
ESMA, 
ESRB, EBA, 
SSM. 
ESMA 

ESMA, with 
NCAs  
ESMA 

ESMA, NCAs 

ESMA 

69 

 
 
 
ANNEX 1: PROCEDURAL INFORMATION 

1. Lead DG, Decide Planning/CWP references 

Lead Directorate-General: Directorate-General for Financial Stability, Financial Services 
and Capital Markets Union.  

Decide Planning Reference: PLAN/2022/6.  

CWP references: N/A 

2. Organisation and timing 

Organisation  and  timing  of  Inter  Service  Steering  Group’s  meetings:  the  Inter  Service 
Steering  Group  included  representatives  of  the  following  Directorates  General:  Budget 
(BUDG),  Competition  (COMP),  Economic  and  Financial  Affairs  (ECFIN),  Internal 
Market, Industry, Entrepreneurship and SMEs (GROW), Justice and Consumers (JUST), 
Trade (TRADE), the Legal Service (LS) and the Secretariat General (SG).  

  1st Meeting on 25 January 2022;  

  2nd meeting on 31 March 2022;  

  3rd meeting on 29 June 2022;  

  Written consultation (11 July – 13 July 2022).  

3. Consultation of the RSB 

The Impact Assessment received a positive opinion (with comments) by the Regulatory 
Scrutiny Board on 14 September 2022 which made the following main recommendations 
for improvements: 

  Explain what success would look like and how it will be effectively monitored;  

  Make the range of options considered more comprehensive; 

  Bring out sufficiently the rationale behind, and the envisaged design of, key measures 
to  be  dealt  with  through  implementing  regulation.  Clarify  on  the  criteria  and 
parameters that will frame their development. 

The  requested  clarifications  were  added  in  the  relevant  sections  of  the  Impact 
Assessment. In particular: 

  Section 5.1 was updated to clarify that the aim of the initiative would be to reduce the 
excessive  exposures  to  a  level  where  the  “substantial”  systemic  importance,  as 
identified  by  ESMA  in  its  report,  achieves  a  level  where  the  framework  set  out  in 
EMIR  to  manage  risks  from  third-country  CCPs  is  sufficient  to  preserve  the  EU’s 
financial stability.  

 

 

In  Section  6  and  Annex  6,  the  options  of  global  coordination  and  a  permanent 
equivalence decision for UK CCPs were identified and discarded. 

In Section 7, and in particular in Section 7.2.2, the options were specified to further 
clarify  how  they  would  be  implemented  in  Regulation  and  how  they  would  be 
monitored by the EU institutions. 

4. Evidence, sources and quality 

70 

 
Evidence used in the impact assessment came from a variety of sources, including:  

•  Replies  by  stakeholders  to  a  targeted  consultation  which  ran  from  8  February 
2022  to  22  March  2022to  obtain  feedback  on  the  review  of  the  central  clearing 
framework in the EU.  It was decided that the consultation should be targeted as 
the questions focused on a very specific and rather technical area. 71 stakeholders 
responded  to  the  targeted  consultation  via  the  online  form  while  some 
confidential responses were also submitted via email. 

  ESMA’s  Report  under  Article  25(2)c  of  EMIR  submitted  to  the  Commission  in 
December 2021162; the report also took into account answers to ESMA’s surveys 
and data collection exercises from CCPs and clearing participants; 

  ESRB’s  response  to  ESMA’s  consultation  under  Article  25.2c  EMIR,  issued  in 

December 2021163; 

  Meeting with Member States’ experts on 30 March 2022 and 16 June 2022;  

  Meetings of the Financial Services Committee on 2 February and 16 March 2022; 

  Meeting of the Economic and Financial Committee on 29 March 2022; 

  Meeting with Members of the European Parliament on 4 May; 

  Bilateral  meetings  with  stakeholders  as  well  as  [confidential]  information 

received from a wide range of stakeholders; 

  Bank for International Settlement statistics; 

  CEPS, 2021, ”Setting EU CCP policy – much more than meets the eye” 

  ClarusFT database 

162  ESMA report on UK CCPs, 2021 (see footnote 9 above). 
163  See  ESRB  response  to  the  European  Commission  targeted  consultation  on  the  review  of  the  central 

clearing framework in the EU, 22 March 2022, see footnote 32. 

71 

 
 
 
                                                           
ANNEX 2: STAKEHOLDER CONSULTATION 

This  annex  outlines  the  consultation  strategy  followed  to  inform  key  elements  of  the 
impact  assessment.  It  provides  an  overview  of  the  input  received  from  stakeholders  in 
preparation  of  this  initiative  (section  1).  In  addition,  it:  outlines  the  feedback  received 
from stakeholders via the targeted consultation on the clearing strategy in the EU (section 
2);  provides  an  overview  of  ESMA’s  assessment  report  under  Article  25(2c)  of  EMIR 
(section  3);  includes  an  overview  of  the  exchange  of  views  with  representatives  of 
Member States, of EU bodies and authorities, during the meeting of the Derivatives and 
Market  Infrastructures  Member  States  Working  Group,  which  took  place  on  30  March 
2022  and  15  July  2021  (section  4)  and  finally  summarises  the  only  response  received 
from the Call for Evidence (section 5). 

1.  Overview of the consultation strategy 

Stakeholder consultation took different forms, including:  

  A Commission targeted consultation between 8 February and 22 March 2022164; 

  A Commission Call for Evidence between 8 February and 8 March 2022165; 

  Consultations  of  stakeholders  through  the  Working  Group  on  the  opportunities 
and challenges of transferring derivatives from the UK to the EU, in the first half 
of 2021 including several stakeholder outreach meetings in February, March and 
June 2021; 

  Meeting with Members of the European Parliament on 4 May as well as bilateral 

meetings subsequently; 

  Meeting with Member States’ experts on 30 March 2022166 and 16 June 2022167;  

  Meetings of the Financial Services Committee on 2 February and 16 March 2022; 

  Meetings  of  the  Economic  and  Financial  Committee  on  18  February  and  29 

March 2022; 

  Bilateral  meetings  with  stakeholders  as  well  as  [confidential]  information 

received from a wide range of stakeholders. 

The main messages of this consultative process were: 

  Work  starting  in  2021  showed  that  improving  the  attractiveness  of  clearing, 
encouraging  the  development  of  EU  infrastructures,  and  the  supervisory 
arrangements in the EU will take time.  

  A variety of measures was identified that could help improve the attractiveness of 
EU CCPs and clearing activities as well as ensure that their risks are appropriately 
managed and supervised. 

164  finance-consultations-2022-central-clearing-review (europa.eu)  
165  https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/13378-Derivatives-clearing-

Review-of-the-European-Market-Infrastructure-Regulation_en  

166  See 

minutes 

at: 

https://ec.europa.eu/transparency/expert-groups-

register/screen/meetings/consult?lang=en&meetingId=45435&fromExpertGroups=false  

167  See 

at: 
register/screen/meetings/consult?lang=en&meetingId=45836&fromExpertGroups=false 

minutes 

https://ec.europa.eu/transparency/expert-groups-

72 

 
                                                           
  These measures  are not  only in  the  remit  of the  Commission  and co-legislators, 
but  also  could  potentially  require  contributions  from  the  ECB,  national  central 
banks, ESAs, national supervisory authorities, CCPs and banks.  

  The consultation showed that market participants generally prefer a market driven 
approach  to  regulatory  measures,  to  minimise  costs  and  for  EU  market 
participants to remain competitive internationally. 

  Nevertheless,  regulatory  measures  were supported to  a certain  extent, especially 
when  allowing  for  a  faster  approval  process  for  CCPs’  new  products  and 
services168. 

Measures deemed useful to enhance EU CCP’s attractiveness were: maintaining an 
active  account  with  an  EU  CCP,  measures  to  facilitate  expanding  services  by  EU 
CCPs,  broadening  the  scope  of  clearing  participants,  amending  hedge  accounting 
rules and enhancing funding and liquidity management conditions for EU CCPs. 

2.  Targeted consultation on the review of the central clearing framework in the EU 

Purpose and timing of the targeted consultation 

The  Commission  launched  a  targeted  consultation  seeking  views  from  stakeholders  on 
the  review  of  the  Central  Clearing  Framework  in  the  European  Union.  A  targeted 
consultation was chosen as the questions focused on a very specific and rather technical 
area. The feedback period ran from 8 February 2022 to 22 March 2022. The consultation 
aimed  at  receiving  relevant  information  for  an  impact  assessment  as  well  as  to  help 
determine  how  best  to  improve  the  attractiveness  of  EU  clearing  markets  and  the 
robustness of EU CCP supervision. DG FISMA services currently envisage a legislative 
proposal in the second half of 2022. 

168  Rather no/limited support regarding higher capital requirements in the CRR  for exposures to Tier 2 non- 
EU CCPs, exposure reduction targets toward specific Tier 2 non- EU CCPs, an obligation to clear in the 
EU and macroprudential tools. 

73 

 
 
                                                           
OVERVIEW OF RESPONDENTS 

71 participants responded to the targeted consultation via the website. The responses are 
summarised  in  this  feedback  statement.  Additional  responses  were  received  only  by 
email.  The  latter  are  treated  as  confidential  and  are  therefore  not  mentioned  in  the 
information below.  

Responses  were  received  from  different  stakeholders  that  can  be  grouped  into  wider 
categories mainly representing the banking industry, market infrastructure operators (e.g., 
CCPs,  CSDs,  stock  exchanges),  investment  funds  and  pensions  providors169.  However, 
around 35% of the respondents indicated an ‘other’ field of activity, of which 44% were 
from  the  energy  industry  and  20%  multilateral  development  banks.  In  total,  77%  of 
respondents  were  companies  or  business  associations.  It  is  also  worth  noting,  that  11 
public  authorities170  from  seven  Member  States  (France,  Czech  Republic,  Poland, 
Denmark,  Netherlands,  Spain,  Sweden)  replied171.  No  consumer  organisation  or  citizen 
responded to the targeted consultation. Around 58% of the replies came from respondents 
in  the  EU  or  in  the  EEA  and  14%  from  respondents  outside  the  EU/EEA.  28%  of 
respondents wanted to stay anonymous regarding their country of origin. 

Figure 1: Participation per category of 
stakeholder

Figure 2: Country of origin 
of respondents

13%

10%

31%

46%

Business
association

Company/busin
ess organisation

Other

Public authority

28%

14%

58%

Inside
EU/EEA

Outside
EU/EEA

Anonymous

169  Multiple answers to field of activity were possible. Therefore, no percentages are indicated. 
170  For  the  ease  of  reference,  this  summary  refers  to  public  authorities,  also  when  governments  and  central 

banks provided replies. 

171  Of  which  two  French  authorities  provided  a  joint  reply  as  well  as  two  Dutch  authorities.  For  the 
consistency with the published excel overview of responses, they are counted as one public authority each. 

74 

 
  
 
 
 
 
 
 
 
 
 
 
                                                           
SUMMARY OF KEY MESSAGES 

In  total  71  stakeholders  replied  to  the  consultation  via  the  Commission  website. 
However,  the  number  of  responses  per  question  varied  considerably.  There  was  no 
question  with  more  than  36  responses.  To  some  questions,  only  very  few  or  even  no 
replies were received. Nevertheless, taking into account that several business associations 
answered  expressing  the  views  of  their  members,  the  feedback  provides  valuable 
insights. However, it should not be seen as fully representative. 

This  section  aims  to  provide  a  summary  of  responses  received  to  the  targeted 
consultation, including statistical information. Each sub-section contains a brief synopsis 
of the responses received for a specific topic, while the analysis does not aim to give an 
overview of responses for each individual question. The percentages expressed exclude 
those who did not answer the questions and those who chose the option “don’t know/ no 
opinion”. 

MOST EFFECTIVE MEASURES IN CONTRIBUTING TO THE OBJECTIVES  

The first question of the consultation aimed to get an overview of stakeholders’ views on 
the  effectiveness  of  a  range  of  possible  options  which  could  support  enhancing  the 
attractiveness  of  clearing  at  EU  CCPs. Respondents  considered  some  measures  (rather) 
effective, notably measures to ‘expand the services by EU CCPs’, ‘broadening the scope 
of clearing participants’, ‘maintaining an active account with an EU CCP’, ‘harmonising 
hedge  accounting  rules’,  ‘improving  payment  and  settlement  arrangements  for  central 
clearing’ and ‘enhancing funding and liquidity management conditions’. 

At  the  same  time,  respondents  found  other  measures  to  be  (rather)  ineffective,  notably 
‘higher  capital  requirements  in  the  CRR  for  exposures  to  Tier  2  non-  EU  CCPs172’,  an 
‘exposure reduction targets toward specific Tier 2 non- EU CCPs’, an ‘obligation to clear 
in the EU’ and ‘macroprudential tools’.173 The following sections provide more details on 
respondents’ feedback. 

SCOPE OF CLEARING PARTICIPANTS AND PRODUCTS CLEARED 

Clearing obligation for Pension Scheme Arrangements (PSAs) 

The consultation asked what measures would be needed to make clearing in the EU more 
attractive for Pension Scheme Arrangements. Two public authorities believed PSAs face 
similar  challenges  as  other  participants  and  expressed  support  for  ending  their  clearing 
exemption while highlighting – as did the vast majority of respondents (82%, i.e. 28 out 
of  34  respondents)  -  that  PSAs  need  access  to  liquidity  in  order  to  be  able  to  provide 
margin,  in  particular  in  adverse  market  situations.  56%  (19  out  of  34  respondents)  of 
respondents  suggested  that  PSAs  should  get  access  to  central  bank-backed  facilities  to 
support their liquidity in times of stress. Views were split regarding the question whether 
specific regulatory initiatives or improvements to be brought about by the market itself 
are most suited to facilitate central clearing for PSAs. 

172  Under EMIR, non-EU CCPs are tiered depending on their systemic importance to the financial stability of 
the  EU and its Member States. It differentiates between  non-systemic  CCPs (Tier 1 non- EU CCPs) and 
systemically important CCPs (Tier 2 non-EU CCPs). 

173  On  the  effectiveness  of  some  measures,  views  were  split,  notably  the  ‘use  of  post-trade  risk  reduction 
services’, ‘fair, reasonable, non-discriminatory and transparent (FRANDT) commercial terms for clearing 
services’, ‘segregated default funds’, ‘interoperability’ and ‘broadening the scope of products cleared’. 

75 

 
                                                           
More clearing by private entities that do not access CCPs directly 

The clearing obligation under EMIR applies to a broad range of entities, most of which 
access  the  services  of  CCPs  through  a  clearing  member174.  The  consultation  aimed  to 
gather a better understanding of their clearing activity and explore possible initiatives to 
encourage them to clear in EU CCPs. Only few stakeholders replied to the questions of 
this section (i.e. 13 respondents in total answered to at least one of the questions in this 
section). Two respondents (corporates) said that they do not clear voluntarily because of 
unpredictable  margin  calls  which  do  not  relate  to  their  commercial  (i.e.,  non-financial) 
activity.  A  business  association  representing  corporates  added  that  corporates  use 
derivatives to  manage specific  risks linked to  their business  operations and pointed out 
that many products which meet the standardisation criteria to be cleared in CCPs do not 
meet  their  specific  needs  in  terms  of  maturity  and  flexibility.  Moreover,  three  other 
respondents  (with  their  field  of  activity  in  investment  management,  pension  provisions 
and  market  making)  highlighted  that  voluntary  clearing  of  certain  products  can 
accomplish  pricing  and  margin  netting  advantages  as  well  as  operational  efficiencies, 
especially if already other products are cleared. Many respondents, i.e. 11 out of 12, were 
in  favour  of  further  incentives  to  facilitate  client  clearing  and  suggested  different 
measures, e.g.  a  central  bank backed  collateral  transformation  service that  would allow 
firms  to  convert  high  quality  collateral  into  cash  for  variation  margin  calls  in  adverse 
market situations, complementing the offer currently provided by commercial banks. 

Encourage clearing by public entities 

The  consultation  asked  to  what  extent  clearing  by  public  entities  would  add  to  the 
attractiveness  of  central  clearing  in  the  EU.  36  respondents,  including  6  from  third 
countries provided a reply to at least one question in this section. In general, stakeholders 
agreed that central clearing of public entities would provide more liquidity and add to the 
attractiveness  of  central  clearing.  However,  views  on  how  central  clearing  by  public 
entities could and should be enhanced, differed. 

Member  States’  public  authorities  were  generally  in  favour  of  public  entities  centrally 
clearing  if  it  remains  voluntary175.  The  same  holds  true  for  most  public  entities176  that 
would  be  concerned  by  a  potential  clearing  obligation.  They  argued  that  market  needs 
should prevail and  – because of public  entities’ special mandate and status  -  a clearing 
obligation  may  bring  additional  risks  and  higher  costs  while  not  providing  additional 
value. Moreover, due to their special mandate, public entities may be unable to assume 
liability  for  default  fund  contributions  requiring  specific  conditions  for  public  entities’ 
access to central clearing which could increase risks for financial stability. 

Other  stakeholders,  notably  banks,  securities  markets  associations  and  pension  scheme 
arrangements, expressed the view that central clearing of public entities would not only 
improve  liquidity  but  also  give  a  clear  and  strong  signal  to  the  market  about  the 
confidence  that  EU  public  actors  have  in  the  robustness  and  reliability  of  the  EU 
derivatives clearing eco-system. They underlined that a successful EU onshoring of the 
clearing  of  euro-denominated  derivatives  implies  public  support  and  incentives.  Some 

174  Among the few respondents, 8 out of 11 indicated to clear derivatives as clients of clearing members. 
175  5 public authorities replied of which 3 mentioned explicitly that it should remain voluntary while one said 
that the impact would probably be limited and one argued that it would add to the attractiveness but that 
first the conditions would need to be assessed properly. 

176   5 replied to the first question of the public entity section of which 4 expressed explicitly being in favour of 

central clearing to remain voluntary.  

76 

 
                                                           
suggested making central clearing mandatory depending on the size and mandate of the 
public entity. Other highlighted also that public entities may be unable to assume liability 
for  default  fund  contributions  and  specific  conditions  for  their  participation  may  be 
needed to be considered. 

CCPs and market infrastructures also pointed to the benefits of public entities to centrally 
clear. Most, i.e. 5 out of 7 respondents, highlighted an increase in liquidity and some177 
argued  further  that  it  would  diversify  clearing,  give  a  strong  signal  to  the  market  and 
contribute to harmonisation and consolidation and – as a consequence - improve financial 
stability. 

Broadening the product scope of the clearing obligation 

The majority of respondents (83%, i.e. 25 out of 30 respondents) did not see the need to 
extend  the  range  of  products  subject  to  the  clearing  obligation.  Market  participants 
expressed the view that the clearing obligation should only apply to those products that 
are  liquid  and  standardised  enough.  CCPs  however  were  in  favour  of  an  wider  scope, 
mentioning  e.g.  foreign  exchange  and  crypto  derivatives.  Moreover,  the  majority  of 
respondents  (83%,  i.e.  15  out  of  18  respondents)  said  that  there  are  instances  where 
participants would choose to trade bilaterally if products are available for clearing but not 
subject to the clearing obligation. Reasons included, for instance, costs, operational and 
legal readiness and the counterparty’s ability to clear. 

MEASURES TOWARDS MARKET PARTICIPANTS 

Reflecting systemic importance and associated risks of Tier 2 non-EU CCPs 

Stakeholders were asked how the greater systemic importance and the associated risks of 
Tier  2  non-EU  CCPs178  could  be  reflected  in  the  context  of  banking  rules  and 
supervision.  The  majority  of  respondents  (70%,  i.e.  19  out  of  27  respondents)  was 
against imposing higher capital requirements on Tier2 CCPs. They argued that this could 
have  negative  effects  on  the  international  competitiveness  of  EU  players  due  to  the 
increased costs. Some respondents believed that, should such a measure be considered, it 
should  only  target  the  exposures  to  the  services  of  the  non-EU  CCPs  which  were 
assessed as substantially systemic and/or certain  activities should possibly be exempted 
from the calculation. Others expressed support for higher capital requirements under the 
condition  that  they  would  be  combined  with  other  measures  such  as  active  account 
requirements and development of offer. The majority of respondents (80%, i.e. 16 out of 
20  respondents)  sees  a  risk  of  participants  relocating  clearing  to  other  non-EU 
jurisdictions  if  a  higher  capital  requirement  on  excessive  exposures  to  T2  CCPs  is 
imposed. 

Macroprudential tools 

Most  respondents  (79%,  i.e.  15  out  of  19  respondents)  expressed  a  negative  opinion 
regarding the idea to introduce macroprudential tools to address the over-reliance on Tier 
2 CCPs. Moreover, all respondents (i.e. 14) were against macroprudential buffers. As for 
potential  higher  capital  requirements,  respondents  highlighted  the  potential  negative 
consequences for EU players’ international competitiveness due to increased costs. 

177  2 highlighted diversification and 2 harmonisation as a benefit. 
178  Footnote 172 provides an explanation of Tier 1 and Tier 2 non-EU CCPs. 

77 

 
                                                           
Setting exposure reduction targets 

Views were mixed regarding the question whether exposure reduction targets should be 
set in order to reduce excessive reliance on Tier 2 CCPs. Also, views on how such targets 
could  be  set  differed,  including  on  the  timeline,  calculation  and  appliance  level. 
Suggestions included a phasing-in of targets, applying targets only to systemic services 
as well as setting the target at clearing member level and/or potentially client level. 

Level playing field, obligation to clear in the EU and facilitate transfer of contracts from 

outside the EU 

Overall,  when  it  comes  to  a  possible  obligation  to  clear  specific  trades  in  the  EU, 
facilitating the transfer of contracts  from  outside  the EU  and level  playing  field  issues, 
respondents  were  against  mandatory  regulatory  measures  and  in  favour  of  voluntary 
market-driven  solutions  which  take  into  account  client  demand:  The  vast  majority  of 
respondents (92%, i.e. 23 out of 25 respondents) was against an amendment of Article 5 
of EMIR resulting in a clearing obligation for new contracts which could only be fulfilled 
through  authorised  EU  CCPs  and/or  recognised  Tier  1  CCPs.  All  respondents  (i.e.  12) 
were  against  a  mandatory  clearing  obligation  in  EU  CCPs  for  legacy  trades  and  most 
(80%,  i.e.  8  out  of  10  respondents)  also  against  a  mandatory  compression  exercise  on 
legacy  trades.  Moreover,  the  majority  of  stakeholders  (93%,  i.e.  14  out  of  15 
respondents)  was  in  favour  of  a  permanent  exemption  for  a  novation  of  legacy  trades 
without triggering any EMIR requirements. Reasons for all the above mentioned were – 
as for macroprudential tools - negative consequences on competitiveness due to increased 
costs. 

Active account 

Only a few respondents (15%, i.e. 3 out of 20 respondents) expressed the view that active 
accounts  were not  a reasonable measure. Views  differed however considerably on how 
an  active  account  should  be  defined.  Some  stakeholders  (including  market  participants 
and a public authority) noted that an active account should only be a back-up solution for 
occasional  use  in  order  to  test  the  account’s  smooth  functioning.  Other  stakeholders 
(including  2  EU  CCPs,  market  participants  and  2  public  authorities)  suggested  that  an 
active  account  should  have  requirements  regarding  the  level  of  its  use.  Suggestions 
varied  considerably  regarding  the  nature  of  these  requirements,  ranging  from  a 
discretionary  ‘reasonable’  frequency  of  use  to  fixed  thresholds  as  well  as  having 
mandatory clearing in active accounts at EU CCPs for certain products. 

Hedge accounting 

All  respondents  answering  (i.e.  10)  were  in  favour  of  a  harmonisation  of  the  hedge 
accounting rules across Member States in order to facilitate a reduction of exposures to 
Tier  2  non-EU  CCPs.  Two  respondents  pointed  out  that  accounting  should  reflect  the 
purpose  of  the  transactions  carried  out,  as  well  as  some  more  formal  aspects,  but  not 
unduly  hinder  transactions.  At  the  same  time,  two  other  respondents  stated  that  a 
harmonisation would be a helpful but not a substantial contribution to enhance clearing in 
EU  CCPs.  Another  two  respondents  highlighted  that  in  any  case  accounting  arbitrage 
should be avoided and a harmonisation could benefit the Capital Markets Union. 

78 

 
Transactions resulting from post-trade risk reduction 
Views  differed  regarding  the  effects  of  post-trade-risk-reduction179.  While  banks  and 
trade  associations  thought  that  multilateral  compression  is  effective  in  reducing  risks 
(also in the uncleared space), financial market infrastructures highlighted that post-trade-
risk-reduction at CCPs already takes place and may well reduce certain risks. However, 
they  stressed  that  it  is  important  to  note  that  compression  does  not  reduce  the  risk 
exposure but only results in a reduction of the notional exposure held. Moreover, several 
respondents  pointed  to  the  importance  of  network  effects  as  post-trade-risk-reduction 
measures are more effective in large CCPs. 

Fair, reasonable, non-discriminatory and transparent  (FRANDT) commercial terms for 
clearing services 
The majority of respondents (87%180, i.e. 13 out of 15 respondents) were against further 
regulation of the provision of client clearing services, which offer clients consistently the 
option  to  clear  at  least  at  one  EU  CCP  or  be  incentivised  to  do  so.  They  argued  that 
public  intervention  and  more  obligations  and  constraints  on  entities  offering  clearing 
services may make it less attractive from a cost point of view to offer clearing services to 
clients with limited trading activity and therefore unintentionally limit access to clearing 
for end clients. 

MEASURES TOWARDS CCPs 

Measures to expand the offer by EU CCPs 

The vast majority of stakeholders (90%, i.e. 20 out of 22 respondents) was positive as to 
the idea of improving the ability of EU CCPs to be competitive by expanding their offer 
and speeding up the approval process for new products. Respondents (mainly CCPs, but 
also  two business  associations, a central  bank and a national  supervisory  authority of  a 
Member State) highlighted that in particular the long EMIR approval process to launch 
new  products  had  negative  consequences  on  EU  CCPs’  competitiveness.  They 
considered the existing governance as well as the requested documentation too complex 
and pointed to a lack of clear timelines. Three public authorities agreed that there is room 
for  a  faster  approval  process  for  certain  initiatives.  Other  respondents,  notably  banks, 
agreed  that  it  is  crucial  that  EU  CCPs  are  able  to  increase  their  offer  to  make  it 
comparable to the offer of non-EU CCPs. 

Payment/settlement arrangements for central clearing 

The majority of respondents (75%, mainly banks and CCPs but also a public authority) 
stated that it would be beneficial to extend the operating hours for payment arrangements 
available  in  the  EU  (Target2181).  They  argued  that  it  would  ease  the  process  of  margin 
calls and payments in EUR, reducing dependence on USD liquidity. Currently, EU CCPs 
are not able to process EUR payments at a late hour (because of Target2 closing times) 
and  need  to  switch  to  USD  to  meet  margin  calls.  According  to  respondents,  EU  CCPs 
therefore  depend  on  the  repo  market  and  the  capacity  of  the  CCPs’  counterparties  to 
absorb such liquidity in exchange for high-quality collateral. 

179 16 respondents expressed a view. 
180 Contrary to this specific section, views regarding FRANDT were split in the introductory question. This is 
due  to  the  fact  that  fewer  respondents  replied  to  the  specific  FRANDT  section  than  to  the  introductory 
question and those responding were rather the ones that considered it an inefficient measure. 
181 TARGET2 is the real-time gross settlement system owned and operated by the Eurosystem. 

79 

 
                                                           
Segregated default funds 

Under  EMIR,  CCPs  can  have  a  single  or  multiple  default  funds.  Some  market 
participants  argued  that  multiple  default  funds  are  an  attractive  feature,  as  they  can 
contribute to  avoiding contagion  and thus  reduce financial  stability risks. However, the 
majority  of  stakeholders  (82%,  i.e.  14  out  of  17  respondents)  did  not  believe  that 
segregation  should  be  imposed  by  law  as  they  do  not  deem  the  segregation  model 
superior  per  se  while  it  could  imply  more  clearing  costs.  Respondents  (a  supervisory 
authority  and  a  CCP)  expressed  the  view  that  legislation  should  not  favour  one  model 
over the other since both  types  of models  are subject  to  supervisory approval  and have 
advantages in different scenarios, depending on the client structure and products cleared. 
Respondents  in  favour  of  mandatory  segregation  (a  bank  and  a  market  infrastructure 
group) believed that the segregated model was good for risk management purposes and 
reducing contagion risk. 

Interoperability 

Regarding interoperability, views were generally mixed. Around half of the respondents 
(8 out of 14 respondents) indicated that EMIR should cover interoperability arrangements 
for  derivatives,  while  the  remaining  respondents  had  the  opposite  view.  Respondents 
(including  public  authorities,  CCPs,  clearing  members)  mentioned  as  advantages  that 
interoperability arrangements promote liquidity, reduce fragmentation and lower costs of 
clearing.  However,  other  respondents  (also  including  public  authorities,  CCPs,  clearing 
members) pointed out that they also pose risks which have to be taken into account and 
thought that interoperability arrangements could in general lead to higher clearing costs. 

MONITORING  PROGRESS  TOWARDS  REDUCED  RELIANCE  OF  EU 

PARTICIPANTS ON TIER 2 CCPS 

Views were mixed regarding the question as to which EU market participants should be 
primarily targeted in a central data collection exercise to ensure a complete risk picture of 
exposures to Tier 2 CCPs. Some respondents said that EU clearing members and specific 
clients  should  be  targeted,  others  expressed  the  view  that  only  EU  clearing  members 
should be part of the data collection and yet others had again different suggestions such 
as including all counterparties subject to the clearing obligation. Even though views were 
split about the level at which a data analysis should take place, most respondents (market 
participants, a CCP and  a public authority) agreed that data which  are  already reported 
under EMIR should be used for the monitoring process. They pointed out that ESMA has 
all  necessary  information  available  and  could  analyse  them  for  clearing  members  and 
clients,  as  well  as  for  any  type  of  product.  Moreover,  some  stakeholders  argued  that  a 
data  collection  should  focus  on  systemic  risk  aspects  and  therefore  only  cover  certain 
derivative asset classes. 

SUPERVISION OF CCPS 

Regarding the benefits of a stronger EU supervision, few responses (i.e. 9) were received 
and views were split. According to stakeholders (including a public authority and a non-
EU  CCP),  benefits  of  a  stronger  EU  supervision  could  be  uniformity  of  supervisory 
practices  and  outcomes.  Respondents  were  in  favour  of  a  faster  approval  process  for 
launching  new  products  (see  also  section  3.4.1  ‘Measures  to  expand  the  offer  by  EU 
CCPs’). Those against a stronger EU supervision (two public authorities, an EU CCP, a 
central bank) argued that it would not reduce costs, as costs were a result of the EMIR 
regulatory  requirements  and  therefore  unrelated  to  the  level  at  which  supervision  is 
exercised. In addition, it was mentioned that ESMA may not be best placed to deal with 

80 

 
interpretation of national law. Overall, CCPs were of the view that regulatory compliance 
costs  were  high  and  procedures  time  consuming  due  to  the  current  structure  of  the 
authorisation process, including duplicative sequencing of authorisations by the national 
competent authority and ESMA and the engagement of the relevant EMIR College. 

EMIR AND OTHER REGULATIONS/DIRECTIVES 

Respondents provided detailed views on the interaction with other regulations/directives 
(MiFID,  CRR,  CRD,  UCITS,  AIFMD2,  MMFR,  Solvency),  however  on  different 
aspects, not allowing for an extrapolation or generalisation. Examples of suggestions are 
the  following:  an  industry  association  representing  European  CCPs,  and  an  EU  CCP, 
suggested amending the Solvency II regulatory framework, explicitly adopting beneficial 
risk weight for CCP cleared transactions cleared directly with CCPs similar to the CRR. 
The same stakeholders suggested amending Article 52 of the UCITS Directive to exclude 
CCP  cleared  transactions  from  counterparty  exposure  and  diversification  requirements, 
reflecting  the  risk  reducing  nature  and  systemic  importance  of  CCPs.  An  industry 
association representing the funds industry of a Member State and an industry association 
representing  the  asset  management  and  investment  fund  industry  in  another  Member 
State called for an amendment of the ESMA Guidelines on ETFs and other UCITS issues 
so that UCITS can use the cash obtained via a repo transaction for the collateralisation of 
CCP  clearing  eligible  OTC  derivatives.  An  association  representing  a  banking  industry 
from  a  Member  State  was  in  favour  of  stronger  protection  for  client  clearing 
arrangements  through  the  Settlement  Finality  Directive  and  the  Financial  Collateral 
Directive. 

OTHER ISSUES 

The  consultation  asked  for  possible  other  matters  that  could  potentially  contribute  to 
enhancing the attractiveness and efficiency of EU CCPs and clearing services. 

Blockchain and distributed ledger technology 

The  consultation  enquired  whether  blockchain  and  DLT  could  be  used  in  the  field  of 
clearing to improve the attractiveness and efficiency of EU CCPs and clearing markets. 
In total  13 stakeholders provided a reply, of which 11 saw benefits.  However, they did 
not express the need to amend EMIR with regard to blockchain or DLT, but highlighted 
instead  the  potential  benefits  (e.g.  its  use  for  the  reconciliation  process  or  reporting  of 
data) as well as limitations of its use for CCPs (e.g. not suited for multilateral netting or 
the default risk management). 

Other issues 

An  issue  raised  by  several  stakeholders  referred  to  the  framework  for  non-EU  CCPs. 
While  a  national  authority  criticised  the  fact  that  the  consultation  did  not  include  any 
questions  in  this  regard,  a non-EU CCP stressed  the importance of  continued access  of 
non-EU  CCPs  to  the  EU  market  based  on  a  transparent,  predictable,  proportionate  and 
risk-based  approach.  An  industry  association  representing  the  banking  industry  from  a 
Member  State  suggested  requiring  non-EU  CCPs  to  accept  EUR  as  a  means  to  pay 
margin  calls  in  order  to  reduce  the  risk  that  EU  clearing  members  face  regarding 
exposures to non-EU CCPs. Other issues raised were e.g. ‘access to liquidity’ (two CCPs 
highlighted  the  need  of  increasing  CCPs’  access  to  central  bank  liquidity  facilities  in 
different  EU  currencies)  and  ‘non-cash  collateral’  (an  industry  association  representing 
European  CCPs  suggested  that  authorities  consider  the  possibility  of  using  non-cash 

81 

 
collateral such as non-fully backed bank guarantees as collateral to benefit non-financial 
users in particular). 

3.  An overview of ESMA’s assessment report under Article 25(2c) of EMIR  

During  2021,  in  accordance  with  Article  24a(10)  of  EMIR,  ESMA  undertook  a 
comprehensive  review  of  the  systemic  importance  of  UK  CCPs.  The  results  of  this 
review were published in the 2021 ESMA report on UK CCPs on16 December 2021182.  

As  part  of  this  analysis,  ESMA  reached  out  to  a  wide  range  of  stakeholders,  including 
public  authorities  and  market  participants  for  input  into  its  assessment  to  ensure  a 
comprehensive  review.  In  particular,  ESMA:  a)  asked  LCH  Ltd  and  ICEU  to  provide 
data  and  information  for  the  assessment  of  their  systemic  importance  under  the 
methodology;  b) invited  relevant  market  participants,  including a representative sample 
of  EU  clearing  members,  clients  and  trading  venues  accessing  LCH  Ltd  and  ICEU,  as 
well as EU CCPs, to  respond to  tailored data requests;  c) engaged with  relevant  public 
authorities,  including  the  ESRB,  the  relevant  central  banks  of  issue,  the  European 
Banking Authority (EBA), the European Insurance and Occupational Pensions Authority 
(EIOPA),  the  Single  Supervisory  Mechanism  (SSM),  the  Single  Resolution  Board 
(SRB), and the Bank of England (BoE). In some cases, tailored data requests were  also 
sent. The reference period was June 2020 to June 2021. 

On 15 July 2021, ESMA organised two roundtables with representatives of EU clearing 
members and clients of EU clearing members to provide ESMA with the user perspective 
on a) the systemic risk posed by Tier 2 CCPs and b) the costs, benefits, and consequences 
of a potential decision not to recognise the CCP to provide certain clearing services. In 
addition,  ESMA  notes  that  engagement  with  the  stakeholders  continued  throughout  the 
assessment  process  through  an  open  dialogue  with  the  Chair  and  the  Independent 
Members  of  the  CCP  SC,  and  ESMA  staff.  Finally,  ESMA  notes  in  its  report  that  the 
CCP Supervisory Committee and ESMA Board of Supervisors were involved throughout 
the  assessment  process  through  presentations,  general  information  sharing,  and 
discussions at regular and dedicated meetings. 

The ESMA Report notes that whilst the analysis suggests that LCH SwapClear and ICEU 
services  on  CDS  and  STIR  could  be  candidates  services  of  substantial  systemic 
importance for the Union, also an assessment that the compliance with the conditions for 
the recognition of Tier 2 CCPs would not sufficiently address financial stability risks to 
the Union or one or more of its Member States should be undertaken.  

ESMA notes that whilst the conditions for the recognition of Tier 2 CCPs aim to ensure 
that such CCPs comply with the requirements under EMIR on an ongoing basis so that, 
in  principle,  the  risks  stemming  from  services  provided  by  a  Tier  2  CCP  would  be  the 
same  if  such  services  were  instead  to  be  provided  by  a  CCP  established  in  the  Union 
there  might  be  scenarios  where  the  formal  compliance  by  a  CCP  with  EMIR 
requirements, located in or outside of the Union, is by itself insufficient to fully mitigate 
the risks that certain services may pose to the financial stability of the Union or of one or 
more  of  its  Member  States.  The  situations  identified  by  ESMA  includes  cases  where 
CCPs may adopt discretionary decisions, under business-as-usual or crisis situations, on 
whether,  when  and  how  to  adopt  certain  risk  management  measures  which  may  have 
broader systemic implications. Moreover, EMIR requirements to be met by CCPs do not 
address financial stability risks resulting from recovery and resolution scenarios. 

182  See 2021 ESMA report on UK CCPs (see footnote 9 above). 

82 

 
                                                           
This scenario analysis highlights in the ESMA report how LCH SwapClear could create 
additional  risks  to  EU  financial  stability  in  business  as  usual,  crisis  management,  and 
recovery and resolution circumstances, due to its location outside the EU.  

On  the  scenarios  ESMA  had  established  3  business  as  usual  scenarios  that  were 
considered in  detail. The first  scenario concerns  LCH  Ltd  and  ICEU limiting access  of 
EU trading venues to its clearing services as both LCH Ltd or ICEU have discretionary 
powers  for  restricting,  suspending,  or  terminating  access  to  EU.  In  this  respect,  ESMA 
notes that, Tier 2 CCPs currently do not have to comply with EMIR provisions on open 
access  for  trading  venues  for  OTC  derivatives  under  Article  7  and  8  of  EMIR.  The 
second business as usual scenario concerns a decision by LCH Ltd or ICEU to terminate 
membership of EU clearing members as the CCP has discretionary powers for restricting, 
suspending, or terminating access to EU clearing members altogether. The final business 
as usual scenario concerns operational disruptions at LCH Ltd or ICEU stemming from 
diverse root causes including in the LCH Ltd assessment operational disruptions that may 
temporarily prevent EU trading venues and clearing members from clearing interest rate 
derivatives subject to the clearing obligation and other interest rate derivatives and where 
financial stability could be affected if the service were not recovered promptly. 

ESMA  notes  that  a  CCP  has  discretionary  powers  under  stressed  market  conditions  to 
take actions that may impact the financial stability of the Union or of one or more of its 
Member States  and that such actions could  conflict with  the coordinated actions of EU 
authorities and institutions to address the market stress and minimise any second-round 
effects. ESMA has identified several scenarios under crisis management (i.e., assuming 
market volatility), where Tier 2 CCPs therefore could pose a systemic risk to the Union 
or  one  or  more  of  its  Member  States.  Discretionary  powers  include:  i)  an  increase  in 
margin  requirements  on  EU  currency  IRDs;  ii)  increases  in  haircuts  on  EU  collateral 
(e.g., government bonds; iii) requests for additional margins from EU clearing members, 
based  on  internal  rating  models;  and  iv)  declarations  of  default  of  an  EU  clearing 
member, irrespective of recovery and resolution measures.  

Whilst  ESMA  notes  that  under  direct  supervision,  ESMA  shall  review  (and,  where 
needed, seek changes  to) the margin  and haircut policies and procedures as well as the 
internal  rating  models,  to  ensure  that  adjustments  are  implemented  when  due  in  an 
objective  and  non-discriminatory  manner,  in  compliance  with  EMIR  (including 
requirements on anti-procyclicality), ESMA has no ex-ante intervention powers vis-a-vis 
the  CCP  to  prevent  the  adoption  of  measures  that  are  detrimental  to  the  EU  financial 
stability  and  further  notes  that  ESMA  has  no  ex-ante  powers  to  oppose  a  supervisory 
intervention or action by the UK authorities relating to the discretionary risk management 
measures considered above, when that would negatively affect EU financial stability. 

Finally,  ESMA  has  assessed  the  scenario  of  recovery  and  resolution  of  LCH  Ltd  and 
ICEU,  where  several  scenarios  may  potentially  impact  EU  financial  stability.  ESMA 
notes that the impact of a recovery event may be disruptive for clearing members per se 
and that the recovery rule book is a contractual arrangement that can be adjusted at any 
time and ESMA has no supervisory mandate over the LCH Ltd or ICEU recovery plans 
and  that  the  recovery  plans  may  evolve  to  comply  with  new  requirements  in  the  UK. 
ESMA  further  notes  that  whilst  ESMA  and  other  relevant  EU  or  national  authorities 
participate in the global college and in crisis management group (CMG) for LCH Ltd and 
ICEU, neither the college nor the CMG adopt  decisions or opinions on the recovery or 
resolution plan, respectively and BoE is independent in reviewing the CCP recovery plan 
and defining its resolution strategy and resolution plan. In doing so, it mainly pursues the 
financial stability of the UK according to its mandate.  

83 

 
Furthermore, a failure of or a disruption to CCP could impact the functioning of money 
impact  financial  stability  and  monetary  policy 
markets  which  may  negatively 
implementation where negative implications have been identified for PLN and EUR for 
LCH Ltd Swap Clear.  

ESMA concludes that both LCH Ltd  and ICEU fulfil a critical function to EU financial 
markets,  and  the  broader  financial  system  and  this  creates  dependencies  of  the  EU  on 
LCH  Ltd  and  ICEU,  which  vary  per  segment  hence  based  on  the  characteristics  of  the 
clearing  service  provided.  The  analysis  of  scenarios  that  may  impact  EU  financial 
stability,  concludes  that  even  where  SwapClear  and  ICEU  are  in  full  compliance  with 
EMIR requirements, certain services of SwapClear and ICEU are of substantial systemic 
importance for the financial stability of the EU as a whole.  

The  assessment  concludes  that  the  SwapClear  service  is  of  substantial  systemic 
importance  for  the  financial  stability  of  the  EU  as  a  whole  in  relation  to  certain  EU 
currencies,  i.e.,  for  EUR  and  PLN.  Although  alternatives  to  LCH  Ltd  are  available 
(Eurex Clearing, CME Clear), these are currently expected to be able to take over LCH 
Ltd's  role  only  to  a  limited  extent  and  bilateral  clearing  will  also  not  be  possible  for 
products subject to a clearing obligation - and would not be a desirable outcome.  

The assessment further concludes, based on the characteristics of ICEU's CDS segment 
and a scenario analysis, that the CDS segment is of substantial systemic importance for 
the financial stability of the EU. The CDS segment has a significant market share in euro 
denominated  CDS,  which  includes  CDS  products  subject  to  the  clearing  obligation. 
Strong  dependencies  exist  with  the  largest  EU  active  clearing  members  and  liquidity 
exposures  are  also  high.  Even  though  the  potential  losses  are  sufficiently  covered  by 
capital in isolated events, EU clearing members would be subject to substantial pressures 
in the case of market-wide crises. Alternatives exist (notably US based ICC and France 
based LCH SA), but market depth is limited, and migration would be costly. 

Finally the assessment notes that for ICEU's F&O segment, the euro-denominated listed 
STIR  derivatives  are  also  considered  to  be  of  substantial  systemic  importance  for  the 
financial  stability  of  the  EU.  These  concern  important  instruments  for  monetary  policy 
for the euro area, including the Euribor futures, and as such are at the nexus of the EU 
financial  system.  Whilst  buffer  capacity  appears  to  be  sufficient,  it  cannot  be  safely 
assumed  that  the  buffers  will  be  available  during  a  crisis  scenario.  ICEU  is  basically  a 
monopolist  in  the  short-term  products.  Eurex  Clearing,  LCH  Ltd,  and  CME  also  offer 
interest rate derivatives, but not with the same maturities and underlying values. Finally, 
ICEU  is  the  only  CCP  to  have  access  to  the  trading  venue  of  reference  for  the  STIR 
products, which is ICE Futures Europe.  

The  ESMA  report  also  presents  a  technical  assessment  of  the  costs,  benefits,  and 
consequences of a decision not to recognise the CCP to provide certain clearing services 
or activities and finally ESMA presents its own conclusions by combining the outcome 
of the first part, whereby ESMA has concluded that certain of the services provided by 
LCH Ltd and ICEU that are to be considered substantially systemically important and the 
part  where  ESMA  is  requested  to  presents  the  costs,  benefits,  and  consequences  of  a 
decision not to recognise the CCP. 

4.  Meetings  of  the  Derivatives  and  Market  Infrastructures  Member  States 

Working Group 

The  Commission  conducted  several  meetings  with  Member  States,  stakeholders,  and 
MEPs.  In  particular,  in  March  2022,  the  Commission  held  a  Member  States’  Expert 
Group  meeting.  The  European  Parliament  Economic  and  Monetary  Affairs  Committee 

84 

 
secretariat,  the  ECB  and  ESMA  were  also  invited.  A  subsequent  meeting  was  held  in 
June  2022  to  consider  a  wide  range  of  policy  options  and  their  potential  impacts.  A 
summary  of  the  discussions  is  available  online  for  both  meetings183.  In  addition,  a 
meeting was held on 4 May 2022 with MEPs to present the preliminary findings from the 
targeted consultation and the next steps. The meeting summaries are the following: 

4.1. Meeting of Member States' Experts on 30 March 2022 

On  30  March  2022,  a  working  group  of  Member  States’  experts  met  by  means  of  a 
virtual conference to discuss ways to enhance clearing capacity in the EU and reduce the 
over-reliance on Tier 2 third-country central counterparties (CCPs) in the context of the 
clearing  strategy  announced  by  Commissioner  McGuinness  on  10  November  2021  and 
the  public  consultation  ran  by  the  Commission  from  8  February  2022  until  22  March 
2022. 

The  meeting  allowed  Commission  services  to  gather  the  views  of  Member  States,  the 
ECB, the ESRB, the SSM, the EBA, the EIOPA and ESMA. The aim was to inform the 
Commission’s  work  developing  its  strategy  on  clearing  following  the  statement  of 
Commissioner McGuinness on 10 November 2021 which is planned for later in 2022, to 
build  domestic  capacity  through  measures  to  make  the  EU  more  attractive  as  a 
competitive and cost-efficient clearing hub, and thus incentivise an expansion of central 
clearing  activities  in  the  EU,  and  strengthen  supervision,  including  a  stronger  role  for 
EU-level  supervision.  The  feedback  received  during  the  meeting  with  Member  States’ 
experts is summarised below. 

4.1.1.  Broadening the scope of the clearing obligation 

Commission  services  consulted  on  whether  this  could  be  achieved  by  broadening  the 
range of entities which would fall under a clearing obligation in 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 (EMIR), and/or by broadening 
the range of products to be centrally cleared.  

Very few Member States intervened on these aspects. Member States generally agree on 
broadening the scope of clearing to Pension Schemes Arrangements at the latest in 2023, 
although one Member State said that solutions should still be found for the provision of 
margins.  Two  Member  States  supported  broadening  the  scope  to  public  entities,  two 
opposed. Several Member State favoured a market driven approach. 

Two  Member  States  said  that  there  was  no  need  to  change  the  methodology  for 
determining  which  products  should  be  subject  to  the  clearing  obligation.  One  said  the 
product scope could be broadened. 

4.1.2.  Increasing clearing in the EU and reducing reliance on Tier 2 third-country CCPs 

Commission  services  consulted  on  a  number  of  measures  that  could  be  considered, 
including in this regard: 

183  See 

the  minutes 

of 

the  meeting  with  Member 

States 

on 

30  March 

2022: 

https://ec.europa.eu/transparency/expert-groups-
register/screen/meetings/consult?lang=en&meetingId=45435&fromExpertGroups=false  
and  the  following  link  for  the  minutes  of  the  meeting  with  Member  States  on  16  June  2022: 
https://ec.europa.eu/transparency/expert-groups-
register/screen/meetings/consult?lang=en&meetingId=45836&fromExpertGroups=false) 

85 

 
                                                           
  higher  capital  requirements  under  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  (CRR)  on  banks’ 
exposures  to  Tier  2  third-country  CCPs,  reflecting  the  risks  of  such  CCPs  and 
thus  aligning  the  CRR  with  the  framework  for  third-country  CCPs  of  EMIR. 
Macroprudential tools could also be considered; 

  exposure reduction targets to be met gradually by clearing participants; 
  EU market participants could be required to open and keep an active account at 

an EU CCP for clearing a portion of their transactions; 

  a  straightforward  obligation  to  clear  in  EU  CCPs  or  in  less  systemic  (Tier  1) 

CCPs. 

Member  States  generally  supported  the  overall  objective  of  the  Commission  to  reduce 
exposures  to  Tier  2  third-country  CCPs,  but  three  also  asked  for  more  analysis  on 
stability  risk.  Several  Member  States  also  expressed  their  concerns  about  potentially 
negative impacts on the EU financial sector as well as their clients in terms of costs and 
competitiveness, which could result in EU firms using non-EU banks to clear abroad. In 
this  context,  7  Member  States  intervening  opposed  negative  incentives  such  as  higher 
capital charges towards Tier 2 CCPs or an obligation to clear in the EU.  

At the same time, two Member States, and two EU authorities, indicated broad support 
for  looking  into  imposing  the  maintenance  of  an  active  account  in  an  EU  CCP.  Some 
Member  States  emphasised  the  need  to  have  a  proportionate  approach  to  the  active 
account  in  order  to  avoid  penalising  smaller  market  participants.  2  Member  States 
supported exploring higher capital charges or activity targets linked to capital penalties. 
One member state opposed the option of active accounts.  

4.1.3.  Expanding the offer by EU CCPs 

Member States were invited to consider how to facilitate, where appropriate, the offering 
of  new  products/currencies  by  EU  CCPs,  as  the  argument  was  raised  that  they  are 
currently hindered in this compared to their peers in other jurisdictions. 

There was broad agreement amongst Member States that EU CCPs should expand their 
offer, however few concrete views were provided on how to achieve this objective. 

4.1.4.  Enhancing 

the  attractiveness  of 

the  EU  clearing 

landscape  and 

the 

competitiveness of EU CCPs 

Member  States  were  asked  to  reflect  on  whether  interoperability  or  cross-margining 
arrangements  could  be  useful  in  the  context  of  the  stated  objectives,  whether 
segregation of default funds could  be an asset in  terms  of attractiveness, or exploring 
any  improvements  in  the  funding  and  liquidity  management  arrangements  for 
CCPs and in the payment and settlement area. 

One  Member  State  suggested  looking  into  a  fast  track  procedure  to  introduce  new 
products. Another Member State said that interoperability, cross-margining or segregated 
default fund requirements should be looked at with care as they are not without risks to 
financial stability. 

More  widely,  Member  States  and  one  EU  authority  supported  the  idea  that  further 
consideration should be given by central banks to enabling EU CCPs to access to central 
bank facilities. 

4.1.5.  Reviewing the supervisory architecture for EU CCPs  

86 

 
Member  States  were  asked  to  reflect  on  the  need  for  changes  in  the  EU  supervisory 
framework. Remarks were general but focused on two main issues. 

First, in general terms, several Member States that took the floor expressed the view that 
the  current  supervisory  framework  allows  for  taking  into  account  cross-border  risks. 
Some  of  them  also  stressed  that  the  current  framework  takes  into  account  the  fiscal 
responsibility of the Member State where the CCP is established in the unlikely event of 
a  CCP  default.  Two  Member  States  were  not  in  favour  of  opening  supervision  in  an 
EMIR  review  for  this  reason.  Six  Member  States  where  sceptical  to  centralised 
supervision. Other participants recalled however that a possible default of a CCP would 
affect  also  those  of  its  clearing  members  that  are  located  in  other  Member  States.  If 
changes were anyhow considered necessary because of increased clearing activity in the 
EU, one Member States expressed the opinion to support looking into whether ‘tiering’ 
of EU CCPs could be an option, based e.g. on financial stability risks. 

Second,  several  Member  States  pointed  out  that  Regulation  (EU)  No  2019/2099184 
(‘EMIR 2.2’) introduced a new supervisory architecture, including the CCP Supervisory 
Committee at  the European Securities and  Markets  Authority (ESMA),  which aimed at 
increasing  EU  convergence  and  coordination  and  gave  ESMA  supervisory  power  over 
Tier2  CCPs  in  third  countries.  Those  Member  States  stated  that  those  changes  seem  to 
work well, and that sufficient experience should be gained before considering changes to 
the supervisory framework. At the same time, there was general agreement among those 
that  intervened  that  there  would  be  room  for  amendments  to  EMIR  to  improve 
procedures; reducing red tape and aligning procedures in different areas could make EU 
supervision  simpler,  faster  and  more  flexible  and  therefore  contribute  to  improving  the 
competitiveness of EU CCPs. 

4.2. Meeting of Member States' Experts on 16 June 2022 

On  16  June  2022,  a  working  group  of  Member  States’  experts  met  virtually  to  discuss 
possible  measures  to  facilitate  clearing  at  EU  CCPs.  The  meeting  also  explored  the 
supervisory  framework  as  well  as  other  issues.  The  meeting  built  on  the  Commission 
targeted  public  consultation  on  the  review  of  the  central  clearing  framework  in  the  EU 
from 8 February to 22 March 2022, to which more than 70 responses were received, and 
on the previous meeting of the Derivatives and Markets  Infrastructures Working Group 
on 30 March 2022. 

The  meeting  allowed  Commission  services  to  gather  the  views  of  Member  States,  the 
ECB, EBA and ESMA. DG FISMA services currently envisage a legislative proposal in 
the second half of 2022. The feedback received during the meeting with Member States’ 
experts is summarised below. 

4.2.1.  Demand-side Measures 
4.2.1.1. 
Active accounts 

Several stakeholders responding to the targeted consultation showed openness to the idea 
of requiring EU clearing participants to hold an active account with an EU CCP, i.e. an 
account through which (at least) a portion of transactions would need to be cleared. An 
active account should ensure that there is regular clearing activity at EU CCPs. It should 
differ  from  accounts  which  already  exist  in  some  cases  but  are  “dormant”,  i.e.  not 

184  Regulation (EU) 2019/2099 of the European Parliament and of the Council of 23 October 2019 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 (OJ L 322, 12.12.2019, p. 1), 

87 

 
                                                           
actively or  regularly used by  clearing participants.  This could  help  enhance liquidity  at 
EU CCPs, an aspect market participants consider key in their choice where to clear. 

Member  States  who  expressed  an  opinion  emphasised  that  competitiveness  of  the  EU 
should be ensured and were either supportive of an active account requirement or open to 
look further into it, subject to certain conditions. In general, Member States highlighted 
that the details were important and proportionality should be respected. 

Three  Member  States  and  one  EU  authority  supported  an  active  account  requirement. 
Two of them and the EU authority said that such a requirement should focus on systemic 
clearing  services,  especially  on  services  denominated  in  euro.  Those  Member  States 
argued  that  an  initial  target  should  be  set  at  the  active  account  and  re-evaluated  and 
potentially be increased at a later stage. One of those Member States said that no volume 
requirements should be set at the beginning. Instead, qualitative measures should be used 
with quantitative measures following in a second stage. Another Member State expressed 
the view that quantitative thresholds should start with a rather low threshold and be re-
calibrating  further  based  on  a  detailed  assessment  of  previous  experiences.  The  same 
Member  State  suggested  that  not  only  clearing  members  but  also  a  wider  range  of 
stakeholders  should  meet  active  account  requirements.  To  take  into  account  client 
clearing  and  its  impact  on  proportionality  aspects,  clients  with  low  exposures  to  third-
country CCPs could be exempted from an active account requirement. A Member State 
suggested  further  to  consider  sanctions  as  an  option  where  levels  are  not  met  and 
highlighted that it should not be supervisory authorities to set the threshold requirements. 

Five  Member  States  indicated  that  they  were  open  at  the  current  stage.  However,  they 
argued  that  an  active  account  requirement  may  mainly  affect  smaller  parties  and  be 
burdensome. Therefore, these Member State indicated that first, costs related to an active 
account requirement would need to be considered and assessed before they could express 
an opinion. However, one EU authority explained that data cannot be shared easily due to 
data protection reasons. 

Two  Member  States  expressed  concerns  that  complexity  may  increase  without  much 
effect  if  only  a  qualitative  requirement  was  introduced.  One  of  these  Member  States 
highlighted the importance of appropriate supervision. One Member States explained that 
smaller  market  participants  may  be  forced  out  of  the  EU  by  an  active  account 
requirement potentially leaving only big players in the market and causing concentration 
issues. The Member State explained that market making and clients of clearing members 
would need exceptions.  

One  EU  authority  supported  the  introduction  of  active  accounts  and  highlighted  that 
active  accounts  as  a  backup  plan  would  be  insufficient  to  address  elevated  exposure 
levels to third-country CCPs and not lead to a risk reduction.  

4.2.1.2. 

Large exposures framework for exposures to systemic qualifying CCPs 

Another  possibility  to  reduce  the  current  over-reliance  on  systemic  third-country  CCPs 
would be to set a specific limit to the exposure banks and investment firms can have to a 
systemic qualifying CCP (QCCP)185. A specific concentration limit  could  be conceived 
under  the  “large  exposures”  regime  of  the  Capital  Requirements  Regulation,  which 

185  Qualifying CCPS (‘QCCPs’) are CCPs authorised in the EU or recognised by ESMA; they benefit from a 

preferential capital treatment under the CRR. 

88 

 
                                                           
currently does not restrict exposures to QCCPs186. The systemic nature of certain QCCPs 
could  justify  the  introduction  of  such  limit  for  financial  stability  reasons.  To  indirectly 
reduce the volumes of EU-denominated transactions to “systemic” non-EU QCCPs, this 
approach should be seen as complementary to the active account option.  

Five  Member  States  and  one  EU  authority  were  not  in  favour  of  a  large  exposure 
framework. One Member State and the EU authority argued that it might be difficult to 
calibrate  an  appropriate  exposure  level  and  highlighted  that  national  supervisors  are 
already allowed to impose additional requirements under the current SREP tool. The EU 
authority  argued  further  that  risks  related  to  over-reliance  on  a  systemic  third-country 
CCP may be manageable on a clearing member level but not on a macro level. Therefore, 
the  risk  should  be  addressed  at  a  macro  rather  than  at  clearing  member  level.  Two 
Member States saw disadvantages for EU clearing members compared to banks in other 
jurisdictions.  Another  Member  State  considered  a  large  exposure  framework  too  rigid. 
One  Member  State  was  in  favour  of  a  large  exposure  framework  which  should  target 
large users while not making it complicated for smaller ones. 

4.2.1.3. 

Clearing by public entities 

Several  stakeholders  consider  that  public  entities,  which  are  not  currently  required  to 
clear at a CCP under EMIR187, should be subject to a clearing obligation and should clear 
at EU CCPs. The rationale is that public entities’ clearing would help increase liquidity at 
EU CCPs and could be a signal of confidence in EU CCPs. Some public entities already 
clear some transactions centrally.  

Four  Member  States  expressed  the  view  that  clearing  for  public  entities  should  stay 
voluntary. Three Member States favoured a recommendation for public entities that clear 
voluntarily  to  do  so  at  an  EU  CCP.  One  EU  authority  supported  this  option  too,  but 
elaborated  further  that  in  their  view  only  EU  currency  business  should  be  captured. 
Another Member State showed openness  to  this as well.  Another Member State was in 
favour of certain public entities being covered by the clearing obligation under EMIR. 

One  Member  State  stated  that  collateral  is  the  most  important  issue  to  consider  in  this 
context, pointing out that public entities posting their own collateral would lead to wrong 
way risk. Public entities not posting collateral at all would create an imbalance between 
clearing  members  and  in  both  cases  other  clearing  members  would  have  to  cover 
sovereign  risks.  Furthermore,  it  might  force  certain  countries  to  buy  assets  from  other 
countries for collateralisation purposes. Two other Member States supported this view. 

4.2.1.4. 

Facilitate clearing by clients 

Respondents to the public consultation were generally in favour of measures facilitating 
clearing by clients. In particular, measures proposed could concern insurance companies 
as  well  as  money  market  and  investment  funds,  which  are  subject  to  the  clearing 
obligation under EMIR. The relevant sectorial legislation do not fully take into account 

186  The large exposures framework aims to limit the overall exposure that a bank has with a single client or a 
group of connected clients, therefore limiting the potential loss if that client or group of connected clients 
do not meet their financial commitments. This framework requires banks to measure their exposures to a 
single  client  or  a  group  of  connected  clients  and  limit  the  size  of  these  exposures  to  a  fixed  pre-defined 
percentage of their available Tier 1 capital (i.e. 25%). 

187  Some public entities (e.g. multilateral development banks, the ESM) are subject to the reporting obligation 

under EMIR, others (e.g. the Eurosystem and debt management offices) are exempt from EMIR. 

89 

 
                                                           
the benefits of central clearing in terms of risk reduction, as the banking framework, for 
example, does188.  

One  Member  State  supported  both  options,  for  insurance  companies  as  well  as  for 
UCITS189. One EU authority expressed – in line with its opinion from 2015 - support for 
revising  the  exposure  limits  for  OTC  derivatives  that  are  cleared  centrally  for  UCITS. 
Two Member States were open to exploring both options further.  

4.2.1.5. 

Hedge accounting 

Another  possible  measure  which  received  broad  support  from  stakeholders  in  the 
consultation  concerns hedge  accounting rules.  According to  some stakeholders, there is 
uncertainty around the application of certain hedge accounting rules (especially national 
ones,  and  to  a  lesser  extent  IFRS),  so  that  a  transfer  of  positions  from  a  third-country 
CCP to an EU one could in practice be discouraged. Stakeholders indicated that in case 
of  a  switch  of  positions  from  a  CCP  to  another  one  and  the  novation  of  derivative 
contracts  used  for  hedging,  there  would  be  uncertainty  as  to  whether  or  not  the  related 
“hedging  relationship”  should  be  considered  terminated,  impacting  the  profit  and  loss 
account190.  

A few Member States took the floor but had no strong views on this matter. One Member 
State  said  that  it  is  working  on  addressing  legal  issues  related  to  the  topic  outlined. 
Another  Member  State  indicated  to  further  look  into  the  issue  and  expressed  the  view 
that  a  more  in-depth  assessment  would  be  needed.  Two  Member  States  argued  there 
would be no harm in exploring this issue, while another did not express a view on any of 
the options outlined as they considered them to be interpretative problems. 

4.2.2.  Supply side Measures 
4.2.2.1. 

Simplification of long, burdensome and complex EMIR procedures 

According  to  the  feedback  received  EU  CCPs  face  complex,  lengthy  and  burdensome 
procedures  in  their  interaction  with  their  supervisors  and  the  other  relevant  authorities 
and bodies as part of the current EMIR framework. They seem to be of particular concern 
when an EU CCP wishes to extend the activities and services it offers (Article 15, EMIR) 
or to bring significant changes to its models and model parameters  (Article 49, EMIR). 
The complexity and length of such procedures affect the ability of EU CCPs to compete. 

Member  States  agreed  that  procedures  under  Article  15  and  49  EMIR  should  be  more 
efficient  and  the  processes  improved.  Most  representatives  who  expressed  their  view 
favoured exploring the setting up of a single point of contact where all CCP submissions 
could take place via a single digital platform and be immediately shared with the national 
competent  authority  (NCA),  ESMA  and  the  other  authorities  involved  in  that  CCP’s 
supervision  (e.g.  college  members).  This  would  ensure  work  can  be  conducted  in 
parallel, possibly shortening the process considerably. Another option that most Member 
States who expressed an opinion considered worth  exploring further was  to  standardise 
more the documentation to be submitted by EU CCPs. 

Three Member States suggested to further look into ex-post approval/review as done in 
some  other  jurisdictions  which  allow  CCPs  to  launch  new  products  in  asset  classes 

188  Under  the  CRR,  banks  and  investment  firms’  exposures  to  qualifying  CCPs  benefit  from  a  preferential 
capital treatment (a risk weight of only 2% applies to trade exposures of clearing members to such CCPs; 
also banks clearing as clients can enjoy a preferential capital treatments under certain conditions). 

189  Undertakings for collective investment in transferable securities (UCITS). 
190  Through the release of other-comprehensive-income cash-flow hedge accounting reserves. 

90 

 
                                                           
already  cleared  under  an  ex-post  approval/review  process  as  well  as  a  self-certification 
process for some rules changes. However, Member States experts pointed to the need to 
carefully  frame  such  approaches.  One  Member  State  particularly  highlighted  that  this 
option should only be available if non systemic risks are concerned.  

4.2.2.2. 

Central bank related measures 

Respondents  to  the  consultation  broadly  support  potential  enhancement  of  the  central 
clearing framework which are in the remit of central banks. In the consultation, market 
participants argue that giving EU CCPs the same level of access to central bank facilities 
irrespective  of  them  having  a  banking  license  would  make  EU  CCPs  safer  by  limiting 
their  dependency  on  commercial  banks,  allowing  them  to  better  manage  risks.  Two 
concrete  measures  were  suggested:  allowing  CCPs  to  accept  payments  in  central  bank 
money  in  all  EU  currencies  ideally  without  interruption  (24-hour  service)  or  over  an 
extended  time  range  and  granting  access  to  central  bank  deposit  and  liquidity  facilities 
(emergency  or  routine)  for  all  EU  CCPs  regardless  of  whether  they  have  a  banking 
license in a harmonised manner. 

Only  few  Member  States  and  one  EU  authority  expressed  a  view.  Views  were  split. 
While around half said that these issues should be discussed in the monetary framework 
rather  than  under  EMIR,  the  other  half  welcomed  the  suggestions  and  encouraged  the 
ECB  and  ESCB  to  further  engage  in  dialogue  with  CCPs  to  discuss  potential 
improvements. 

4.2.2.3. 

Other issues 

Regarding other issues, a potential requirement for segregated default funds for different 
asset classes, potential changes to the investment policy as well as eligible collateral were 
discussed. Only a few opinions were provided, expressing concerns rather than support.  

Regarding eligible collateral, two Member State expressed concerns regarding emission 
allowances  being  considered  highly  liquid.  Another  argued  that  a  review  of  eligible 
collateral might be worth considering for commodity derivatives and in particular energy 
derivatives. One Member State stated that there was no need for segregated default funds 
for  different  asset  classes  as  EMIR  creates  obstacles  for  segregated  default  funds.  One 
Member  State  indicated  itself  reluctant  to  any  changes  regarding  the  three  issues 
mentioned as none would enforce EU CCPs attractiveness, while another Member State 
considered itself open to amendments, especially regarding investment policy. 

4.2.3.  Supervision – Elements to be improved in EU CCP supervision 

Improved  attractiveness,  competitiveness  and  capacity  of  EU  CCPs  should,  over  time, 
lead  to  significant  additional  volumes  of  clearing  in  the  EU,  increased  activities  in  EU 
CCPs and therefore increased cross-border activity within the EU. In this context, further 
consideration  should  be  given  on  how  to  ensure  that  the  related  risks  could  be 
appropriately  managed  through  a  robust  and  efficiently  functioning  system  for  the 
supervision of EU CCPs. Two options were suggested; the supervision of all or certain 
EU CCPs at EU level and the enhancement of the EMIR 2.2 supervisory framework. 

One  EU  authority  stated  they  have  more  insight  in  third-country  CCPs  than  in  the  EU 
ones and are of the opinion that this should change. Another EU authority agreed that the 
latter should have a more important role in the supervision of EU CCPs, in particular in 
coordinating responses at times of crises.  

Six  Member  States  expressed  the  view  that  supervision  should  not  be  fundamentally 
changed by granting ESMA with the power to supervise some or all EU CCPs. Two of 

91 

 
them  stated  that  fiscal  responsibility  should  go  hand  in  hand  with  supervisory 
responsibility  and  therefore  were  clearly  against  the  supervision  of  all  or  certain  EU 
CCPs at EU level. Three others agreed that an enhancement of the EMIR 2.2. supervisory 
framework  would  be  sufficient,  while  the  other  Member  State  said  that  changes  to  the 
supervisory  framework  might  require  changes  to  the  CCP  Recovery  and  Resolution 
Regulation191  (CCP RRR) while the need to  ensure alignment between supervisory and 
fiscal  responsibility  should  not  be  exaggerated  and  they  are  still  against  reopening  the 
CCP  RRR.  One  Member  State  said  that  while  it  was  reluctant  to  changes  to  ESMA’s 
responsibility  it  was  in  favour  of  strengthening  ESMA’s  coordinating  function  in 
emergency  situations  as  well  as  introducing  a  stronger  cross-sectoral  monitoring 
mechanism for the EU’s exposures to Tier 2 CCPs. Furthermore, it was not in favour of 
mixed  supervisory  teams  due  to  the  lack  of  clear  responsibilities.  Yet  another  Member 
State  indicated  to  be  in  favour  of  reassessing  the  supervision  of  EU  CCPs,  making 
processes  leaner  for  market  participants.  However,  that  Member  State  was  against 
enlarging the role of the central banks of issue. One Member State said that to assess the 
issue properly, they would need more data. 

4.2.4.  Other Issues Raised 
4.2.4.1. 

Third-country CCPs 

Some stakeholders suggested adding more proportionality to the framework by reducing 
or  removing  the  requirement  for  a  third-country  to  have  a  regime  in  place  providing 
access  to  EU  CCPs.  Two  Member  State  stated  that  the  equivalence  framework  has 
caused  level  playing  field  problems.  However,  they  indicated  to  need  for  more  time  to 
evaluate  the  suggested  options.  Another  Member  State  supported  more  proportionality 
for smaller jurisdictions, but opposed any self-assessment by banks.  

One EU authority stated that more information about the consequences would be needed, 
in  particular  about  the  definition  of  a  small  jurisdiction.  It  pointed  out  that  otherwise  a 
circumvention may be possible for jurisdictions, which might be difficult to challenge, if 
they claim to be small and no information were provided nor could be asked for. 

4.2.4.2. 

Intragroup transactions 

Several stakeholders underlined in the targeted consultation the need to address the issue 
of intragroup transactions. Absent a solution, transactions between an EU firm – financial 
and  non-financial  –  and  its  subsidiary  abroad  would  become  subject  to  the  clearing 
obligation or margin requirements. Two EU authorities stressed the need to be mindful of 
the  use  of  intragroup  transactions  by  EU  groups  and  the  importance  to  require  that  the 
risk at group level should be managed from within the EU. They however agreed on the 
need to move forward and find a permanent solution. Four Member States intervened and 
confirmed the need to address the issue. 

Clearing thresholds 

4.2.4.3. 
EMIR  requires  that  standardised  OTC  derivatives  contracts  are  centrally  cleared  and, 
where not possible, that collateral is exchanged to reduce the risks. According to a recent 
report  by  ESMA  and  a  large  number  of  contributions,  notably  energy  firms,  to  the 

191  Regulation  (EU)  2021/23  of  the  European  Parliament  and  of  the  Council  of  16  December  2020  on  a 
framework  for the recovery and resolution of central counterparties and amending Regulations (EU) 
No 1095/2010, (EU) No 648/2012, (EU) No 600/2014, (EU) No 806/2014 and (EU) 2015/2365 and 
Directives 2002/47/EC, 2004/25/EC,  2007/36/EC, 2014/59/EU and (EU) 2017/1132 (Text  with EEA 
relevance); OJ L 22, 22.1.2021, p. 1–102. 

92 

 
                                                           
targeted  consultation,  EU  energy  firms  are  getting  closer  to  reaching,  or  have  reached, 
the  clearing  threshold  for  “OTC  commodity  derivative  contracts  and  other  OTC 
derivative  contracts”.  Consequently,  they  have  or  will  become  subject  to  the  margin 
requirements.  In  its  report  on  the  commodity  clearing  threshold,  ESMA  suggested 
amending  the  methodology  to  calculate  the  position  in  OTC  derivatives  that  count 
towards  the  clearing  threshold  by  replacing  the  reference  to  OTC  derivatives  with  a 
reference to uncleared derivatives and aligning the clearing threshold methodology with 
the methodology set in Article 11, and in particular paragraph 3 on the requirements to 
exchange initial margins. 

Three  Member  States  said  they  would  need  time  to  assess,  while  one  indicated  that  in 
general, it sees  room for improvement.  One EU authority as well as one Member State 
indicated that leveraging on EMIR data would be too difficult and is likely to not work. 

4.2.4.4. 

Scope of CCP authorisation/extension of services 

Feedback  from  some  stakeholders  in  the  targeted  consultation  drew  attention  to  a 
possible inconsistency in EMIR relating to the scope of a CCP’s activities. Certain CCPs 
are  authorised  or  recognised  to  clear  products  which  are  not  financial  instruments  nor 
traded on financial markets192. The same issue might emerge should CCPs intend to start 
clearing certain crypto-assets which are not financial instruments.  

No Member State took the floor to express its opinion on the matter outlined. 

4.2.4.5. 

SFD 

Respondents  to  the  consultation  on  clearing  suggested  that  the  Settlement  Finality 
Directive193  (SFD)  could  be  amended  in  several  ways,  in  particular  apply  the  SFD 
protection  to  all  systems  operated  by  a  CCP  (even  if  not  designated  under  the  SFD). 
However, this would give considerable discretion to CCPs letting them benefit from the 
SFD  protections  and  it  would  bring  the  risk  of  mixing  the  financial  and  non-financial 
sphere. 

One EU authority was in favour of considering the change proposed by stakeholders. In 
its  opinion,  broadening  the  SFD  protections  would  address  a  problem  that  some  CCPs 
have  which  want  to  extend  their  services  to  other  products  that  are  not  in  the  list  of 
securities/financial  instruments  under  the  SFD  (notably  commodity  derivatives).  No 
Member State took the floor to express its opinion on the matter outlined. 

5. Call for evidence on the review of the central clearing framework in the EU 

The Commission launched a call for evidence to collect evidence on ways to improve the 
attractiveness of EU CCPs and enhance their supervision. The feedback period ran from 
8 February 2022 to 22 March 2022. 1 response was received. 

The only respondent welcomed the consultation and called for an extension of the list of 
eligible collateral at EU CCPs, increased transparency in CCP margin models, increased 
predictability of margin calls by CCPs and a substantial increase of the clearing threshold 
for commodities. 

192  For  EU  CCPs  see  ccps_authorised_under_emir.pdf  (europa.eu).  For 

third-country  CCPs  see 

thirdcountry_ccps_recognised_under_emir.pdf (europa.eu) 

193  Directive  98/26/EC  of  19  May  1998  on  settlement  finality  in  payment  and  securities  settlement  systems 

(OJ L 166, 11.6.1998, p. 45–50). 

93 

 
 
 
                                                           
ANNEX 3: WHO IS AFFECTED AND HOW? 

1. Practical implications of the initiative 

The preferred aggregated option will imply the following obligations: 

  EU  CCPs  do  not  have  any  specific  new  obligations  under  this  initiative.  They 
will benefit from streamlined processes to launch new products/services or adapt 
risk models. Their communication with supervisors may be also streamlined with 
strengthened  cooperation  among  supervisors.  These  measures  will  decrease  the 
overall regulatory costs that CCPs face. In addition, EU CCPs will benefit from 
increased clearing flows which will generate additional revenue. 

  EU  clearing  members  and  clients  will  have  to  open  and  maintain  an  active 
account at EU CCPs. Clearing members will need to enhance their clearing offer 
towards  their  clients  by  systematically  proposing  to  clear  in  EU  CCPs.  These 
measures  imply  potentially  significant  adjustment  costs  for  clearing  parties, 
especially in terms of netting benefits lost. The magnitude of this cost impact will 
depend on the requirement and respective calibration to clear a proportion of new 
trades at EU CCPs, as well as on market developments (e.g. increase in offer by 
EU CCPs). Overtime these costs can gradually reduce due to market adaptations. 
In addition, there will be some administrative costs related to reporting on active 
account requirements.  

  EU  and  national  supervisors  will  need  to  adapt  their  internal  procedures  and 
supervisory  approach  in  line  with  the  amended  requirements.  This  will  imply 
some change costs. In the long-run, the measures should in fact reduce day-to-day 
costs of supervision given streamlined requirement.  

2. Summary of costs and benefits 

The tables below summarise the expected benefits and costs of the preferred initiative for 
the  affected  stakeholders.  It  should  be  noted  that  no  significant  costs  or  benefits  are 
expected  to  arise  for  citizens,  hence  the  overview  of  costs  focuses  on  stakeholder 
categories expected to bear some additional costs.  

I. Overview of Benefits (total for all provisions) – Preferred Option 

Description 

Administrative costs 
reductions 

Amount 

Direct benefits 

Comments 

Ongoing  reduction  of  compliance  costs  for 
CCPs:  total  EU-wide  ongoing  cost  reduction  of 
ca.  EUR 5 million 
to  ca.  EUR 15 million 
(assuming  10  Article  15  or  49  procedures  per 
year  for  all  EU  CCPs).  The  more  detailed 
breakdown  of  cost  savings  per  procedure 
follows: 
  For  option  A2:  Reduction  of  staff  needed 
thanks  to  simplified  procedures:  approx. 
0.5  FTE  per  year,  costing  approximately 
EUR 150 000. 

  Reduction  of  costs 
potential 

to 
legal 
between 
opinions: 
EUR 10 000 and EUR 250 000 (depending 

related 
saving 

This  benefit  stems  from  the  simplified 
approval procedures and replacement of ex-
ante approval by ex-post approval for some 
changes.  Standardised  documents  and 
to  be 
greater  clarity  on  what  needs 
submitted  will  require  less  substantive  and 
legal  work. Greater clarity is  also expected 
limit 
interaction  with 
supervisors  (i.e.  currently  duplicative  and 
contradicting rules and requests).  

needed 

the 

94 

 
on the procedure and the fees charged) per 
procedure.  

  Reduction  of  costs  of  external  consultants 
for  an  art.  15  or  49  procedure:  savings 
between  EUR 200 000  and  EUR 350 000 
per procedure.  

  Reduction of costs of hiring staff for these 
procedures  (assuming  a  1-year  contract):  
savings of approx. EUR 1 300 per day over 
1 year or approx. EUR 475 000 per annum. 
  Reduction  of  staff  needed  for  a  given 
procedure:  approx.  1.6  FTEs  for  a  given 
procedure 
costing 
1 
approximately EUR 300 000. 

year, 

over 

No estimate available. 

Improved capacity for 
oversight and management 
of financial stability risks 
and supervisory capacity of 
ESMA, central banks of 
issue and national 
supervisors 

Lower financial stability 
risks  

Indirect benefits 

Societal benefit. No estimate available.  

of 

and 

roles 

issue 

national 

of 
entities, 

to  enhanced  and  more  efficient 
Due 
cooperation  between  ESMA,  central  banks 
of 
supervisors, 
supervisors  will  be  able  to  better  monitor 
relevant  financial  stability  risks.  Notably, 
different 
clarification 
reduction 
supervisory 
of 
duplications  and 
improved  knowledge 
sharing and more frequent cooperation will 
together  with 
this  effect 
contribute 
greater clarity as to minor vs major changes 
in  activities  and  models  efficiencies. 
Central  banks  and  ESMA  would  benefit 
from  having  a  clearer  overview  on  EU 
CCPs  and  relevant  financial  stability  risks, 
which is important for their role. 

to 

to 

arise 

(i)  by 

A  positive  impact  on  financial  stability  is 
expected 
reducing  
concentration  rates  and  over-reliance  on 
non-EU  CCPs  (ii)  reducing  frictional  costs 
in case of developments or problems with a 
third-country  CCP  which  would  require  a 
massive  shift  of  positions  towards  EU 
CCPs,  and  (iii)  by  ensuring 
that  EU 
supervisors  are  given  adequate  powers  and 
monitoring capabilities. 

Benefits for the single 
market of enhanced 
supervisory cooperation and 
convergence 

Enhanced offer possibilities 
for EU CCPs and reduced 
opportunity costs. Market 
participants benefit from 
increased competition 
between EU and third-
country CCPs and greater 
clarity 

Societal benefit. No estimate available. 

The  opportunity  costs  associated  with  long  and 
burdensome  procedures  are  difficult  to  estimate 
but  translate  into  lost  business,  impact  on  the 
CCP’s reputation (loss of credibility) and missed 
revenues.  Stakeholder 
feedback  points  at 
complex  and  unclear  supervisory  requirements 
as a significant hurdle to bringing new products 
to  the  market  and  thus  the  attractiveness  of  EU 
CCPs,  hence  the  impact  of  their  removal  is 
likely moderate to large. 

Strengthened  role  for  EU  authorities  in  the 
supervisory  framework  and  streamlined 
cooperation.  Ongoing  benefits  in  terms  of 
higher  supervisory  standards  for  CCPs  and 
financial stability 

Faster and clearer procedures for launching 
new products and changing risk models are 
expected to result in an ongoing increase in 
EU  CCPs’  capacity  to  bring  new  products 
to the market and change risk models. This 
should  lead  to  greater  choice  for  market 
participants  (e.g.  more  CCPs  to  choose 
from  to  clear  specific  derivatives).  Greater 
clarity 
from 
for  market  participants 
standardised  documents  and  shorter  time 
for  supervisors  to  approve  changes.  Cost 

95 

 
 
 
More opportunities for 
clearing members and 
clients 

No  estimate  available,  depending  on  market 
developments  and  choices  of  EU  CCPs 
regarding launch of new products.  

savings 
for  EU  CCPs  may  also  be 
potentially  passed  on  to  clearing  members 
and clients.  

This  initiative  will  enable  EU  CCPs  to 
bring  more  products  to  the  market  and 
make  their  product  offer  more  attractive, 
and  will  encourage  EU  clearing  members 
and clients to clear with EU CCPs. Clearing 
members  and  clients  are  thus  expected  to 
have  more  choices  for  clearing  their  trades 
and  can  potentially  benefit  from  increased 
competition. 

Administrative cost savings related to the ‘one in, one out’ approach* 

Administrative cost 
reductions (described 
above) 

Approximately  EUR 5-15 million  EUR  of 
administrative  cost  savings  per  year  (described 
above) ; EU-wide total. 

As  described  above.  These  cost  savings 
relate  to  a  simplification  of  administrative 
obligations  at  EU  level  (of  existing  EMIR 
rules)  and  hence  all  related  reductions  in 
expenses count under “one in, one out”.  

II. Overview of costs – Preferred option 

Businesses – EU CCPs 

Businesses – EU clearing 
members and clients 

Administrations 
(supervisors, ESMA) 

One-off 

Recurrent 

One-off 

Recurrent 

One-off 

Recurrent 

Supply-
side 
measures 

Direct adjustment 
costs 

Direct 
administrative 
costs 

Direct regulatory 
fees and charges 

Direct 
enforcement costs 

Indirect costs 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified   

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

Moderate 
cost of 
setting up 
new IT tools 

Operating new 
IT tools; less 
time to assess 
proposed 
actions 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

Costs of setting 
up and operating 
new IT tools by 
supervisors may 
be reflected in 
increased 
supervision 
fees194 

No cost impact 
identified 

No cost impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

Demand-
side 
measures 

Direct adjustment 
costs 

No cost 
impact 
identified 

No cost impact 
identified 

Costs for 
clearing 
members and 
clients to reduce 
excessive 

Potentially 
significant costs, 
depending on the 
precise 
calibration and 

No cost 
impact 
identified 

No cost impact 
identified 

194  But potential savings from streamlined cooperation would have an opposite effect which would (partially 

or even fully) mitigate this. 

96 

 
 
 
                                                           
exposures or 
increase capital 
to meet higher 
requirements 
(depending on 
the precise 
calibration and 
their choices195) 

Paperwork 
related to 
opening an 
account 
(expected to be 
negligible)198  

choice of 
individual 
companies196, 
notably higher 
costs of clearing 
(e.g. loss of 
netting 
benefits)197 
and/or, 
opportunity costs 
of holding higher 
capital to meet 
requirements for 
non-EU CCP 
exposures. 

Reporting costs 
in relation to 
active account 
requirements  

Direct 
administrative 
costs 

No cost 
impact 
identified 

No cost impact 
identified 

Direct regulatory 
fees and charges 

Direct 
enforcement costs 

Indirect costs 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost 
impact 
identified 

Minimal 
additional costs 
of reporting on 
more accounts 
(expected to be 
negligible) 

No cost impact 
identified 

Clients will face 
a small increase 
in clearing fees  
as clearing 
member pass on 
cost increases 
from maintaining 
multiple 
accounts199 

Supervisio
n   

Direct adjustment 
costs 

No cost 
impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

Setting up 
systems to 
monitor 
active 
account 
compliance 

No cost 
impact 
identified 

No cost 
impact 
identified 

On-going 
monitoring of 
active account 
compliance 

No cost impact 
identified 

No cost impact 
identified 

No cost 
impact 
identified 

More 
enforcement 
may be needed 
as EU business 
volumes grow 

Modification 
of procedures 
and tools to  
the new 
supervisory 
cooperation 
framework 

Resource 
implications of  
cooperation in 
joint 
supervisory 
teams and to 
the joint cross-
border 
monitoring 
system (e.g. 

195  Magnitude  of  these  costs  cannot  be  reliably  assessed  as  they  depend  on  the  precise  calibration  of  the 
measures  which  will  be  established  through  delegated/implementing  acts  (which  will  consider  cost 
implications to the degree possible) and on choices of companies. Hence it cannot be determined upfront 
and is likely to vary by company depending on its specific situation.  

196  Magnitude  of  these  costs  cannot  be  reliably  assessed  as  they  depend  on  the  precise  calibration  of  the 
measures  which  will  be  established  through  delegated/implementing  acts  (which  will  consider  cost 
implications to the degree possible) and on choices of companies. Hence it cannot be determined upfront 
and is likely to vary by company depending on its specific situation. At the same time, this cost is expected 
to be potentially significant in size.  

197  Expected to be partially mitigated over the medium to long term by market adaptation 
198  As some clearing participants (e.g. clients) that do not already have an account at an EU CCP will have to 

open one. 

199  These  costs  are  expected  to  decrease  over  time  as  the  market  adapts  to  the  new  situation  by  moving 

positions.  

97 

 
                                                           
Direct 
administrative 
costs 

No cost 
impact 
identified 

Direct regulatory 
fees and charges 

Direct 
enforcement costs 

Indirect costs 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

Increased costs of 
supervision may 
be passed on to 
CCPs via 
increased 
supervision fees 

Costs related to the ‘one in, one out’ approach 

staff, meetings) 

Additional 
paperwork 
related to 
modification 
of tools and 
procedures 
(likely low) 

Additional 
paperwork 
related to 
enhanced 
cooperation 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost impact 
identified 

No cost 
impact 
identified 

No cost impact 
identified 

Direct adjustment 
costs  

Costs for 
clearing 
members and 
clients to reduce 
excessive 
exposures or 
increase capital 
to meet higher 
requirements 
(described above 
and depending 
on calibration 
and).  

Total   

Indirect 
adjustment costs 

No cost 
impact 
identified 

No cost impact 
identified 

Increased costs of 
supervision may 
be passed on 
CCPs via 
increased 
supervision fees 

Administrative 
costs (for 
offsetting) 

No cost 
impact 
identified 

No cost impact 
identified 

One-off costs 
related to 
paperwork for 
opening an 
account 

Potentially 
significant costs, 
depending on the 
precise 
calibration and 
choice of 
individual 
companies 
(described 
above) and/or, 
opportunity costs 
of holding higher 
capital to meet 
requirements for 
non-EU CCP 
exposures. 

Clients may face 
an increase in 
costs of clearing 
when the 
clearing member 
maintains 
multiple 
accounts.200 
Indirect cost, not 
subject to off-
setting under 
“one in, one 
out”. 

No cost impact 
identified 

200  These  costs  are  expected  to  decrease  over  time  as  the  market  adapts  to  the  new  situation  by  moving 

positions.  

98 

 
 
 
 
 
 
 
                                                           
(expected to be 
negligible)201 

Small ongoing 
costs for 
reporting of 
active account 
requirements 

3. Relevant sustainable development goals 

III. Overview of relevant Sustainable Development Goals – Preferred Option(s) 
Relevant SDG 

Expected progress towards the Goal 

Comments 

SDG no. 8 – decent work 
and economic growth 
education 

Expected to contribute positively to target 8.10 
“Strengthen the capacity of domestic financial 
institutions to encourage and expand access to 
banking, insurance and financial services for all”  

The impact is expected to be achieved by 
developing capital market infrastructure in 
the EU and safeguarding risks that would 
result in disruption in access to clearing 

201  As some clearing participants (e.g. clients) that do not already have an account at an EU CCP will have to 
open one. This is a simple process consisting of filling out several documents. Even if the number of new 
clients was high, this cost  would be relatively small overall. Hence it was not considered proportional to 
attempt more precise costing.   

99 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
ANNEX 4: ANALYTICAL METHODS 

The  analysis  carried  out  as  part  of  the  impact  assessment  is  based  on  three 
methodological approaches:  

1. desk research;  

2. qualitative analysis; and 

3. quantitative analysis.  

The data used to calculate the expected benefits and costs stem from a variety of different 
data  sources.  Sources  include  the  targeted  consultation  that  ran  from  January  2022  to 
March 2022, stakeholder meetings  especially with CCPs, clearing members such as the 
European  Banking  Federation  (EBF)  and  the  Futures  Industry  Association  (FIA), 
information  provided  by  supervisors  as  well  as  other  direct  contributions  (including 
confidential  ones)  received.  Additional  data  was  collected  from  publicly  available 
sources (e.g. websites and annual statements of CCPs) and from the European Securities 
Markets Authority (ESMA), the ESRB and the ECB.  

The  analysis  is  strongly  based  on  cost  estimates  provided  by  supervisors,  market 
participants  and  CCPs.  In  some  cases,  the  data  analysed  cannot  be  publicly  distributed 
given an extremely limited number of data points on specific market actors. Making such 
information  public  may  allow  identification  of  the  contributor.  Publication  of  this  data 
could  provide  information  to  active  or  potential  competitors  which  may  allow  them  to 
gain insights as to cost functions and other sensitive corporate information, thus leading 
to unfair competitive advantages. This data has been considered by the Commission in its 
analysis and the results are reflected qualitatively in this impact assessment. To that end, 
respective  figures  have  been  presented  in  the  Impact  Assessment  to  the  Regulatory 
Scrutiny  Board  as  part  of  the  impact  assessment  scrutiny  process  as  coming  from 
confidential  contributions.  Some  data  has  been  removed  afterwards  as  the  publication 
would lead to identification of the contributor. 

In  addition  to  limitations  on  making  data  public,  the  presented  analysis  faces  several 
methodological  limitations.  In  particular,  supervisory  data  such  as  reported  to  trade 
repositories by market participants is available to supervisors and certain other authorities 
only  but  not  to  the  Commission  or  the  general  public.  While  the  impact  assessment 
sought  data  from  supervisors,  some  datasets  could  not  be  shared  directly.  This  applies 
especially  to  data  which  would  identify  individual  market  actors.  In  effect,  the  Impact 
Assessment relies on the analyses carried out by supervisors and can often refer only to 
qualitative insights gained therefrom. 

As concerns data provided by market participants, a significant limitation and likely bias 
arises from the economic interest of market participants. There is a strong incentive for 
market participants to maintain the status quo in terms of current clearing arrangements. 
In  effect,  it  is  likely  that  costs  figures  provided  are  inflated  in  order  to  increase  the 
perceived  costs,  especially  as  concerns  the  demand  side  measures  analysed.  More 
generally,  however,  market  participants  have  been  reluctant  to  share  data  for  fear  of 
providing insights into their operational structure, as well as cost structure and business 
strategies;  for  example,  depending  on  their  internal  IT  systems,  compliance  costs  may 
vary  considerably  from  clearing  member  to  clearing  member  for  certain  changes.  A 
further challenge is that not all clients are easily identifiable, making it more difficult to 
gather data in a targeted manner. 

100 

 
In  addition,  certain  costs  will  depend  strongly  on  the  respective  calibration  (e.g.  active 
account requirement). Where an obligation is further calibrated under level 2 acts, as is 
the  case  for  the  obligation  to  clear  a  certain  proportion  of  transactions  considered  of 
substantial  systemic importance to  the EU in  EU CCPs, these costs will be assessed in 
detail  at  a later stage  in  the development  of level  2 requirements. These technical  rules 
will be prepared by ESMA, and for the one to calibrate the level of clearing in EU CCPs, 
this  RTS  would  be  developed  in  cooperation  with  ESRB,  EBA  and  EIOPA  and  in 
consultation  with  the  ESCB  to  ensure  the  broadest  institutional  involvement  possible. 
The  related  standards  will  be  developed  and  adopted  after  an  open  public  consultation 
has  taken  place  and  the  potential  related  costs  and  benefits  have  been  analysed,  as 
required  under,  for  example,  the  ESMA  Regulation202.Lastly,  the  analysis  faces 
significant difficulties to assess quantitatively the benefits that arise in terms of financial 
stability.  While  a  qualitative  assessment  is  possible  in  terms  of  aspects  such  as 
supervisors’ tools, monitoring ability and powers, it is not possible to convert this into a 
cost  saving  figure.  The  envisaged  amendments  will  address  mainly  tail  risks  (e.g.  CCP 
default) which, while clearly present, cannot be estimated with any reasonably degree of 
accuracy.  

This, in combination with a lack of data, makes the meaningful estimation on the effects 
of  the  presented  options  difficult  to  provide  and  qualitative  information  was  used  and 
presented  to  make  the  case  for  the  presented  preferred  options.  While  the  Commission 
does  expect  these  benefits  to  materialise,  these  will  also  depend  on  future  business 
decisions  taken  by  the  respective  CCPs,  for  example  to  what  extent  they  extend  the 
services they offer. 

202 ESMA Regulation EU (No) 1095/2010, Article8(3).   

101 

 
                                                           
ANNEX 5: TABLES AND FIGURES 

Table 1: List of authorised EU CCPs203 

No  Name of the CCP 

1 

2 

3 

4 

5 

Nasdaq OMX 
Clearing AB 
European Central 
Counterparty N.V. 
KDPW_CCP 

Eurex Clearing AG 

Cassa di 
Compensazione e 
Garanzia S.p.A. 
(CCG) 

6 

LCH SA 

7 

8 

9 

European Commodity 
Clearing 
Keler CCP 

CCP Austria 
Abwicklungsstelle 
für 
Börsengeschäfte 
GmbH 
(CCP.A) 

Identification Code of 
CCP (LEI) 
54930002A8LR1AA 
UCU78 
724500937F740MH 
CX307 
2594000K576D5CQ 
XI987 

529900LN3S50JPU 
47S06 

Country 
of 
establishment 
Sweden 

Netherlands 

Poland 

Germany 

8156006407E264D2 
C725 

Italy 

Competent authority   Date of initial 

Finansinspektionen 

De  Nederlandsche 
Bank (DNB) 
Komisja  Nadzoru 
Finansowego (KNF) 
Bundesanstalt 
für 
Finanzdienstleistungs 
aufsicht (Bafin) 
Banca d’Italia 

authorisation 
18 
2014 

March 

1 April 2014 

8 April 2014 
10 April 2014 

20 May 2014 

R1IO4YJ0O79SMW 
VCHB58 

France 

529900M6JY6PUZ9 
NTA71 

529900MHIW6Z8O 
TOAH28 
529900QF6QY66Q 
ULSI15 

Germany 

Hungary 

Austria 

et 

Autorité de Contrôle 
Prudentiel 
de 
Résolution (ACPR) 
Bundesanstalt 
für 
Finanzdienstleistungs 
aufsicht (Bafin) 
Central  Bank 
Hungary (MNB) 
Austrian  Financial 
Market 
Authority 
(FMA) 

of 

22 May 2014 

11 June 2014 

4 July 2014 

14 August 
2014 

10 

BME Clearing 

5299009QA8BBE2 
OOB349 

Spain 

11 

OMIClear - C.C., S.A. 

5299001PSXO7X2J 
X4W10 

Portugal 

12 

13 

14 

ICE Clear Netherlands 
B.V.204 
Athens Exchange 
Clearing House 
(Athex Clear) 
SKDD-CCP Smart 
Clear 
d.d (SKDD-CCP) 

7245003TLNC4R9X 
FDX32 
213800IW53U9JMJ 
4QR40 

747800E0OA8S9C 
M7RR46 

Netherlands 

Greece 

Croatia 

Table 2: List of recognised third-country CCPs205 

Comisión  Nacional 
del  Mercado 
de 
Valores (CNMV) 
Comissão 
do 
Mercado  de  Valores 
Mobiliários 
(CMVM) 
De  Nederlandsche 
Bank (DNB) 
Hellenic 
Capital 
Market Commission 

16 
September 
2014 
31 October 
2014 

12 December 
2014 
22 January 
2015 

Hrvatska agencija za 
nadzor 
financijskih 
usluga (HANFA) 

29 October 
2021 

203 https://www.esma.europa.eu/sites/default/files/library/ccps_authorised_under_emir.pdf.  
204 Previously named Holland Clearing House B.V 
205 https://www.esma.europa.eu/sites/default/files/library/third-country_ccps_recognised_under_emir.pdf  

102 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                           
1 

2 

3 
4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

21 

22 

23 

24 

25 

id 

Name of the CCP 

CCP 
short 
name 
ASXF 

Country 
establishment 

of 

Date 
recognition 

of 

Tier 

of 

Date 
last 
review 

Australia 

27 April 2015 

ASX Clear (Futures) Pty 
Limited 

ASX Clear Pty Limited 

ASX 

Australia 

Hong Kong Securities Clearing 
Company Limited 
HKFE Clearing Corporation 
Limited 
OTC Clearing Hong Kong 
Limited 
The SEHK Options Clearing 
House Limited 
Japan Securities Clearing 
Corporation 

HKSCC 

Hong Kong 

HKFE 

Hong Kong 

OTCH
K 
SEOCH 

Hong Kong 

27 April 2015 

Hong Kong 

27 April 2015 

JSCC 

Japan 

Tokyo Financial Exchange 

TFX 

Japan 

Central Depository (Pte) 
Limited 
Singapore Exchange 
Derivatives Clearing 
ICE Clear Singapore 

CDP 

Singapore 

SGXDC 

Singapore 

ICSG 

Singapore 

JSE Clear 

JSEC 

South Africa 

ICE NGX Canada Inc.3 

NGX 

Canada 

Canadian Derivatives Clearing 
Corporation 

CDCC 

Canada 

Asigna Compensacion y 
Liquidacion 
SIX x-clear AG 

ACYL 

Mexico 

27 January 2016  8 March 

SIXX 

Switzerland 

23 March 2016 

Korea Exchange, Inc. 

KRX 

South Korea 

Chicago Mercantile Exchange, 
Inc. 

CME 

ICE Clear Credit LLC 

ICC 

20  Minneapolis Grain Exchange, 

MGEX 

ICUS 

NSCC 

Inc. 
ICE Clear US, Inc. 

National Securities Clearing 
Corporation 
Dubai Commodities Clearing 
Corporation 

The Clearing Corporation of 
India Ltd 

22 April 2016 

13 June 2016 

28 September 
2016 

28 September 
2016 

14 December 
2016 

United States of 
America 

United States of 
America 
United States of 
America 
United States of 
America 

United States of 
America 

DCCC  United Arab Emirates 

CCIL 

India 

8 March 2022 

n/a 

29 March 
2017 

18 March 
2022 

29 March 2017 

n/a 

Nasdaq Dubai Ltd 

NDL 

Dubai International 
Financial Centre 

29 March 2017  18 March 

2022 

27 April 
2015 

27 April 2015 

27 April 2015 

27 April 2015 

27 April 2015 

27 April 2015 

27 April 2015 

24 September 
2015 

27 January 2016  Review of 
recognition 
still ongoing 

27 January 2016  8 March 

2022 

27 January 2016  8 March 

2022 

8 March 
2022 

8 March 
2022 

18 March 
2022 
18 March 
2022 
18 March 
2022 
18 March 
2022 

9 March 
2022 

9 March 
2022 
8 March 
2022 
8 March 
2022 

8 March 
2022 

2022 
9 March 
2022 
9 March 
2022 

8 March 
2022 

8 March 
2022 

8 March 
2022 

9 March 
2022 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Tier 1 

Subject to 
review of 
recognition 
Tier 1 

103 

 
 
 
26 

27 

28 

29 

30 

33 

34 

35 

36 

37 

38 

39 
40 

41 

B3 

Nodal Clear, LLC 

B3 

NCL 

New Zealand Clearing Limited 

NZX 

United States of 
America 
New Zealand 

Brazil 

29 March 2017 

Indian Clearing Corporation 
Limited 

ICCL 

India 

NSE Clearing Limited8 

NSCCL 

India 

9 March 
2022 
8 March 
2022 

8 March 
2022 

n/a 

n/a 

29 March 2017 

24 May2017 

27 September 
2017 

27 September 
2017 

31 

India International Clearing 
Corporation (IFSC) Limited 

IICC 

India 

6 May 2019 

n/a 

32  NSE IFSC Clearing Corporation 

NICCL 

India 

Limited 

24 June 2019 

n/a 

Tier 1 

Tier 1 

Tier 1 

Subject to 
review of 
recognition 
Subject to 
review of 
recognition 
Subject to 
review of 
recognition 
Subject to 
review of 
recognition 
Tier 1 

Multi Commodity 
Exchange Clearing 
Corporation Limited 

MCXC
CL 

India 

3 December 2019  Review of 
recognition 
still ongoing 

LCH Limited 

ICE Clear Europe Limited 

LCH 

ICEU 

United Kingdom 

United Kingdom 

LME Clear Limited 

LMEC 

United Kingdom 

Options Clearing Corporation 

OCC 

Fixed Income Clearing 
Corporation 
ComDer Contraparte Central 
Shanghai Clearing House 

FICC 

CDER 
SHCH 

United States of 
America 
United States of 
America 
Chile 
China 

1 January 2021 

1 January 2021 

1 January 2021 
27 June 2022 

27 June 2022 

8 August 2022 
27 September 
2022 

Dubai Clear LLC 

DUBC  United Arab Emirates  27 September 

2022 

n/a 

n/a 

n/a 
n/a 

n/a 

n/a 
n/a 

n/a 

Tier 2 

Tier 2 

Tier 1 

Tier 1 

Tier 1 

Tier 1 
Tier 1 

Tier 1 

Table  3:  Involvement  of  colleges  and  ESMA  in  decisions  adopted  by  national 
supervisors 

EMIR provisions 

College opinion206 

Access to a CCP (Art. 7) 
Access to a trading venue (Art. 8) 
Authorisation of a CCP and its procedures 
(Art. 14 and 17) 
Extension of activities or services (Art. 15) 
Withdrawal of authorisation (Art. 20) 
Review and evaluation of the CCP's 
compliance with EMIR regularly, at least 
annually (Art. 21) 
Emergency situations (Art. 24) 

206  Articles 18 and 19 of EMIR. 
207  Article 23a of EMIR. 

ESMA opinion  
(draft prepared by CCP 
Supervisory Committee)207 
✔ 
✔ 
✔ 

✔ 

✔ 

✔ 
✔ 
(No opinion, but College is 
informed) 

(No opinion, but College is 
informed) 

(No opinion, but ESMA is 
informed) 

104 

 
 
 
 
 
 
                                                           
Record-keeping (Art. 29) 
Shareholders and members with qualifying 
holdings (Art. 30-32) 
Conflicts of interest (Art. 33) 
Outsourcing (Art. 35) 
General provisions on conduct of business 
(Art. 36) 
Validation of models and parameters for 
margins (Art. 41(2)) 
Review of models, stress testing and back 
testing (Art. 49) 

Interoperability arrangements (Art. 51) 
Approval of interoperability arrangements 
(Art. 54) 

✔ 

✔ 

✔ 

✔ 

✔ 
✔ 

✔ 
✔ 

✔ 
✔ 
✔ 

(ESMA validation required 
in addition to an NCA 
validation) 

✔ 

105 

 
 
 
 
 
 
 
ANNEX 6: OPTIONS DISCARDED AT AN EARLY STAGE 

Certain  options  were  discarded  at  an  early  stage  as  inconsistent  with  the  EU  legal 
framework or with financial stability considerations that are at the heart of EMIR and of 
this initiative. These options refer, in particular, to measures targeting the supply side of 
clearing services (Section 5.2.1), measures targeting the demand side of clearing services 
(Section 5.2.2), and relying on an approach based on global coordination.  

Concerning the supply side of clearing services, two options were discarded as they fall 
within the competence of central banks: granting all EU CCPs the same access to central 
bank liquidity facilities, irrespective of the need for a banking licence; and the extension 
of the operating hours of payment systems (Target 2) beyond the current closing time (6 
p.m.).  The  same  level  of  access  to  central  bank  liquidity  facilities  for  EU  CCPs 
irrespective  of  them  holding  a  banking  license  could  contribute  to  improving  the 
attractiveness  of  the  EU  central  clearing  framework  and  bringing  the  EU  in  line  with 
other  jurisdictions,  e.g.  the  UK  or  the  US.  Stakeholders  consider  this  option  to  be 
effective or rather effective in contributing to the objectives of the initiative, and Member 
States’  feedback208  was  also  overall  positive.  ESMA  also  assessed  this  option  as  worth 
exploring, since requiring a banking license leads to additional costs without clear added 
value.209 However, in the EU access to central bank facilities is the exclusive competence 
of central banks and linked to their independence as grounded in the TFEU. As regards 
Target 2 operating hours, extending them would allow clearing participants to meet late-
hour  CCP  margin  calls  in  euros  instead  of  relying  on  other  currencies  (typically,  US 
Dollars), as Euro payments cannot be processed after Target 2 closes210. Respondents to 
the  targeted  consultation  also  generally  supported  this  option,  also  because  it  would 
reduce  the  dependence  of  EU  clearing  participants  on  US  Dollar  liquidity.  However, 
these types of operational initiatives are not regulated under EMIR. Consequently, these 
options were not further assessed. 

As  regards  the  demand  of  clearing  services,  the  option  of  broadening  the  scope  of 
products  subject  to  a  clearing  obligation  was  discarded.  Stakeholders  generally  did  not 
see the specific need to extend the range of products subject to the clearing obligation, as 
the  criteria  for  including  new  products  are  already  clear  in  the  EMIR  framework;  only 
products that are liquid and standardised enough could qualify for a clearing obligation. 
CCPs,  on  the  other  hand,  were  generally  in  favour  of  an  extended  scope.  However, 
extending the scope of the clearing obligation is already possible under EMIR following 
a procedure involving ESMA. The procedure requires an analysis as to if the mentioned 
criteria are met before imposing a clearing obligation. These criteria are associated with 
financial stability and they should be duly assessed for any new category of products to 
be made subject to a clearing obligation. In light of the above, a more regular review by 
ESMA  of  the  products  rather  than  any  specific  changes  to  the  criteria  for  the  clearing 
obligation is considered more appropriate. 

Another  option  concerning  the  demand  of  clearing  services  which  was  discarded  is 
imposing  a  straightforward  obligation  to  clear  all  derivative  transactions  at  EU  CCPs 

208  Derivatives and Market Infrastructures Member States Working Group on 30 March 2022 and on 16  June 

2022. 

209  See ESMA’s reply to the targeted consultation on clearing, 1 April 2022, see footnote 100. 
210  Ancillary services are available after Target 2 closes. 

106 

 
 
                                                           
and/or  Tier  1  CCPs.  The  vast  majority  of  respondents  were  against  an  amendment  of 
Article 5 of EMIR resulting in a clearing obligation for new contracts which could only 
be  fulfilled  through  authorised  EU  CCPs  and/or  recognised  Tier  1  CCPs.  Several 
Member  States  also  opposed  such  a  measure211.  This  option  was  discarded  as 
disproportionate at this stage.  

The option to oblige pension scheme arrangements to clear is not considered here as this 
requirement already exists and will kick in on 19 June 2023. 

As regards the option of relying on coordination  at  the global level,  following on from 
the  G20  commitments  in  Pittsburgh212,  there  is  cooperation  on  standard-setting  among 
the  major  jurisdictions.  The  EMIR  framework  is  based  on  the  Principles  for  Financial 
Market  Infrastructures  set  by  the  relevant  international  body  (CPMI-IOSCO);  EMIR 
implements then in the EU in an ambitious way, sometimes even going beyond them213. 
The  EU  also  participates  in  the  monitoring  of  their  implementation  and  regularly 
discusses  implementation  issues  in  the  relevant  international  fora.  As  described  in  this 
impact  assessment  different  jurisdictions  have  chosen  different  ways  to  implement  the 
international  principles  for  financial  market  infrastructures.  Within  these  frameworks, 
third-countries,  such  as  Japan  or  the  US,  have  also  opted  to  manage  their  exposure  to 
foreign  entities  to  protect  their  financial  and  economic  system  from  undue  risks.  Japan 
requires  Japanese  entities  to  clear  their  home  currency-denominated  interest  rate 
derivatives  through  a  local  CCP214,  while  the  US  has  a  more  expansive  approach  to 
supervision,  complemented  by  the  possibility  to  grant  additional  powers  to  the  Federal 
Reserve over UK CCPs. The UK too has a specific regime for exposures to third-country 
CCPs. A globally-agreed approach to the exposures to third-country CCPs is difficult to 
achieve because jurisdictions have developed their own approaches and do not share the 
same  situations  and  interests.  As  such,  the  option  of  relying  solely  on  international 
cooperation has been discarded at an early stage. 

Finally,  the  option  of  granting  permanent  equivalence  to  certain  third  countries  is 
discarded here too. Such an approach would not mitigate the risks for EU firms and the 
wider  EU  financial  system  arising  from  substantially  systemic  exposures  and  thus  be 
ineffective.  More  importantly,  this  impact  assessment  cannot  tie  the  hands  of  a  future 
Commission, in particular if the regulatory and supervisory framework of a third country, 
e.g. the UK, were to diverge from that of the EU, which remains a possibility.  

211  Derivatives and Market Infrastructures Member States Working Group on 30 March 2022.  
212  https://www.bis.org/cpmi/info_pfmi.htm  
213  E.g.  in  some  instances  EMIR  has  more  prescriptive  requirements  than  those  set  out  in  the  PFMIs,  in 
particular  in  relation  to  financial  risks.  For  example,  EMIR  requires  all  CCPs  to  maintain,  ex  ante, 
resources to cover the credit risk generated by the default of at least the two clearing members to which it 
has  the  largest  exposures  (the  PFMIs  require  CCPs  that  either  have  a  more  complex  risk  profile  or  are 
systemically  important  in  multiple  jurisdictions  to  maintain  this  level  of  resources).  Similarly  EMIR 
requires all CCPs to maintain, ex ante, resources to cover the liquidity shortfalls generated by the default of 
at  least  the  two  clearing  members  to  which  it  has  the  largest  exposures  (PFMIs  require CCPs  that  either 
have  a  more  complex  risk  profile  or  are  systemically  important  in  multiple  jurisdictions  to  consider 
maintain this level of resources). 

214  See CEPS, 2021, ”Setting EU CCP policy – much more than meets the eye”. 

107 

 
                                                           
 
ANNEX 7: BACKGROUND 

1.  THE OVER-THE-COUNTER (OTC) DERIVATIVES MARKET 

A derivative is a financial contract whose value is linked to a change in the price of an 
underlying  asset,  a  basket  of  assets  or  other  benchmark  or  index.  They  allow  for  a 
transfer of risks between market  participants and are often used to  cover  the risks (e.g. 
interest  rate,  exchange  rate  risks).215  Derivatives  can  also  be  used  for  speculative 
purposes.  Examples  of  assets  on  which  a  derivative  contract  can  be  written  include 
equities  or  commodities  (metals,  oil,  cereals…).  OTC  derivatives  can  therefore  have  a 
significant  impact  on  the  real  economy,  from  mortgages  to  food  prices.  The  value  of  a 
derivative  can  also  be  derived  from  the  value  of  a  market  variable  (e.g.  interest  rate 
benchmark, exchange rate or a stock index). Although derivatives are generally used to 
cover  the  risk  of  changes  in  the  value  of  the  underlying  asset,  the  way  markets  work 
means that the price of the derivative can influence on the price of the underlying asset 
and vice-versa.216 

An OTC derivative contract is privately negotiated between two firms and not traded on 
regulated  markets.  It  is  tailored  to  the  specific  needs  of  the  counterparties.  Derivatives 
traded on a  regulated market  are called exchange traded derivatives (ETDs), by  nature, 
these are standardised and generally less risky than OTC derivatives.217 As of end-June 
2021,  the  outstanding  notional  of  OTC  derivatives  amounted  to  EUR 514 trillion, 
corresponding  to  88%  of  the  overall  derivatives  market.218  Interest  rate  derivatives 
represent 80% of outstanding OTC derivatives, of which 60% are cleared through CCPs. 

OTC  derivatives  were  at  the  heart  of  the  2008-2009  financial  crisis  for  several  reasons 
including  the  lack  of  transparency  in  those  markets,  the  leverage219  market  participants 
could build through them, as well as the risk they expose parties to the contract to, and 
the resulting interconnectedness throughout the financial system. To address those risks, 
the  G20  decided  in  2009  to  make  the  OTC  derivatives  market  more  transparent  by 
reporting contracts to trade repositories and requiring all standardised OTC derivatives to 
be traded on exchanges or electronic platforms and centrally cleared, while also ensuring 
that uncleared derivative transactions are appropriately risk managed. In the EU, this was 
implemented via the European Market Infrastructure Regulation (EMIR) in 2012. 

215  E.g. an airline company will want to “lock” the price of fuel over a period of time or an insurance company 
will  want  to  make  sure  it  is  protected  from  the  risk  of  rising  interest  rates  that  would  lower  the  present 
value of the securities it has invested in. 

216  This is particularly true as the outstanding notional of derivatives is not limited to the outstanding notional 
of  the  underlying  they  refer  to.  E.g.  more  call  options  on a  stock  can  be  written  than  there  are  stocks  in 
circulation, if all those options are exercised at the same time the price of the stock will naturally go up. 
217  The  key  advantages  of  ETDs  over  OTC  Derivatives  are  their  standardisation,  liquidity  and  the  fact  that 

there is no default risk attached to them as the obligations are guaranteed by the exchange. 

218  BIS, OTC derivatives statistics: https://www.bis.org/statistics/derstats.htm  
219  Leverage results from using borrowed capital as a funding source when investing in an asset. Just as they 
can refer to  more stocks than have been issued, through leverage, derivatives can offer  an exposure to x 
times the performance of a given stock, benchmark or index. 

108 

 
 
                                                           
2.  CLEARING 

CCPs interpose themselves between counterparties to a financial instrument or product, 
becoming the buyer to every seller and the seller to every buyer in a process known as 
clearing.  EMIR  defines  clearing  as  the  process  of  establishing  positions,  including  the 
calculation of net obligations, and ensuring that financial guarantees (or ‘collateral’) are 
available to secure the exposures arising from those positions.220 CCPs become the focal 
point  for  derivative  transactions,  linking  multiple  financial  actors,  increasing  market 
transparency and reducing some risks. As a corollary, CCPs concentrate risk and should 
therefore be regulated and supervised accordingly. 

3.  CCPS ARE VITAL INFRASTRUCTURES FOR THE FINANCIAL SYSTEM 

CCPs  are  at  the  centre  of  financial  markets.  They  play  a  key  role  in  mitigating 
counterparty  credit  risk  in  transactions  involving  a  range  of  financial  instruments  and 
products,  thereby  contributing  to  the  reduction  of  systemic  risk.221  By  interposing 
themselves  between  parties  to  transactions,  CCPs  simplify  the  network  of  counterparty 
exposures and  lower  the average  counterparty  credit risk222 through multilateral  netting 
techniques,  i.e.  a  payment  arrangement  under  which  transactions  among  multiple 
counterparties  are  grouped  and  settled  on  a  net  basis,  rather  than  settled  individually 
(Figure  4).  These  techniques  could  reduce  exposures  and,  as  a  result,  central  clearing 
may  also  mitigate  systemic  risk  by  reducing  the  risk  that  the  default  of  one  or  several 
clearing members propagates from counterparty to counterparty. 

Figure  4  -  Exposures  network:  from  non-centrally  cleared  to  centrally  cleared 
derivatives 

Source: BIS223 

A limited number of clearing members typically access CCPs directly, while a wide array 
of clients and indirect clients access CCPs via clearing members or clients respectively. 
Clients  and  indirect  clients  typically  include  medium  sized  banks,  small  financial 
companies, investment funds, insurance companies as well as non-financial  companies. 
Direct CCP membership is concentrated in a limited number of entities, as CCPs impose 
stringent  criteria  to  clearing  members,  notably  in  terms  of  financial  robustness, 

220  See EMIR, Article 2(2). 
221  Systemic risk refers to the risk that the inability of one participant to meet its obligations in a system will 
cause other participants to be unable to meet their obligations when they become due, potentially with spill 
over effects (e.g. significant liquidity or credit problems) threatening the stability of or confidence in the 
financial system. That inability to meet obligations can be caused by operational or financial problems. 
222  The risk that a counterparty will not settle an obligation for full value, when due or at any time thereafter. 

Credit risk includes pre-settlement risk (replacement cost risk) and settlement risk (principal risk). 
current 

December 

clearing: 

issues", 

trends 

2015, 

223  "Central 

and 

available 

http://www.bis.org/publ/qtrpdf/r_qt1512g.htm  

at 

109 

 
 
                                                           
operational capacity and product expertise.224 Typically in the EU, a clearing member is a 
large credit institution subject to prudential requirements under the Capital Requirements 
Regulation225,  engaging  with  CCPs  to  trade  on  their  own  account  or  that  of  their 
clients.226 

Post-crisis  reforms  have  focused  on  establishing  clearing  obligations  for  standardised 
OTC  derivatives,  but  CCPs  clear  a  much  wide  and  diverse  range  of  financial 
instruments  and products.  Instruments cleared  by CCPs  differ in  risk profile, ranging 
from the clearing of securities which are liquid assets and for which a key risk lies in the 
settlement of transactions, usually over a few days, to long term OTC derivatives which 
can  become  highly  illiquid  in  times  of  stress  and  have  market,  liquidity  and  credit  risk 
spread over several years. 

Contracts  cleared  by  CCPs  can  be  outright  purchases  and  sales  of  securities  (bonds  or 
equities),  commodities,  Securities  Financing  Transactions227 
including 
repurchase agreements, i.e. repos), or derivatives, whether traded on an exchange (listed) 
or  bilaterally  (OTC).  A  large  number  of  CCPs  only  clear  securities  and  SFTs  in  their 
local markets, but about half of them also clear derivatives, locally or internationally. In 
contrast, most CCPs established in the EU clear several product classes, from listed and 
OTC  financial  and  commodity  derivatives  to  cash  equities,  bonds  and  repos.228  EU 
financial market participants can use EU authorised CCPs and CCPs established outside 
of the EU, if recognised by ESMA.229 

(‘SFTs’, 

4.  CLEARING IN THE EU 

4.1. 

Increasing volumes of clearing 

Since the adoption of EMIR and the introduction of a clearing obligation for standardised 
OTC  derivatives  and  the  creation  of  incentives  for  central  clearing  (see  Section  1.4.1), 
the  number  of  centrally-cleared  contracts,  in  particular  for  interest-rate  and  credit 
derivatives, has significantly increased. (Figure 5).  

The outstanding gross market value of transactions cleared by CCPs globally reflects the 
introduction  of  central  clearing  obligations  across  asset  classes  as  well  as  a  broad 
acceptance  of  the  benefits  of  central  clearing  by  market  participants.  The  notional 
amounts of centrally cleared OTC derivatives transactions outstanding at the end of June 

224  EMIR imposes non-discriminatory, transparent, objective criteria to ensure fair and open access. 
225  Regulation  (EU)  No  575/2013  of  the  European  Parliament  and  of  the  Council  of  26  June  2013  on 
prudential  requirements  for  credit  institutions  and  amending  Regulation  (EU)  No  648/2012,  OJ  L  176, 
27.6.2013. 

226  See,  e.g.  the  list  of  active  clearing  members  at  Eurex  Clearing  AG:  https://www.eurex.com/ec-

en/join/clearing-contacts  

227  Securities financing transactions (SFTs) allow the use of assets, e.g. shares or bonds, to secure funding for 
their activities. A securities financing transaction can be: a repurchase transaction  - selling a security and 
agreeing to repurchase it in the future for the original sum of money plus a return for the use of that money; 
lending a security for a fee in return for a guarantee in the form of financial instruments or cash given by 
the borrower; a buy-sell back transaction or sell-buy back transaction; a margin lending transaction. 

228  “List of Central Counterparties authorised to offer services and activities in the Union”, ESMA, November 

2021: https://www.esma.europa.eu/sites/default/files/library/ccps_authorised_under_emir.pdf  

229  “List  of  third-country  central  counterparties  recognised  to  offer  services  and  activities  in  the  Union”, 
https://www.esma.europa.eu/sites/default/files/library/third-

2021: 

August 
ESMA, 
country_ccps_recognised_under_emir.pdf  

110 

 
                                                           
those  derivatives 

2021 was estimated at USD 610 trillion,230 of which USD 488 trillion was attributable to 
interest-rate derivatives and USD 8.8 trillion was attributable to credit default swaps. The 
gross  market  value  of 
represented  USD 8.9 trillion  and 
USD 205 billion,  respectively.  For  interest-rate  derivatives,  75%  of  the  outstanding 
notional  amount  was  centrally  cleared,  with  a  corresponding  share  of  64%  for  credit 
derivatives.  The  share  of  centrally-cleared  transactions  in  other  segments  of  OTC 
derivatives markets remains negligible (about 4% of the outstanding notional amount for 
OTC foreign exchange derivatives and roughly 1% for equity-linked contracts231), mainly 
due to the absence of a central clearing obligation. 

Figure  5:  Growth  of  central  clearing  (notional  amounts  outstanding  by 
counterparty in percent) 

Source: BIS derivatives statistics, November 2021232 

EEA30 derivatives stood at EUR 244 trillion in outstanding total notional amount, down 
from  EUR 254 trillion  a  year  earlier233.  Market  composition  changed  slightly,  with 
interest rate derivatives (IRDs) accounting for 79% of notional amount in 4Q20 (up from 
76% in 4Q 2019) while 13% of the notional amount was in currency (down from 16%), 
with 8% remaining in equity, credit and commodities. Credit institutions and investment 
firms were the most significant counterparties, these were counterparties in close to 75% 
of  contracts  by  outstanding  notional  amount.  OTC  derivatives  contracts  still  accounted 
for most of the outstanding notional amount, 92%, but 16% of all notional amount was in 
on-trading venue OTC contracts, while 8% was in exchange traded derivatives (ETDs). 
Central clearing rates in Q4 2020 were 71% of the notional amount in IRDs and 41% in 
credit derivatives, both up on a year earlier (from 68% and 38% respectively).234  

230  Statistical 

derivatives 
release:  OTC 
https://www.bis.org/publ/otc_hy2111.pdf   

statistics 

at 

end 

June 

2021,  November 

2021, 

231  There is little benefit to centrally clear FX derivatives as the main risk they pose is settlement risk, a risk 
better mitigated through payment and settlement systems. Equity derivatives represent a very small portion 
of the derivatives market and have the characteristic of not being highly standardised as interest rates and 
credit derivatives can be. 

232  Statistical 

derivatives 
release:  OTC 
https://www.bis.org/publ/otc_hy2111.pdf   

statistics 

at 

end 

June 

2021,  November 

2021, 

233  As of end 2020. See EU Derivatives Markets, ESMA Annual Statistical Report, 2021. 

https://www.esma.europa.eu/sites/default/files/library/esma50-165-2001_emir_asr_derivatives_2021.pdf  
234  As  a  continued  part  of  the  single  market  during  the  transition  period,  the  UK  remained  central  to  EU 
derivative  markets  in  2020,  about  half  of  contracts  by  notional  amount  have  a  UK  counterparty,  and  a 
quarter in contracts are held between two EEA30 counterparties. 

111 

 
 
                                                           
 
Since  June  2016,  certain  interest-rate  and  credit  derivatives  need  to  be  centrally 
cleared;235  mandatory  central  clearing  for  other  derivatives  can  be  required  by  the 
Commission  on  the  basis  of  a  recommendation  by  ESMA  if  liquidity  picks  up  and  the 
criteria for the clearing  obligation are deemed fulfilled.236 Further requirements exist to 
mitigate  risk  in  bilateral  transactions237  by  imposing  higher  collateral  requirements  (as 
agreed by the G20) and to strengthen the incentives to move to central clearing (where 
possible and available).238 The higher collateral requirement on bilateral transactions has 
attracted  many  entities  towards  central  clearing,  e.g.  insurance  companies  and  pension 
funds  or,  even  though  the  latter  do  not  currently  fall  within  the  scope  of  the  EMIR 
clearing obligation. This trend is likely to continue in 2022 with the entry into force of 
the requirements for the last class of entities to be subject to the framework.239 

4.2.  Concentrated and integrated CCP landscape 

Most  CCPs  (and  other  market  infrastructures)  were  originally  established  to  serve 
national  needs.  Today,  many  of  these  CCPs  provide  their  services  across  national 
borders,  regardless  of  the  currency  denomination,  and  the  market  for  the  provision  of 
clearing services is highly concentrated. 

While  the  volume  of  transactions  cleared  in  the  EU  has  increased  substantially,  the 
number  of  CCPs  remains  high  compared  to  other  jurisdictions  with  a  limited  range  of 
products offered for clearing. Currently, there are 14 CCPs240 established in the EU and 
authorised under EMIR to offer clearing services in the EU. Some of these EU CCPs are 
also authorised, recognised or registered by third-country authorities to provide clearing 
services to non-EU clearing members or trading venues. 

Not  all  EU  CCPs  are  authorised  to  clear  all  asset  classes.  In  the  case  of  some  asset 
classes,  there  is  only  a  small  number  of  EU  CCPs  offering  clearing  services  (e.g.  only 
one  EU  CCP  clears  credit  derivatives,  only  two  EU  CCPs  clear  inflation-rate 
derivatives).  In  addition  to  EU  CCPs,  a  further  38  third-country  CCPs  have  been 

235  The central clearing determinations covering OTC interest rate swaps (IRS) related to the Euro, the USD, 
the  Yen,  the  British  Pound,  the  Norwegian  Krone,  Polish  Zloty,  and  Swedish  Krona  as  well  as  Credit 
Default Swaps (CDS) apply to all counterparties above the clearing thresholds. See Commission Delegated 
Regulation  (EU)  2015/2205,  Commission  Delegated  Regulation  (EU)  2016/1178  and  Commission 
Delegated Regulation (EU) 2016/592. 

236   The detailed compliance deadlines for the central clearing determination applying to various asset classes 

and to different types of counterparties are available here: 
https://www.esma.europa.eu/sites/default/files/library/public_register_for_the_clearing_obligation_under_
emir.pdf  

237   Commission Delegated Regulation (EU) 2016/2251 of 4 October 2016 supplementing Regulation (EU) No 
648/2012  of  the  European  Parliament  and  of  the  Council  on  OTC  derivatives,  central  counterparties  and 
trade  repositories  with  regard  to  regulatory  technical  standards  for  risk-mitigation  techniques  for  OTC 
derivative contracts not cleared by a central counterparty, OJ L 340, 15.12.2016, p. 9–46. 

238  These  requirements  follow  international  standards  developed  by  the  BCBS  and  IOSCO.  For  further 

information, see http://www.bis.org/bcbs/publ/d317.htm  

239  From  1  September  2022,  counterparties  having,  or  belonging  to  a  group  having  an  aggregate  average 
notional  amount  of  non-centrally  cleared  derivatives  that  is  above  EUR  8  billion  will  have  to  start 
exchanging initial margin. See Commission Delegated Regulation (EU) 2016/2251. 

240  A list of those CCPs and the classes of financial instruments covered by their authorisations can be found 

here: https://www.esma.europa.eu/sites/default/files/library/ccps_authorised_under_emir.pdf.  

112 

 
                                                           
recognised  by  ESMA  under  EMIR,  including  UK  CCPs  in  September  2020  enabling 
them to offer their services in the EU.241 

The  number  of  recognised  third-country  CCPs  reflects  the  EU's  commitment  to 
integrated  financial  markets  and  international  standards.242  Once  recognition  has  been 
granted, the third-country CCP may provide services to clearing members established in 
the EU and to EU trading venues, EU counterparties may use the third-country CCP to 
clear OTC derivatives subject to the EMIR clearing obligation, in the same way as an EU 
CCP.  Such  recognition  also  allows  EU  clearing  member  banks  to  benefit  from 
preferential  risk  weightings  for  calculating  the  capital  requirements  associated  with  the 
trade exposures and default fund contributions towards those third-country CCPs.243 

Despite having  52  CCPs authorised or recognised under EMIR  for clearing worldwide, 
central clearing markets are generally concentrated in a few CCPs located outside of the 
EU, and are highly concentrated in  respect  of some asset classes.244 As a  consequence, 
the  EU  is  heavily  reliant  on  certain  third-country  CCPs.  For  instance,  according  to  the 
ESRB,  at  end-December  2020,  SwapClear,  the  clearing  service  of  LCH  Ltd  (a  CCP 
established  in  the  UK)  for  interest  rate  derivatives,  cleared  more  than  90%  of  centrally 
cleared  OTC  interest  rate  derivatives  globally.  In  terms  of  EU  currencies,  SwapClear 
cleared  more  than  80%  of  the  volume  of  EUR-denominated  OTC  IRDs  and  more  than 
90% of the volume for OTC IRDs denominated in other EU currencies.245 Additionally, 
there  are  CCPs  established  outside  of  the  EU  that  have  no  substitute  globally  to  their 
clearing offer (e.g. LME Ltd in the UK which clears commodity derivatives).  

4.3.  Big differences in product offerings 

Most  CCPs,  albeit  with  some  exceptions,  operate  mainly  as  regional  or  national  hubs 
based on the currencies of the instruments they clear, with instruments being traded and 
cleared  by  and  between  local  participants  in  local  CCPs.  The  exceptions  are  a  few 
‘global’  CCPs  offering  services  for  a  broad  range  of  products  to  a  wide  spectrum  of 
clearing members and clients. 

EU  CCPs  initially  developed  their  offer  on  the  basis  of  the  needs  of  local  market 
participants,  i.e.  serving  local  equity  and  bond  markets  as  well  as  derivatives  allowing 
hedging in the local currency. With the introduction of the euro and the development of 
the  single  market,  some  CCPs  have  started  to  offer  products  that  are  of  interest  to  the 

241  ESMA provides  a list of the  third-country  CCPs recognised to offer services and activities in the Union, 

including the classes of financial instruments covered by the recognition. See Annex 5.  

242  See  G20  Leaders'  St  Petersburg  Declaration  of  September  2013  (paragraph  71):  “We  agree  that 
jurisdictions and regulators should be able to defer to each other when it is justified by the quality of their 
respective regulatory and enforcement regimes, based on similar outcomes, in a non-discriminatory way, 
paying due respect to home country regulatory regimes.”, as well as the G20 Leaders' Brisbane declaration 
of November 2014 (paragraph 12): “We call on regulatory authorities to make further concrete progress in 
swiftly  implementing  the  agreed  G20  derivatives  reforms.  We  encourage  jurisdictions  to  defer  to  each 
other when it is justified, in line with the St Petersburg Declaration". 

243  Under the CRR, exposures to ‘qualifying’ CCPs (QCCPs) are treated as less risky than exposures to ‘non-
qualifying’  CCPs  (non-QCCPs)  and  are  subject  to  lower  capital  requirements.  A  QCCP  is  defined  as  a 
central  counterparty  that  has  been  authorised  or  recognised  in  accordance  with  EMIR;  see  point  (88)  of 
Article 4(1) of Regulation (EU) No 575/2033. 
statement 

important  UK  CCPs; 

244   See  ESMA’s 

systemically 

assessment 

on 

its 

of 

https://www.esma.europa.eu/press-news/esma-news/esma-publishes-results-its-assessment-systemically-
important-uk-central  

245  According to sources available to the Commission.  

113 

 
                                                           
international community. However, given the prominent role London has taken over the 
years  as  a  financial  hub  while  the  UK  was  part  of  the  EU,  thanks  to  the  regulatory 
environment  offered  by  the  single  market,  the  trading  and  clearing  of  derivatives 
developed and concentrated in the UK. 

In  general,  most  EU  clearing  members  active  in  UK  CCPs  are  also  participants  in 
EU CCPs.  For  example, as regards  LCH  Ltd,  the level  of participation  of EU  clearing 
members varies per clearing segment and is the highest in SwapClear, which is used by 
47 EU clearing members from 12 Member States.246 The top three EU clearing members 
in  SwapClear  include  BNP  Paribas  (France),  Deutsche  Bank  (Germany)  and  Société 
Générale (France)247. Among the top 30 clearing members at SwapClear, 9 are from the 
EU. Currently, the main alternative to SwapClear in the EU is Eurex Clearing and most 
EU  clearing  members  active  at  SwapClear  are  also  clearing  members  in  Eurex 
Clearing248. However, LCH Ltd is able to offer the clearing of some contracts in certain 
third-country currencies, due to the economies of scale achieved and due to its extended 
membership. Overall, Eurex Clearing offers clearing of fewer currencies.  

Table 4 shows the participation in LCH Ltd: in addition to participants from the EU, the 
high number of participants from other jurisdictions should also be noted. 

Table 4. Clearing members per LCH Ltd clearing service (end of June 2021) 

Business 
Segment 

SwapClear 

ForexClear 
Listed Rates 
RepoClear 

EquityClear 

Number of EU clearing members 

47 (AT, BE, DE, DK, ES, FR, FI, IE, 
IT, NL, PL, SE)249 
9 (DE, ES, FR, NL) 
2 (FR) 
43 (BE, DE, DK, ES, FR, IE, IT, LU, 
NL) 
19 (FI, FR, DE, IE, IT, NL, ES) 

Source: ESMA Report, December 2021 

Number of non-
EU clearing 
members 
75 

24 
14 
63 

22 

Total number of 
clearing members 

122 

33 
16 
106 

41 

Given SwapClear’s dominant market share in OTC interest rate derivatives, an important 
number  of  EU  entities  have  direct  or  indirect  access  to  this  service  to  be  able  to  clear 
products  under  the  clearing  obligation.  For  the  other  segments,  EU  entities’  reliance  is 
lower  due  to  the  absence  of  the  clearing  obligation  and  the  availability  of  alternative 
services at other CCPs. 

A  significant  number  of  EU  clients250,  from  23  Member  States,  are  also  active  at 
SwapClear251. Some, but not all, of the clients are subject to the clearing obligation for 
interest rate derivatives. Participation of EU clients in SwapClear is greater than in Eurex 
Clearing. For example, the clearing activity of pension scheme arrangements (for cleared 
swaps) is split between Eurex and LCH Ltd in the same proportion as for the rest of the 
market, i.e. LCH Ltd has a very dominant market share.252  

246  See 2021 ESMA report on UK CCPs (see footnote 9 above). 
247  See 2021 ESMA report on UK CCPs (see footnote 9 above). 
248  See 2021 ESMA report on UK CCPs (see footnote 9 above).. 
249  In addition, one Norwegian entity is a clearing member of SwapClear. 
250  EU credit institutions, pension funds, insurance companies, other funds and corporates. See Glossary. 
251  See 2021 ESMA report on UK CCPs (see footnote 9 above). 
252  ESMA  Letter  to  the  European  Commission,  1  February  2022,  https://www.esma.europa.eu/press-

news/esma-news/esma-recommends-clearing-obligation-pension-funds-start-in-june-2023  

114 

 
                                                           
Also  in  the  case  of  ICE  EU,  the  largest  EU  clearing  members  participate  in  both  its 
clearing segments (the futures and options segment and the CDS segment), as shown in 
Table  5  below.  A  significant  number  of  major  non-EU  clearing  members  also 
participate253. The CCP is estimated to have an important market share for these products 
in Europe, notably for the transactions of EU clearing members.  

Table 5. Clearing members per ICEU clearing service (end June 2021) 

Business Segment 

Number of EU clearing members 

CDS 
F&O 

Source: ESMA Report, December 2021 

15 (DE, ES, FR, IE, IT) 
20 (DE, ES, FR, IT, NL, SE) 

Number of 
non-EU 
clearing 
members 
15 
55 

EU CCPs offer a range of products to large international banks, funds and institutional 
investors as well as non-financial companies including: cash equity markets at EuroCCP; 
euro  general  collateral  repos  at  LCH  SA  or  Eurex  Clearing;  EURO  STOXX  futures  at 
Eurex Clearing; interest rate derivatives in multiple currencies in Eurex Clearing; credit 
default swaps in a broad range of EU and US underlyings at LCH SA; some commodity 
and energy products at ECC (power, natural gas, emission allowances, pulp). See Annex 
X for further information. 

LCH  Ltd,  for  example,  offers  clearing  of  interest  rate  derivatives  in  27  currencies, 
referencing  different  benchmark  rates  across  a  wide  range  of  available  maturities  (See 
Table  6)254.  LCH  Ltd  clears  products  denominated  in  all  EU  currencies,  including  all 
IRDs subject to the clearing obligation255. The market share of SwapClear is estimated to 
be  above  90%  for  these  products.256  Within  LCH  Ltd,  the  activity  in  products 
denominated in EU currencies is relatively important compared to other currencies with a 
share of around 27%.  

Table 6. Example of different CCP offer: LCH Ltd SwapClear vs Eurex Clearing 

253  See 2021 ESMA report on UK CCPs (see footnote 9 above). 
254   ESMA Assessment Report under Art. 25(2c) of EMIR, 16 December 2021. 
255   LCH  Ltd  offer  includes  all  OTC  Interest  Rate  Derivatives  subject  to  the  clearing  obligation,  which  are 
EUR/GBP/USD/JPY/NOK/PLN/SEK-denominated  Basis  Swaps,  interest  rate  swaps,  forward  rate 
agreements and overnight index swaps. These contracts are subject to the clearing obligation pursuant to 
Commission  Delegated  Regulation  (EU)  2015/2205  and  the  Commission  Delegated  Regulation  (EU) 
2016/592. 

256  According to confidential information provided to DG FISMA services. 

115 

 
                                                           
CO Transactions257 

IRS, ZC, Basis, VNS, 
FRA, OIS 

Inflation 

Basis Overnight/IBOR 

LCH Ltd 

Eurex Clearing 

EUR, USD, GBP, JPY, 
NOK, PLN, SEK 

EUR, USD, GBP 
CHF, JPY 
DKK, SEK, NOK 
PLN, CZK, HUF 
AUD, CAD, HKD, MXN, 
NZD, SGD, ZAR, BRL, 
CLP, CNY, COP, INR, 
KRW, ILS, THB, TWD 
EUR, GBP, USD 
AUD, CAD, EUR, GBP, 
JPY, NZD, SGD, USD 

EUR, USD, GBP, JPY, NOK, PLN, SEK 

EUR, USD, GBP 
CHF, JPY 
DKK, SEK, NOK 
PLN, CZK, HUF 
AUD, CAD, HKD, MXN, NZD, SGD, ZAR, 
BRL, CLP, CNY, COP, INR, KRW, ILS, 
THB, TWD 

EUR, GBP, USD 
AUD, CAD, EUR, GBP, JPY, NZD, SGD, 
USD 

Source: CCP websites, green: similar product offering, orange: partial match (not all maturities available), 
red: no product offering 

Clearing  members  and  clients  argued  that  to  benefit  from  portfolio  margining258,  and 
because  of  the  correlation  between  currencies,  there  is  an  incentive  to  clear  all  interest 
rate  swaps  in  the  CCP  offering  the  widest  range  of  currencies  available  for  clearing.259 
(See Section X). LCH Ltd, for example, currently provides a wider currency offer than 
EU CCPs.  

Another  example  is  credit  default  swaps  (CDSs).  Before  the  global  financial  crisis, 
CDS  clearing  was  in  ICE  Clear  Credit  in  the  US  and  ICE  Clear  Europe  (ICEU)  in  the 
UK. ICEU offers clearing of EU CDSs executed in the OTC market, which includes 148 
index products, 200 corporate single names, and 7 sovereign single names260. It contains 
products subject to the EU clearing obligation. An alternative offer was launched in 2010 
in  LCH  SA.261  In  recent  years,  LCH  SA’s  offer  grew  from  a  very  low  market  share, 
nevertheless, as shown in Figure X, ICE Group CCPs continue to dominate the market. 

Figure 6: Market Share of EUR iTraxx 

257   Interest rate derivatives subject to a clearing obligation at the time of writing. 
258   Portfolio margining is groups transactions where risk factors are correlated to one another, the amount of 

collateral required by the CCP can be reduced while achieving the same level of risk mitigation. 

259   Responses to the targeted consultation and confidential contributions to DG FISMA services as part of the 

work of the Commission Working Group in 2021. 

260   See 2021 ESMA report on UK CCPs (see footnote 9 above). 
261   https://secure-area.lchclearnet.com/media_centre/press_releases/2010-10-05_2.asp  

116 

 
 
 
                                                           
Source: ClarusFT  

Table 7. Illustrative example: CCP CDS services 

Clearing 
Obligation 

Other Indexes 

Single Name 

Sovereigns 

ICEU 
Itraxx Europe Main 
Itraxx Europe Crossover 
Itraxx Senior Financials 
Itraxx Sub Financials 
CDX.NA.IG 
CDX.NA.HY 
European Corporates 
AT 
BE 
ES 
IE 
IT 
NL 
PT 

ICE Clear Credit LLC 
Itraxx Europe Main 
Itraxx Europe Crossover 
Itraxx Senior Financials 
Itraxx Sub Financials 
CDX.NA.IG 
CDX.NA.HY 
European Corporates 
AT 
BE 
ES 
IE 
IT 
NL 
PT 

LCH SA 
Itraxx Europe Main 
Itraxx Europe Crossover 
Itraxx Senior Financials 
Itraxx Sub Financials 
CDX.NA.IG 
CDX.NA.HY 
European Corporates 
AT 
BE 
ES 
IE 
IT 
NL 
PT 

Source: CCP websites, green: similar product offering, red: no product offering 

ICEU  also  offers  clearing  of  futures  and  options,  including  short-term  interest  rate 
derivatives (STIR futures).262 In both the CDS and the futures and options segments of 
ICEU,  the  euro  is  the  most  significant  currency  of  denomination.  Some  EU  CCPs  also 
offer  STIR  futures,  but  they  do  not  offer  the  same  range  as  ICEU.  Eurex  Clearing,  for 
example,  has  a  similar  offer  for  EUR-denominated  products,  including  Euribor 
Futures.263 However, ICEU is dominant in Euribor Futures with more than 90% of total 
open  interests  while  volumes  traded  and  cleared  in,  e.g.  Eurex  Clearing,  represent 
0.2%.264 

Finally,  though  none  of  these  asset  classes  are  subject  to  a  clearing  obligation,  there  is 
currently  no  offer  in  the  EU  for  certain  commodity  derivatives,  e.g.  metal  or  oil 
derivatives such as those offered in LME Ltd or ICE Clear Europe, as well as no offer for 
the clearing of foreign exchange derivatives such as those offered in LCH Ltd. 

4.4.  Liquidity 

The number of trades (volume) and currency value of trades in a product or market can 
be used as  a (rough) indicator of liquidity. For example, LCH  Ltd  is  one of the largest 
CCPs  worldwide  in  term  of  the  value  of  cleared  transactions,  and  has  been  growing  in 
recent years265. The OTC derivatives segment has in particular grown following the G20 
mandate of 2009 to centrally clear all standardised OTC derivatives (Figures 7 and 8). 

262  The Futures and Options service of ICE EU clears energy and commodity derivatives; listed interest rate 
derivatives, including short-term European interest rate futures contracts (STIR); listed equity derivatives. 
See 2021 ESMA report on UK CCPs (see footnote 9 above). 
263  See 2021 ESMA report on UK CCPs (see footnote 9 above). 
264  https://www.risk.net/comment/6726646/swaps-data-a-new-era-of-competition-in-interest-rate-futures 
265  See 2021 ESMA report on UK CCPs (see footnote 9 above). 

117 

 
 
                                                           
Figure  7.  LCH  Ltd  Cleared  Value 
Worldwide Ranking, 2019 

Figure 8. LCH Ltd Cleared Value 2015-
2019 

Source: CPMI Statistics Payments and Financial Market Infrastructures, 2021 

Moreover, SwapClear has the highest market share in interest rate derivatives under the 
clearing obligation (Figure 9) and more in general in EU currencies (Figure 10). 

Figure 9. Market share OTC IRD under 
Clearing Obligation (EUR, USD, JPY, 
GBP) 

Figure 10. Market share OTC IRDs in 
EU currencies 

The other UK-based CCP classified as systemically important (Tier 2 CCP) under EMIR, 
ICE Clear Europe, is also one of the largest in terms of the value of cleared transactions, 
compared  to  its  EU  peers266.  As  described  in  Section  2.2.3,  ICE  Clear  Europe  offers 
clearing of CDSs and short-term interest rate derivatives (STIR futures). LCH SA offers 
the same clearing of CDSs as ICEU (except for CDSs on sovereigns). The market for the 
clearing of the two main euro-denominated index CDSs  is  split  almost  evenly  between 
ICEU  and  LCH  SA,  even  if  the  situation  has  recently  changed,  with  the  relocation  of 
some  CDS  trading  to  the  US  (See  Figure  11).  As  regards  STIR  futures  (which  are  not 

266  See 2021 ESMA report on UK CCPs (see footnote 9 above). 

118 

02004006008001,0001,20020152016201720182019GBP TrillionsRepurchase transactionsEquity transactionsETD derivativesOTC derivativesNote:Yearlyvaluecleared,inGBPTn.Sources:BIS,ESMA.0408012016020050%60%70%80%90%100%LCH SwapClear LtdEurexCMEJSCCHKEXBMETotal value (rhs)Note:MarketshareonOTCcentralclearingofbasisswaps,fixed-to-floatswaps,forwardrateagreementsandovernightindexedswapsinEUR,USD,JPYorGBP,in%.Quarterlynotionalvolumescleared,inEURtn(rhaxis).Sources:ClarusFinancialTechnology,ESMA.01020304050600%10%20%30%40%50%60%70%80%90%100%1Q182Q183Q184Q181Q192Q193Q194Q191Q202Q203Q204Q201Q212Q213Q21BMECME (OTC)EurexHKEXKDPW_CCPLCH SwapClear LtdNasdaq OMXTotal value (rhs)Note:QuarterlyvalueclearedandmarketsharesforOTCIRDs(Basis,FRA,IRS,inflation,OIS,VNS,ZC)denominatedinEUR,CZK,DKK,HUF,NOK,PLN,SEKandZAR.InEURTn.Sources:ClarusFinancialTechnology,ESMA. 
 
 
 
 
 
                                                           
subject  to  the clearing obligation),  ICEU is  the  only CCP to  have  access to  the trading 
venue of reference for the STIR products, namely ICE Futures Europe.  

Figure 11. Market share CDS under the clearing obligation 

119 

00.511.522.530%20%40%60%80%100%1Q182Q183Q184Q181Q192Q193Q194Q191Q202Q203Q204Q201Q212Q21ICE Clear CreditICE Clear EuropeLCH CDSClearCMETotal value (rhs)Note:MarketshareofOTCcentralclearingofiTraxxEuropeandiTraxxCrossover,in%.Quarterlynotionalvaluecleared,inEURtrillion(rightaxis).Sources:ClarusFinancialTechnology,ESMA.