CELEX: 
Language: en
Date: 2020-07-14 00:00:00
Title: COMMISSION DELEGATED REGULATION (EU) …/... supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to the minimum elements to be assessed by ESMA when assessing third-country CCPs' requests for comparable compliance and the modalities and conditions of that assessment

EUROPEAN
                            COMMISSION
                                                    Brussels, 14.7.2020
                                                    C(2020) 4895 final
                COMMISSION DELEGATED REGULATION (EU) …/...
                                        of 14.7.2020
    supplementing Regulation (EU) No 648/2012 of the European Parliament and of the
   Council with regard to the minimum elements to be assessed by ESMA when assessing
     third-country CCPs' requests for comparable compliance and the modalities and
                               conditions of that assessment
                                 (Text with EEA relevance)
EN                                                                                   EN
 ---pagebreak---                                     EXPLANATORY MEMORANDUM
   1.        CONTEXT OF THE DELEGATED ACT
   Article 25a of Regulation (EU) No 648/2012 (the European Market Infrastructure Regulation
   or ‘EMIR’) provides that a third-country Central Counterparty (CCP) that is considered
   systemically important or likely to become systemically important for the financial stability of
   the Union or for one or more of its Member States (‘Tier 2’ CCP) may request the European
   Securities and Markets Authority (ESMA) to assess its ‘comparable compliance’, i.e. whether
   that CCP may be in compliance with EMIR through its compliance with its domestic law.
   Article 25a(3) of EMIR empowers the Commission to adopt a delegated act specifying: (a)
   the minimum elements to be assessed by ESMA for the purpose of comparable compliance
   and; (b) the modalities and conditions for ESMA to carry out that assessment.
   This delegated act is adopted in accordance with Article 82(2) of EMIR, which provides that
   the Commission shall endeavour to consult ESMA before adopting such an act.
   2.        CONSULTATIONS PRIOR TO THE ADOPTION OF THE ACT
   Procedural aspects
   In May 2019, the Commission asked ESMA for its views (‘technical advice’) on a
   Commission delegated act on comparable compliance specifying the minimum elements to be
   assessed by ESMA for the purpose of comparable compliance and the modalities and
   conditions for ESMA to carry out that assessment. ESMA conducted a public consultation on
   its draft technical advice on comparable compliance from 29 May 2019 to 29 July 2019. 11
   respondents to the public consultation gave public feedback, others responded on a
   confidential basis. The non-confidential responses to the consultation are published on
   ESMA’s website. ESMA submitted its technical advice to the Commission on 11 November
   2019. That advice is non-binding and does not prejudge the Commission's final decision.
   On 21 October 2019, the Commission consulted the Expert Group of the European Securities
   Committee (EGESC) on the provisional content of this delegated act. The EGESC comprises
   representatives of Member States, the European Central Bank (ECB), the Secretariat of the
   European Parliament’s Committee on Economic and Monetary Affairs, and ESMA.
   In accordance with the Better Regulation Guidelines, the draft delegated act was published on
   the Better Regulation Portal for a four-week public feedback period, running between 11 June
   and 9 July 2020. 8 responses were received. The responses are available on the Better
   Regulation Portal1. In addition to the feedback received via the Better Regulation Portal, the
   Commission received several confidential replies. ESMA also provided further technical
   feedback.
   Stakeholders’ views
   As a result of the abovementioned consultations as well as ad hoc contributions, the
   Commission received a wide range of views on the content of the delegated act. The views
   received referred mainly to the following aspects:
   Need to highlight the benefits of comparable compliance
   Many stakeholders questioned the benefits of comparable compliance for a Tier 2 CCP.
   1
           https://ec.europa.eu/info/law/better-regulation/have-your-say/initiatives/12023-Financial-market-
           regulation-compliance-of-non-EU-clearing-houses/feedback?p_id=8001699
EN                                                         1                                                 EN
 ---pagebreak---    First, a large number of stakeholders expressed concerns about assessing a third-country
   CCP’s comparability with Article 16, Title IV and Title V of EMIR, including the relevant
   technical standards, on a requirement-by-requirement basis. Stakeholders indicated that such a
   granular approach, while potentially helpful in framing how ESMA conducts the assessment,
   amounted to a strict line-by-line assessment. They pointed out that this could result in a risk
   that the rules applied by a third-country CCP, while still achieving the same outcome as
   EMIR, could not be comparable enough to those of EMIR as they would be unlikely to be
   identical.
   Second, stakeholders also expressed concerns about dividing EMIR requirements into ‘core
   provisions’, including related technical standards, or not, and establishing different
   benchmarks for comparable compliance accordingly. Stakeholders indicated that such an
   approach could:
            frame the assessment in a way that would make it difficult for ESMA to reach a
             positive finding of comparable compliance for any third-country CCP;
            provide for an inconsistent assessment of EMIR requirements, given the ‘arbitrary’
             distinction between core and other provisions of EMIR;
            result in an overly complex and opaque compliance regime;
            introduce policy objectives that may not be aligned with EMIR;
            lead ESMA to apply EMIR to Tier 2 CCPs, submitting Tier 2 CCPs to overlapping
             regulators and leading them to comply with requirements that may be inappropriate
             or incompatible with their domestic legal regimes, potentially supplanting their local
             regulatory regimes and threatening financial stability;
            increase the risk of conflicts between the laws in the third country and the rules in
             EMIR;
            prevent alternative routes to compliance where compliance with the EMIR
             requirement would be legally impossible for a given Tier 2 CCP or expose it to legal
             risks; and
            contradict the G20’s commitment 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’2, thereby potentially
             fragmenting global markets.
   Consequently, stakeholders broadly called for the assessment of comparable compliance to
   focus on whether compliance with a third-country regime genuinely compares with
   compliance with certain provisions in EMIR. Members of the EGESC also called for ensuring
   that the assessment of comparable compliance ensures compliance with EMIR through
   compliance with the third-country rules. Some stakeholders also suggested following a
   holistic assessment, whereby a deviation from one of the requirements in EMIR could be
   offset by compliance with another provision corresponding to another EMIR requirement so
   that, on the whole, compliance with the applicable third-country framework would enable the
   Tier 2 CCP to achieve the same practical outcome on the relevant issue as compliance with
   EMIR. Other stakeholders suggested that the assessment should rely on the relevant elements
   of the Principles for Financial Markets Infrastructures (PFMIs) rather than EMIR provisions.
   2
           G20        Leaders’     declaration,    Saint       Petersbourg, 2013.   Available    at:
           http://www.g20.utoronto.ca/2013/2013-0906-declaration.html
EN                                                    2                                              EN
 ---pagebreak---    Finally, some stakeholders also noted that, when conducting the comparable compliance
   assessment, ESMA should liaise with third-country regulators in order to ensure that ESMA
   has a comprehensive picture and understanding of the applicable third-country framework. In
   addition, stakeholders advocated for consulting the third-country authorities in the event that
   ESMA intends to reject a request for comparable compliance before coming to a finding.
   Need to take into account the Commission’s equivalence decision
   A large number of stakeholders asked for the delegated act to clarify the relationship between
   on the one hand, the European Commission’s assessment of the equivalence of the regulatory
   and supervisory regime of a third-country jurisdiction and on the other hand, ESMA’s
   assessment of comparable compliance. Similarly, members of the EGESC also called for
   clarifying further the role of the Commission’s equivalence decision in relation to comparable
   compliance.
   In particular, stakeholders argued that assessing the requirements applicable to a third-country
   CCP for the purpose of comparable compliance would disregard the fact that the EU has
   already determined the regulatory and supervisory regime applicable to that CCP as
   ‘equivalent’. Moreover, they stated that such an approach would not reflect the EMIR
   requirement that ESMA’s assessment take into account equivalence decisions. Stakeholders
   indicated that, where the European Commission has already made an equivalence
   determination, a re-assessment of the relevant third-country rules could be duplicative and
   unnecessary, potentially rendering the European Commission’s equivalence assessment null
   and void and superseding it with ESMA’s own assessment.
   Consequently, a majority of stakeholders strongly supported reflecting further the
   Commission’s equivalence assessment in any comparable compliance assessment by ESMA,
   with some stakeholders urging ESMA to simply accept the findings of the Commission’s
   equivalence decision.
   Excessively burdensome process
   Stakeholders highlighted that, should a line-by-line assessment be followed, the detail of the
   information to be provided by Tier 2 CCPs requesting comparable compliance is likely to
   place a significant cost and resource burden on each CCP. This may lead to some third-
   country CCPs withdrawing from the EU market, to the detriment of EU clients.
   Most stakeholders also voiced concerns about Tier 2 CCPs including, in their request for
   comparable compliance, an opinion of the third-country supervisory authority on the accuracy
   of the representation of the requirements applying in the third country, a legal opinion
   confirming the accuracy of the mapping of corresponding requirements and, where necessary,
   a certified translation of relevant requirements in the third country. Stakeholders indicated that
   those opinions and their translation would impose significant compliance and cost burden on
   Tier 2 CCPs. In addition, with regard to the legal opinion, stakeholders also challenged
   whether a comparative legal analysis would be at all possible or relevant. Stakeholders
   suggested that ESMA should liaise with the relevant third-country authority to address any
   concerns. Stakeholders also called for time limits for ESMA to conduct the comparability
   assessment and for providing Tier 2 CCPs with a grace period during which a Tier 2 CCP
   may request a re-assessment of its non-comparability assessment.
   3.        IMPACT ASSESSMENT
   According to Article 25a(3) of EMIR, the Commission must specify the minimum elements to
   be assessed by ESMA and the modalities and conditions of the assessment of comparable
   compliance.
EN                                                  3                                                 EN
 ---pagebreak---    Under paragraphs (1) and (2) of Article 25a, ESMA shall, where a Tier 2 CCP submits a
   reasoned request for comparable compliance, assess whether that CCP may satisfy
   compliance with Article 16, Title IV and Title V of EMIR by complying with the applicable
   third-country framework, taking into account the provisions of the related Commission’s
   equivalence decision under Article 25(6) of EMIR. The Tier 2 CCP’s request shall provide the
   factual basis for a finding of comparability and the reasons why compliance with the
   requirements applicable in the third country satisfies the relevant EMIR requirements.
   ESMA’s technical advice
   In its technical advice, ESMA proposed specifying minimum elements for each EMIR
   provision, according to a requirement-by-requirement approach. ESMA divided the minimum
   elements into: (i) ‘core provisions’, which were satisfied by ‘equal or at least as strict or
   conservative corresponding requirements’ in the third country; and (ii) ‘other EMIR
   provisions’, which could be satisfied by similar corresponding third-country requirements
   substantially achieving the respective objectives. The assessment would have been based on
   information in a CCP’s request for comparable compliance, and could have been
   accompanied by more documentation, including an opinion by the third-country authority on
   the accuracy of the representation of the third-country rules, a certified translation of the third-
   country rules and a legal opinion on specific elements of the third-country rules.
   The Commission has fully considered all representations received, including the technical
   advice provided by ESMA and the responses to ESMA’s public consultation, the feedback
   received from the EGESC, as well as other input provided to the Commission by
   stakeholders. On this basis, the Commission is proposing the adoption under Article 25a(3) of
   EMIR of this delegated act specifying the minimum elements to be assessed by ESMA and
   the modalities and conditions of the assessment of comparable compliance.
   This delegated act nevertheless deviates from ESMA’s technical advice in order to ensure:
   that the assessment of comparable compliance focuses on whether compliance with a third-
   country framework may satisfy compliance with EMIR; that equivalence decisions are taken
   into account; and that Tier 2 CCPs do not face unnecessary burden. These aspects are
   explored in more detail below.
   ESMA’s technical advice is accompanied by an impact assessment. Against this background
   and taking into account that the Commission’s deviations are intended to reduce further the
   administrative burden and costs for third-country CCPs compared to ESMA’s technical
   advice, the Commission has not prepared a separate impact assessment. Nevertheless, Section
   3 below assesses the positive and negative impacts of the changes introduced by the
   Commission and analyses the costs and benefits of the measures proposed.
   Quantitative data reflected in the costs and benefits section is however limited for several
   reasons. First, the majority of the data available to the Commission is confidential and cannot
   be reproduced. Second, ESMA asked for quantitative data as part of its public consultation
   but received very limited feedback. Third, the differences in third-country CCPs are such that
   the costs (and benefits) of the changes will vary considerably, e.g. depending on how much
   information is already publically available or has already been provided to ESMA or
   depending on the size and complexity of a third-country CCP.
   On the basis of the views brought to the attention of the Commission, the following policy
   options can be identified:
   Policy option 1           To assess comparable compliance by conducting a requirement-by-
                             requirement analysis of the third-country rules that correspond to
EN                                                  4                                                   EN
 ---pagebreak---                               those EMIR requirements that apply to Tier 2 CCPs, including those
                              that have been already assessed by the Commission for the purpose
                              of the relevant equivalence decision.
   Policy option 2            To assess comparable compliance by analysing whether compliance
                              with the third-country rules may satisfy compliance with those EMIR
                              requirements that apply to Tier 2 CCPs, taking into account the pre-
                              existing Commission’s assessment of some of those requirements for
                              the purpose of the relevant equivalence decision.
   Policy option 3            To assess comparable compliance against the Principles for
                              Financial Market Infrastructures (PFMIs), automatically accepting
                              the findings of the Commission’s equivalence decision for those
                              EMIR requirements that are subject to an equivalence decision.
   It is important that this delegated act ensures a level-playing field between EU CCPs and Tier
   2 CCPs that provide services to EU firms, and a level of resilience of the Tier 2 CCPs in
   accordance with the EMIR requirements. Nevertheless, the Commission seeks to address the
   concerns about imposing EMIR requirements as floor and potentially superseding the
   domestic third-country regime, and the need to take into account the Commission’s
   assessment of equivalence.
   In that sense, the Commission favours Option 2, according to which the assessment of
   comparable compliance can focus on whether compliance with EMIR may be satisfied
   through compliance with third-country rules, taking into account the equivalence assessment
   and limiting the burden on Tier 2 CCPs, without pre-empting ESMA’s assessment or putting
   the stability of the EU’s financial system at risk.
   Option 3 was favoured by some stakeholders, who advocated for an automatic granting of
   comparable compliance for those provisions of EMIR that have been assessed equivalent or
   deemed compliant with the Principles for Financial Market Infrastructures. This would
   however ignore the requirements under EMIR whereby the assessment of compliance with
   domestic rules: (i) is compared against compliance with certain EMIR requirements and (ii)
   applies to EMIR provisions that are also assessed by the Commission for the purpose of
   equivalence.
   Ensuring compliance with EMIR through compliance with third-country rules
   The Commission specifies in this delegated act the requirement of Article 25a(3) of EMIR
   that a Tier 2 CCP’s compliance with its domestic framework should effectively satisfy
   compliance with the requirements set out in Article 16, Title IV and Title V of EMIR in order
   to be granted comparable compliance. As such, the Commission proposes to indicate clearly
   the minimum elements to be verified in order to ensure compliance with EMIR through
   compliance with the third-country rules.
   This approach highlights the benefits of comparable compliance for Tier 2 CCPs, in response
   to concerns voiced by stakeholders, by clarifying that where comparable compliance is found,
   a Tier 2 CCP will be considered to comply with EMIR to access the EU’s single market by
   continuing complying with its domestic rules. This approach also clarifies that comparable
   compliance is not about assessing the rules of a third country, and focuses ESMA’s
   assessment on how a Tier 2 CCP’s compliance with those rules can effectively satisfy
   compliance with the requirements set out in Article 16, Title IV and Title V of EMIR.
EN                                                   5                                             EN
 ---pagebreak---    In addition, the Commission proposes to target the assessment on those EMIR CCP
   requirements that are critical to ensuring the resilience of Tier 2 CCPs accessing the single
   market and a level-playing field between them and EU CCPs, in line with internationally
   agreed principles. EMIR requirements that apply to competent authorities and that are specific
   to the EU market and supervisory architecture are therefore outside the scope of comparable
   compliance.
   This approach provides further flexibility to cater for situations where a Tier 2 CCP’s
   compliance with a given EMIR requirement may contradict or impede compliance with
   applicable domestic law. In cases where a Tier 2 CCP’s compliance with its domestic rules
   satisfies compliance with EMIR, comparable compliance should be granted. This fully
   reflects the EU’s current deference practices, in line with G20 international commitments,
   while maintaining a level playing field between EU and Tier 2 CCPs and the necessary
   stability of the EU’s financial system, in line with EMIR’s main objective. This balance
   addresses concerns voiced by certain third-country regulators about potentially overlapping
   supervisory requirements.
   Finally, the delegated act does not request Tier 2 CCPs to apply an EMIR requirement as a
   minimum or ‘floor’ where the corresponding requirement in the third country is not identical
   to allow comparable compliance with respect to that requirement. This approach addresses
   concerns about the perceived risk that achieving comparable compliance could potentially
   result in supplanting a Tier 2 CCP’s local regulatory regime and require Tier 2 CCPs to
   ‘disapply’ domestic rules, thereby threatening financial stability.
   Consideration of equivalence decision
   The Commission clarifies in this delegated act the requirement under Article 25a(1) of EMIR
   that ESMA should take into account the respective equivalence decision in its assessment of
   comparable compliance for Title IV of EMIR (organisational requirements, conduct of
   business rules, prudential requirements) given that an assessment of all those requirements has
   already been made for the purposes of the Commission’s equivalence decisions.
   Indeed, while equivalence applies to a jurisdiction (and to the respective Tier 1 and Tier 2
   CCPs alike) and covers, in particular, Title IV of EMIR, comparable compliance applies to a
   given Tier 2 CCP and can be found for Title IV, as well as Article 16 (capital requirements)
   and Title V (interoperability requirements) of EMIR.
   For this reason, in order to ensure that the assessment of comparable compliance considers the
   findings of the relevant Commission equivalence decision, the delegated act introduces
   specific modalities for ESMA’s assessment of Title IV of EMIR. First, the delegated act sets
   out in an annex the minimum elements that ESMA should verify to determine whether a
   CCP’s compliance with the applicable third-country framework is comparable to the
   compliance with Title IV of EMIR, focused on aspects that are critical to ensure a level-
   playing field amongst operators. Second, if an equivalence decision includes conditions,
   ESMA should verify that the Tier 2 CCP effectively fulfils those specific conditions. Third,
   ESMA should consult the relevant third-country authorities in order to confirm its
   understanding of the outcome of a Tier 2 CCP’s compliance with its domestic law. Fourth,
   given that equivalence decisions are adopted by the Commission, ESMA should also inform
   the Commission where it intends to reject a request for comparable compliance as this may
   have implications for the equivalence assessment for which the Commission is responsible.
   The benefit of that approach is that, by providing for the interplay between the assessments of
   equivalence and comparable compliance, the overall consistency of the EMIR third-country
EN                                                  6                                              EN
 ---pagebreak---    regime is preserved and streamlined to the benefit of cooperation with third-country
   authorities and financial stability.
   Limited burden on Tier 2 CCPs
   This delegated act ensures that comparable compliance provides significant administrative
   and regulatory relief to Tier 2 CCPs. Comparably compliant Tier 2 CCPs will be able to
   access the EU’s single market through compliance with their domestic rules, to the benefit of
   EU firms that are serviced by those CCPs.
   The indication of the elements to assess comparable compliance brings ex ante clarity to Tier
   2 CCPs, setting upfront the bar for comparable compliance without pre-empting ESMA’s
   assessment.
   3.1 Analysis of costs and benefits
   By ensuring that the assessment of comparable compliance focuses on how a Tier 2 CCP’s
   compliance with third-country rules can effectively satisfy compliance with EMIR and takes
   into account the pre-existing equivalence decision, the proposed modalities meet their
   objectives. The costs to third-country CCPs being assessed and the costs to ESMA are
   reduced, while providing for a level playing field between EU and Tier 2 CCPs and
   safeguarding financial stability.
   The costs to third-country CCPs are minimised as much as possible. First, where comparable
   compliance is found, a Tier 2 CCP faces, in principle, no additional compliance costs as that
   CCP can comply with EMIR through compliance with its domestic rules. Second, the costs of
   preparing the reasoned request are reduced, as the delegated act sets upfront the essential
   elements for justifying comparable compliance, making it easier for a Tier 2 CCP to explain
   why compliance with its domestic law effectively satisfies compliance with EMIR.
   As far as ESMA is concerned, on the one hand, costs may increase, as ESMA needs to ensure
   in cooperation with the relevant third-country authorities that its understanding of a Tier 2
   CCP’s compliance with its domestic law is accurate and comprehensive. In addition, ESMA
   will face costs to assess comparable compliance with Title IV of EMIR, with the need to
   consult the relevant third-country authorities before rejecting a request for comparable
   compliance and inform the Commission thereof.
   On the other hand, the costs of conducting the assessment for ESMA may also be lowered
   since the assessment of comparable compliance is simplified by no longer setting out a
   different assessment process for ‘core provisions’ of EMIR. In addition, the elements to be
   assessed no longer reflect a strict requirement-by-requirement approach and therefore provide
   for a less burdensome assessment. The costs for ESMA to carry out that assessment could
   therefore be reduced, without impinging on the costs relating to the ongoing supervision of
   Tier 2 CCPs as provided under Article 25b of EMIR.
   3.2 Proportionality
   This delegated act specifies the minimum elements to be assessed and the modalities and
   conditions to assess whether a Tier 2 CCP can benefit from comparable compliance, both
   within the recognition process or at any point in time thereafter. This delegated act facilitates
   a Tier 2 CCP’s request for comparable compliance by providing it upfront with greater clarity
   on what is required for a positive assessment of comparable compliance, enabling it to tailor
   their request accordingly. This objective is achieved by limiting the assessment to
   requirements that are critical to ensure a level-playing field amongst operators and safeguard
   the stability of the EU’s financial system.
EN                                                 7                                                 EN
 ---pagebreak---    3.3 Subsidiarity
   The objective of this Regulation is to specify the minimum elements to be assessed and the
   modalities and conditions ESMA should take into account when assessing whether a Tier 2
   CCP can satisfy compliance with EMIR by complying with its domestic law.
   Under EMIR, ESMA is responsible for carrying out the supervision of Tier 2 CCPs that
   access the EU’s single market. Member States and national supervisors, therefore, cannot
   assess comparable compliance as they have no competence over Tier 2 CCPs.
   As such, the objective of this delegated act to assess comparable compliance cannot be
   achieved by the Member States and can therefore, by reason of the scale of actions, be better
   achieved at EU level, in line with the principle of subsidiarity as set out in Article 5 of the
   Treaty on European Union (TEU).
   4.       LEGAL ELEMENTS OF THE DELEGATED ACT
   4.1 Article 1
   This provision sets out the procedure for a Tier 2 CCP to request comparable compliance,
   including timelines for that CCP to provide complete information to ESMA and for ESMA to
   complete its assessment.
   4.2 Article 2
   This provision sets out the modalities for ESMA to assess whether a Tier 2 CCP’s compliance
   with the applicable third-country framework satisfies compliance with Article 16 of EMIR
   (‘Capital requirements’).
   4.3 Article 3
   This provision introduces modalities for ESMA to assess whether a Tier 2 CCP’s compliance
   with the applicable third-country framework satisfies compliance with Title IV of EMIR
   (organisational requirements, conduct of business rules, prudential requirements) following a
   detailed assessment of certain elements.
   4.4 Article 4
   This provision sets out modalities for ESMA to assess whether a Tier 2 CCP’s compliance
   with the applicable third-country framework satisfies compliance with Title V of EMIR
   (‘Interoperability arrangements’) following a detailed assessment of certain elements.
   4.5 Article 5
   This provision sets out specific conditions to conduct the assessment of comparable
   compliance. It sets out that ESMA should not refuse comparable compliance merely because
   a Tier 2 CCP applies an exemption under its home rules which is comparable to any of those
   set out in EMIR. It also stipulates that, where a Tier 2 CCP’s compliance with a specific
   requirement of EMIR results in breaching the applicable third-country framework, ESMA
   should grant comparable compliance only where certain conditions are met.
   4.6 Article 6
   This provision specifies that a Tier 2 CCP that benefits from comparable compliance should
   keep ESMA informed of any changes to the applicable third-country framework.
   4.7 Annexes
   Annex I sets out the elements to assess comparable compliance with Title IV of EMIR.
EN                                                8                                                EN
 ---pagebreak---    Annex II sets out the elements to assess comparable compliance with Title V of EMIR.
EN                                               9                                      EN
 ---pagebreak---                      COMMISSION DELEGATED REGULATION (EU) …/...
                                              of 14.7.2020
      supplementing Regulation (EU) No 648/2012 of the European Parliament and of the
     Council with regard to the minimum elements to be assessed by ESMA when assessing
       third-country CCPs' requests for comparable compliance and the modalities and
                                     conditions of that assessment
                                       (Text with EEA relevance)
   THE EUROPEAN COMMISSION,
   Having regard to the Treaty on the Functioning of the European Union,
   Having regard to 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 3, and
   in particular Article 25a(3) thereof,
   Whereas:
   (1)     According to Article 25a of Regulation (EU) No 648/2012, a third-country central
           counterparty (CCP) that is systemically important or likely to become systemically
           important for the financial stability of the Union or one or more of its Member States
           (Tier 2 CCP) may request the European Securities and Markets Authority (ESMA) to
           assess whether that Tier 2 CCP’s compliance with the applicable third-country
           framework may be deemed to satisfy compliance with the requirements set out in
           Article 16 and in Titles IV and V of Regulation (EU) No 648/2012 (comparable
           compliance), and to adopt a decision accordingly.
   (2)     Comparable compliance preserves the financial stability of the Union and ensures a
           level-playing field between Tier 2 CCPs and CCPs authorised in the Union while
           reducing administrative and regulatory burdens for those Tier 2 CCPs. The assessment
           of comparable compliance should, therefore, verify whether a Tier 2 CCP’s
           compliance with the third-country framework effectively satisfies compliance with any
           or all requirements set out in Article 16, Title IV and V of Regulation (EU) No
           648/2012. This Regulation should therefore indicate the elements to be assessed by
           ESMA when assessing a Tier 2 CCP's request for comparable compliance. When
           conducting that assessment, ESMA should also consider that CCP's compliance with
           any requirements in delegated or implementing acts that further specify those
           elements, including those requirements related to margin requirements, liquidity risk
           controls, and collateral requirements.
   (3)     In its assessment of whether compliance with the applicable third-country framework
           satisfies compliance with the requirements set out in Article 16, Title IV and V of
           Regulation (EU) No 648/2012, ESMA might also consider the recommendations
           developed by the Committee on Payments and Market Infrastructures and the
           International Organization of Securities Commissions.
   3
         OJ L 201, 27.7.2012, p. 1.
EN                                                 10                                              EN
 ---pagebreak---    (4)  ESMA should conduct a detailed assessment to determine whether to grant a Tier 2
        CCP comparable compliance for Title IV of Regulation (EU) No 648/2012. Any
        potential refusal of comparable compliance with respect to that Title IV might impact
        the equivalence assessment conducted by the Commission pursuant to Article 25(6) of
        that Regulation. ESMA should therefore inform the Commission where it intends not
        to grant comparable compliance with respect to that Title.
   (5)  Where a Tier 2 CCP has entered into an interoperability arrangement with a CCP
        authorised under Article 14 of Regulation (EU) No 648/2012, that arrangement
        constitutes a direct link and, therefore, a direct channel of contagion, to a CCP in the
        Union. For such arrangements, ESMA should conduct a detailed assessment to
        determine whether to grant comparable compliance for Title V of that Regulation. An
        interoperability arrangement between a Tier 2 CCP and another third-country CCP
        does not constitute a direct link to a CCP in the Union but might, under certain
        circumstances, function as an indirect channel of contagion. For such arrangements,
        ESMA should only conduct a detailed assessment where the impact of that
        arrangement on the financial stability of the Union or one or more of its Member
        States justifies it.
   (6)  Since one of the objectives of comparable compliance is to reduce administrative and
        regulatory burden for Tier 2 CCPs, comparable compliance should not be refused only
        because a Tier 2 CCP applies, under the applicable third-country framework,
        exemptions that are comparable to those set out in paragraphs 4 and 5 of Article 1 of
        Regulation (EU) No 648/2012. The assessment of comparable compliance should also
        take into account the extent to which not granting it may result in the impossibility for
        the Tier 2 CCP to comply with both Union and third-country requirements at the same
        time.
   (7)  ESMA’s decision on whether to grant comparable compliance should be based on the
        assessment conducted at the time of the adoption of that decision. In order for ESMA
        to reassess its decision whenever relevant developments, including changes to a CCP’s
        internal rules and procedures occur, the Tier 2 CCP should notify ESMA of any such
        developments.
   (8)  Regulation (EU) No 2019/2099 of the European Parliament and of the Council4, which
        inserted Article 25a into Regulation (EU) No 648/2012, started to apply on 1 January
        2020. To ensure that that article is fully operational, this Regulation should enter into
        force as a matter of urgency,
   HAS ADOPTED THIS REGULATION:
                                             Article 1
               Procedure for submitting a request for comparable compliance
   1.     The reasoned request referred to in Article 25a(1) of Regulation (EU) No 648/2012
          shall be submitted either within the deadline set by ESMA in the notification
          informing the third-country CCP that it is not considered to be a Tier 1 CCP or at any
   4
        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).
EN                                              11                                                      EN
 ---pagebreak---          moment after a third-country CCP has been recognised by ESMA as a Tier 2 CCP in
         accordance with Article 25(2b).
         The Tier 2 CCP shall inform its competent authority of the submission referred to in
         the first subparagraph.
   2.    The reasoned request referred to in paragraph 1 shall specify:
         (a)    the requirements for which the Tier 2 CCP requests comparable compliance;
         (b)    the reasons why the Tier 2 CCP’s compliance with the applicable third-country
                framework satisfies compliance with the relevant requirements set out in
                Article 16 and Titles IV and V of Regulation (EU) No 648/2012;
         (c)    the way in which the Tier 2 CCP complies with any conditions set out for the
                application of the implementing act referred to in Article 25(6) of Regulation
                (EU) No 648/2012.
         For the purposes of point (b), the Tier 2 CCP shall provide, where relevant, the
         evidence referred to in Article 5.
   3.    The Tier 2 CCP shall, at ESMA's request, include in the reasoned request referred to
         in paragraph 1:
         (a)    a statement from its competent authority confirming that the Tier 2 CCP is of
                good repute and standing;
         (b)    where necessary, with regard to the requirements set out in Article 16 and Title
                V of Regulation (EU) No 648/2012, a translation of the relevant applicable
                third-country framework into a language commonly used in finance.
   4.    ESMA shall assess, within 30 working days of receipt of a reasoned request
         submitted in accordance with paragraph 1, whether that reasoned request is complete.
         ESMA shall set a deadline by which the Tier 2 CCP has to provide additional
         information where the request is incomplete.
   5.    ESMA shall decide whether to grant comparable compliance for the requirements
         included in the reasoned request within 90 working days from the receipt of a
         complete reasoned request submitted in accordance with paragraph 4 of this Article.
         ESMA may postpone that decision where the reasoned request or the additional
         information referred to in paragraph 4 are not submitted in time and the assessment
         of that request could, as a result, delay ESMA’s decision on the recognition of the
         third-country CCP or the review of its recognition.
   6.    A Tier 2 CCP for which ESMA has not granted comparable compliance for one or
         more requirements may not submit a new reasoned request as referred to in
         paragraph 1 regarding those requirements, unless there has been a relevant change to
         the applicable third-country framework or to the way in which that CCP complies
         with that framework.
                                            Article 2
      Comparable compliance with respect to Article 16 of Regulation (EU) No 648/2012
   1.    ESMA shall grant comparable compliance with respect to Article 16(1) of
         Regulation (EU) No 648/2012 where a Tier 2 CCP’s capital, including retained
EN                                             12                                                EN
 ---pagebreak---            earnings and reserves, has a permanent and available initial capital which
           corresponds to at least EUR 7,5 million.
   2.      ESMA shall grant comparable compliance with respect to Article 16(2) of
           Regulation (EU) No 648/2012 where a Tier 2 CCP’s capital, including retained
           earnings and reserves, is at all times higher than or equal to the sum of:
           (a)    the CCP’s capital requirements for winding down or restructuring its activities;
           (b)    the CCP’s capital requirements for operational and legal risks;
           (c)    the CCP’s capital requirements for credit, counterparty and market risks that
                  are not already covered by the specific financial resources referred to in
                  Articles 41 to 44 of Regulation (EU) No 648/2012 or comparable specific
                  financial resources required by the CCP’s home jurisdiction’s legal order;
           (d)    the CCP’s capital requirements for business risk.
           For the purposes of the first subparagraph, ESMA shall calculate the capital
           requirements in accordance with the specific capital requirements set out in the
           applicable third-country framework, or, where that framework does not provide for
           any of those capital requirements, in accordance with the relevant requirements set
           out in Articles 2 to 5 of Commission Delegated Regulation (EU) No 152/20135.
                                                    Article 3
      Comparable compliance with respect to Title IV of Regulation (EU) No 648/2012
   1.      ESMA shall grant comparable compliance with respect to the requirements set out in
           Title IV of Regulation (EU) No 648/2012 where:
           (a)    the Tier 2 CCP complies with the requirements referred to in the implementing
                  act referred to in Article 25(6) of that Regulation, if any;
           (b)    the Tier 2 CCP complies with all relevant elements set out in Annex I to this
                  Regulation.
   2.      Before ESMA adopts a decision not to grant comparable compliance, it shall:
           (a)    verify its understanding of the applicable third-country framework and the way
                  in which the Tier 2 CCP complies with it with that CCP’s competent authority,
           (b)    inform the Commission thereof.
                                                    Article 4
      Comparable compliance with respect to Title V of Regulation (EU) No 648/2012
   1.      Where a Tier 2 CCP has entered into an interoperability arrangement with a CCP
           authorised under Article 14 of Regulation (EU) No 648/2012, ESMA shall grant
           comparable compliance with respect to the requirements set out in Title V of that
           Regulation where the Tier 2 CCP complies with all relevant elements set out in
           Annex II to this Regulation.
   5
       Commission Delegated Regulation (EU) No 152/2013 of 19 December 2012 supplementing Regulation
       (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical
       standards on capital requirements for central counterparties (OJ L 52, 23.2.2013, p. 37).
EN                                                      13                                                EN
 ---pagebreak---    2.        Where a Tier 2 CCP has entered into an interoperability arrangement with a third-
             country CCP, ESMA shall grant comparable compliance with respect to the
             requirements set out in Title V of Regulation (EU) No 648/2012 unless the impact of
             that arrangement on the financial stability of the Union or one or more of its Member
             States justifies assessing whether to grant comparable compliance in accordance with
             paragraph 1.
                                                Article 5
                              Exemptions and incompatible requirements
   1.        ESMA shall not refuse comparable compliance with respect to the requirements set
             out in Article 16 and Titles IV and V of Regulation (EU) No 648/2012 for the mere
             reason that the Tier 2 CCP applies an exemption under the applicable third-country
             framework which is comparable to any of those set out in paragraphs 4 and 5 of
             Article 1 of that Regulation. The Tier 2 CCP shall provide evidence that the Union
             and third-country exemption are comparable.
   2.        Where complying with a specific requirement set out in Article 16 or Titles IV or V
             of Regulation (EU) No 648/2012 implies a breach of the applicable third-country
             framework, ESMA shall grant comparable compliance with respect to that
             requirement only where the Tier 2 CCP provides evidence that:
             (a)   it is impossible to comply with that requirement without breaching a
                   mandatory provision of the applicable third-country framework;
             (b)   the applicable third-country framework effectively achieves the same
                   objectives as Article 16 and Titles IV and V of Regulation (EU) No 648/2012;
             (c)   it complies with the applicable third-country framework.
                                                Article 6
                          Changes to the applicable third-country framework
   A Tier 2 CCP that has been granted comparable compliance shall notify ESMA of any change
   to its applicable third-country framework and to its internal rules and procedures. ESMA shall
   inform the Commission of those notifications.
                                                Article 7
                                            Entry into force
   This Regulation shall enter into force on the day following that of its publication in the
   Official Journal of the European Union.
EN                                                  14                                             EN
 ---pagebreak---    This Regulation shall be binding in its entirety and directly applicable in all Member States.
   Done at Brussels, 14.7.2020
                                                 For the Commission
                                                 The President
                                                 Ursula VON DER LEYEN
EN                                                 15                                             EN
 ---documentbreak---                             EUROPEAN
                            COMMISSION
                                                    Brussels, 14.7.2020
                                                    C(2020) 4895 final
                                                    ANNEXES 1 to 2
                                        ANNEXES
                                           to the
                COMMISSION DELEGATED REGULATION (EU) …/...
                                          of XXX
    supplementing Regulation (EU) No 648/2012 of the European Parliament and of the
   Council with regard to the minimum elements to be assessed by ESMA when assessing
     third-country CCPs' requests for comparable compliance and the modalities and
                               conditions of that assessment
                                (Text with EEA relevance)
                                            […]
EN                                                                                   EN
 ---pagebreak---                                               ANNEX I
                       ELEMENTS REFERRED TO IN ARTICLE 3(1)
       Provision of                         Elements referred to in Article 3(1)
        Union law
   Chapter 1: Organisational requirements
                        The third-country CCP has:
   General
   provisions           (a) robust governance arrangements, including a clear organisational
                        structure with well-defined, transparent and consistent lines of
   Article 26(1) of
   Regulation (EU)      responsibility;
   No 648/2012          (b) effective processes to identify, manage, monitor and report the risks to
                        which it is or might be exposed;
                        (c) adequate internal control mechanisms, including sound administrative
                        and accounting procedures.
   Article 26(2) of     The third-country CCP has established policies and procedures which are
   Regulation (EU)      sufficiently effective so as to ensure compliance with the relevant third-
   No 648/2012          country framework, including compliance with that framework by its
                        managers and employees.
   Article 26(3) and    The third-country CCP:
   (4) of Regulation    (a) maintains and operates an organisational structure that ensures
   (EU) No 648/2012     continuity and orderly functioning in the performance of its services and
                        activities;
                        (b) employs appropriate and proportionate systems, resources and
                        procedures;
                        (c) maintains a clear separation between the reporting lines for risk
                        management and those for the other operations of the CCP.
   Article 26(5) of     The third-country CCP implements and maintains a remuneration policy
   Regulation (EU)      which promotes sound and effective risk management and which does not
   No 648/2012          create incentives to relax risk standards.
   Paragraphs 6, 7      The third-country CCP:
   and 8 of Article 26  (a) maintains information technology systems adequate to deal with the
   of Regulation (EU)   complexity, variety and type of services and activities performed so as to
   No 648/2012          ensure high standards of security and the integrity and confidentiality of
                        the information maintained;
                        (b) makes available publicly its governance arrangements, the rules
                        governing the CCP, and its admission criteria for clearing membership;
                        (c) is subject to frequent and independent audits, the results of which are
                        communicated to its board and made available to its competent authority.
                        The senior management of a third-country CCP is of sufficiently good
   Senior
   management and       repute and has sufficient experience to ensure the sound and prudent
   the board            management of the CCP.
EN                                                1                                                  EN
 ---pagebreak---    Article 27(1) of
   Regulation (EU)
   No 648/2012
   Paragraphs 2 and 3 The third-country CCP has a board with a sufficient number of
   of Article 27 of   independent members that have clear roles and responsibilities, an
   Regulation (EU)    adequate representation of clearing members and clients, and mechanisms
   No 648/2012        to address any potential conflicts of interest within the CCP to ensure
                      sound and prudent management of the CCP.
                      The third-country CCP:
   Risk Committee
                      (a) maintains a body to advise the board, independently of any direct
   Article 28 of
                      influence by the management of that CCP, on developments impacting the
   Regulation (EU)
   No 648/2012        risk management of the CCP, ensuring the representation of its clearing
                      members, independent members of the board and representatives of its
                      clients;
                      (b) has mechanisms in place to promptly inform the relevant competent
                      authority of the third country of any decision in which the board decides
                      not to follow the advice of that body.
                      The third-country CCP maintains, for a period of at least 10 years, all the
   Record Keeping
                      records on the services and activity provided so as to enable its competent
   Article 29(1) of
                      authority to monitor its compliance with the relevant third-country
   Regulation (EU)
   No 648/2012        framework.
   Article 29(2) of   The third-country CCP maintains, for a period of at least 10 years
   Regulation (EU)    following the termination of a contract, all information on all contracts it
   No 648/2012        has processed to enable the identification of the original terms of a
                      transaction before clearing by that CCP.
   Article 29(3) of   The third-country CCP makes available to any relevant third-country
   Regulation (EU)    authority, upon request, the records on the services and activity provided,
   No 648/2012        the information on all contracts it has processed and all information on the
                      positions of cleared contracts, irrespective of the venue where the
                      transactions were executed.
                      The third-country CCP informs its competent authority of the identities of
   Shareholders and
   members with       the shareholders or members that have qualifying holdings and of the
   qualifying         amounts of those holdings.
   holdings
   Article 30(1) of
   Regulation (EU)
   No 648/2012
   Paragraphs 2 and 4 The shareholders or members that have qualifying holdings in a third-
   of Article 30 of   country CCP:
   Regulation (EU)    (a) are suitable, taking into account the need to ensure the sound and
   No 648/2012        prudent management of that CCP;
EN                                              2                                                  EN
 ---pagebreak---                     (b) do not exercise an influence that is likely to be prejudicial to the sound
                    and prudent management of the CCP.
   Article 30(3) of Close links between the third-country CCP and other natural or legal
   Regulation (EU)  persons do not prevent the effective exercise of the supervisory functions
   No 648/2012      of the competent authority of the third country.
   Article 30(5) of The laws, regulations or administrative provisions of a third country
   Regulation (EU)  governing one or more natural or legal persons with which the CCP has
   No 648/2012      close links, or difficulties involved in their enforcement, do not prevent
                    the effective exercise of the supervisory functions of the competent
                    authority.
   Article 31(1) of The third-country CCP notifies its competent authority of any changes to
   Regulation (EU)  its management and the third-country framework ensures that appropriate
   No 648/2012      measures are taken where the conduct of a member of the board of a
                    third-country CCP is likely to be prejudicial to the sound and prudent
                    management of the CCP.,.
                    The third-country CCP maintains and operates effective arrangements to
   Conflict of
   Interest         identify, manage and resolve any potential conflicts of interest between
                    itself, including its managers, employees, or any person with direct or
   Article 33(1) of
   Regulation (EU)  indirect control or close links, and its clearing members or their clients
   No 648/2012      known to the CCP.
   Article 33(2) of Where the arrangements of the third-country CCP to manage conflicts of
   Regulation (EU)  interest are not sufficient to ensure, with reasonable confidence, that risks
   No 648/2012      of damage to the interests of a clearing member or client are prevented, ,
                    that CCP discloses to clearing members and, where clients are known to
                    that CCP, to those clients, the general nature or sources of conflicts of
                    interest before accepting new transactions from those clearing members.
   Article 33(3) of Where the third-country CCP is a parent undertaking or a subsidiary, ,
   Regulation (EU)  that CCP’s arrangements to manage conflicts of interest take into account
   No 648/2012      any circumstances of which the CCP is or should be aware which may
                    give rise to a conflict of interest due to the structure and business
                    activities of other undertakings of which it is a parent or a subsidiary.
   Article 33(5) of The third-country CCP takes all reasonable steps to prevent any misuse of
   Regulation (EU)  information held in its systems and prevents the use of that information
   No 648/2012      for other business activities.
                    The third-country CCP implements and maintains an adequate business
   Business
   Continuity       continuity policy and disaster recovery plan aimed at ensuring the
                    preservation of its functions, the timely recovery of operations and the
   Article 34(1) of
   Regulation (EU)  fulfilment of the CCP’s obligations, including the recovery of all
   No 648/2012      transactions at the time of disruption to enable the CCP to continue to
                    operate with certainty and to complete settlement on the scheduled date.
   Article 34(2) of The third-country CCP implements and maintains an adequate procedure
                    ensuring the timely and orderly settlement or transfer of the assets and
EN                                            3                                                    EN
 ---pagebreak---    Regulation (EU)    positions of clients and clearing members in the event of a withdrawal of
   No 648/2012        authorisation.
                      When outsourcing operational functions, services or activities, the third-
   Outsourcing
                      country CCP ensures that, at all times:
   Article 35 of      (a) outsourcing does not result in the delegation of its responsibility;
   Regulation (EU)
   No 648/2012        (b) the relationship and obligations of that CCP towards its clearing
                      members or, where relevant, towards their clients are not altered;
                      (c) outsourcing does not prevent the exercise of supervisory and oversight
                      functions;
                      (d) outsourcing does not result in depriving the CCP from the necessary
                      systems and controls to manage the risks it faces;
                      (e) the service provider implements equivalent business continuity
                      requirements to those that the CCP must fulfil;
                      (f) the CCP retains the necessary expertise and resources to evaluate the
                      quality of the services provided and the organisational and capital
                      adequacy of the service provider, and to supervise the outsourced
                      functions effectively and manage the risks associated with the outsourcing
                      and supervises those functions and manages those risks on an ongoing
                      basis;
                      (g) the CCP has direct access to the relevant information of the
                      outsourced functions;
                      (h) the service provider protects any confidential information relating to
                      the CCP and its clearing members and clients.
   Chapter 2: Conduct of business rules
                      The third-country CCP, when providing services to its clearing members,
   General
   provisions         and where relevant, to their clients, acts fairly and professionally in
                      accordance with the best interests of such clearing members and clients
   Article 36(1) of
   Regulation (EU)    and sound risk management.
   No 648/2012
   Article 36(2) of   The third-country CCP has accessible, transparent and fair rules for the
   Regulation (EU)    prompt handling of complaints.
   No 648/2012
                      The third-country CCP establishes categories of admissible clearing
   Participation
   requirements       members and non-discriminatory, transparent and objective admission
                      criteria to ensure fair and open access to the CCP and sufficient financial
   Paragraphs 1 and 2
   of Article 37 of   resources and operational capacity of clearing members, enabling the
   Regulation (EU)    CCP to control the risk it is exposed to, and monitors on an ongoing basis
   No 648/2012        that those criteria are met.
   Article 37(3) of   The third-country CCP’s rules for clearing members enables it to gather
   Regulation (EU)    relevant basic information to identify, monitor and manage relevant
EN                                              4                                                 EN
 ---pagebreak---    No 648/2012        concentrations of risk relating to the provision of services to clients.
   Paragraphs 4 and 5 The third-country CCP has objective and transparent procedures for the
   of Article 37 of   suspension and orderly exit of clearing members that no longer meet the
   Regulation (EU)    admission criteria and can only deny access to clearing members meeting
   No 648/2012        the admission criteria where duly justified in writing and based on a
                      comprehensive risk analysis.
   Article 37(6) of   Specific additional obligations on clearing members, such as the
   Regulation (EU)    participation in auctions of a defaulting clearing member’s position, are
   No 648/2012        proportional to the risk brought by the clearing member and do not restrict
                      participation to certain categories of clearing members.
                      The third-country CCP publicly discloses the prices and fees associated
   Transparency
                      with each service provided, including discounts and rebates and the
   Article 38(1) of
                      conditions to benefit from those reductions, and allows its clearing
   Regulation (EU)
   No 648/2012        members and, where relevant, their clients, separate access to the specific
                      services provided.
   Article 38(2) of   The third-country CCP discloses to clearing members and clients the risks
   Regulation (EU)    associated with the services provided.
   No 648/2012
   Article 38(3) of   The third-country CCP discloses to its clearing members the price
   Regulation (EU)    information used to calculate its end-of-day exposures to its clearing
   No 648/2012        members, and publicly discloses the volumes of the cleared transactions
                      for each class of instruments cleared by the CCP on an aggregated basis.
   Article 38(4) of   The third-country CCP publicly discloses the operational and technical
   Regulation (EU)    requirements relating to the communication protocols covering content
   No 648/2012        and message formats it uses to interact with third parties, including the
                      operational and technical requirements related to access of trading venues
                      to the CCP.
   Paragraphs 6 and 7 The third-country CCP provides its clearing members with information on
   of Article 38 of   the initial margin models it uses, explaining how the models operate and
   Regulation (EU)    describing the key assumptions and limitations of those models.
   No 648/2012
                      The third-country CCP keeps separate records and accounts for each
   Segregation and
   Portability        clearing member, segregates the assets and positions of the clearing
                      member from the assets and positions of the clients of the clearing
   Article 39 of
   Regulation (EU)    member, and provides sufficient protection for the assets and positions of
   No 648/2012        each clearing member and each client, as well as a choice of segregation
                      of positions and assets and of options of portability to each client,
                      including individual client segregation.
   Chapter 3: Prudential requirements
                      The third-country CCP maintains appropriate policies and mechanisms to
   Exposure
   management         manage, on a near to real time basis, intra-day exposures to sudden
                      changes in market conditions and in positions.
   Article 40 of
EN                                              5                                                 EN
 ---pagebreak---    Regulation (EU)
   No 648/2012
                      The third-country CCP imposes, calls and collects margins to limit its
   Margin
   requirements       credit exposures from its clearing members and, where relevant, from
                      CCPs with which it has interoperability arrangements, and that CCP
   Article 41(1) of
   Regulation (EU)    regularly monitors and, if necessary, revises the level of its margins to
   No 648/2012        reflect current market conditions taking into account any potentially
                      procyclical effects of such revisions. Such margins shall be sufficient:
                      (a) to cover potential exposures that may occur until the liquidation of the
                      relevant positions;
                      (b) to cover losses that result from at least 99 % of the exposures
                      movements over an appropriate time horizon.
                      Those margins ensure that a CCP fully collateralises its exposures with all
                      its clearing members, and, where relevant, with CCPs with which it has
                      interoperability arrangements, at least on a daily basis.
   Article 41(2) of   The third-country CCP applies models and parameters in setting its
   Regulation (EU)    margin requirements that capture the risk characteristics of the products
   No 648/2012        cleared and take into account the interval between margin collections,
                      market liquidity and the possibility of changes over the duration of the
                      transaction.
   Article 41(3) of   The third-country CCP calls and collects margins on an intraday basis, at
   Regulation (EU)    least when predefined thresholds are exceeded.
   No 648/2012
   Article 41(4) of   The third-country CCP calculates, calls and collects margins that are
   Regulation (EU)    adequate to cover the risk stemming from the positions registered in each
   No 648/2012        account with respect to specific financial instruments, or to a portfolio of
                      financial instruments provided that the methodology used is prudent and
                      robust.
                      The third-country CCP:
   Default Fund and
   Other Financial    (a) maintains one or more pre-funded default funds to cover losses that
   Resources          exceed the losses to be covered by margins, arising from the default,
   Paragraphs 1 and 4 including the opening of an insolvency procedure, of one or more clearing
   of Article 42 of   members;
   Regulation (EU)    (b) establishes a minimum amount below which the size of the default
   No 648/2012        fund is not to fall under any circumstances.
   Article 42(2) of   The third-country CCP establishes the minimum size of contributions to
   Regulation (EU)    the default fund and the criteria to calculate the contributions of the single
   No 648/2012        clearing members. The contributions are proportional to the exposures of
                      each clearing member.
   Articles 42(3) and The third-country CCP develops scenarios of extreme but plausible
EN                                               6                                                   EN
 ---pagebreak---    43(2) of           market conditions, including the most volatile periods that have been
   Regulation (EU)    experienced by the markets for which that CCP provides its services, and
   No 648/2012        a range of potential future scenarios, taking into account sudden sales of
                      financial resources and rapid reductions in market liquidity, and the
                      default fund of that CCP enables it, at all times, to withstand the default of
                      at least the two clearing members to which it has the largest exposures
                      under extreme but plausible market conditions.
   Article 43(1) of   The default fund of the third-country CCP maintains sufficient pre-funded
   Regulation (EU)    available financial resources to cover potential losses that exceed the
   No 648/2012        losses to be covered by margins. Those pre-funded available financial
                      resources include dedicated resources of the CCP, are freely available to
                      the CCP and are not used to meet capital requirements.
   Article 43(3) of   The third-country CCP ensures that the exposures of the clearing
   Regulation (EU)    members toward that CCP are limited.
   No 648/2012
                      The third-country CCP:
   Liquidity risk
   controls           (a) has access to adequate liquidity at all times measured to cover its
                      liquidity needs on a daily basis and taking into account the liquidity risk
   Article 44(1) of
   Regulation (EU)    generated by the default of at least the two clearing members to which it
   No 648/2012        has the largest exposures;
                      (b) obtains the necessary credit lines or similar arrangements to cover its
                      liquidity needs in case the financial resources at its disposal are not
                      immediately available;
                      (c) ensures that a clearing member, parent undertaking or subsidiary of
                      that clearing member together do not provide more than 25 % of the credit
                      lines needed by that CCP.
                      The third-country CCP uses the margins posted by a defaulting clearing
   Default waterfall
                      member prior to other financial resources in covering losses and
   Paragraphs 1 and 2 thereafter, where the margins posted by that clearing member are not
   of Article 45 of
   Regulation (EU)    sufficient to cover the losses incurred by the CCP, the default fund
   No 648/2012        contribution of that clearing member to cover those losses.
   Paragraphs 3 and 4 The third-country CCP:
   of Article 45 of   (a) uses contributions to the default fund of the non-defaulting clearing
   Regulation (EU)    members and any other financial resources that are part of its default
   No 648/2012        waterfall only after having exhausted the contributions of the defaulting
                      clearing member and its dedicated own resources;
                      (b) does not use the margins posted by non-defaulting clearing members
                      to cover the losses resulting from the default of another clearing member.
                      The third-country CCP accepts only highly liquid collateral with minimal
   Collateral
   requirements       credit and market risk to cover its initial and ongoing exposure to its
                      clearing members, and applies adequate haircuts to asset values that
   Article 46 of
                      reflect the potential for their value to decline over the interval between
EN                                              7                                                    EN
 ---pagebreak---    Regulation (EU)   their last revaluation and the time by which they can reasonably be
   No 648/2012       assumed to be liquidated, taking into account the liquidity risk following
                     the default of a market participant and the concentration risk on certain
                     assets that may result in establishing the acceptable collateral and the
                     relevant haircuts.
                     The third-country CCP invests its financial resources only in cash or in
   Investment Policy
                     highly liquid financial instruments with minimal market and credit risk,
   Article 47(1) of
                     and its investments are capable of being liquidated rapidly with minimal
   Regulation (EU)
   No 648/2012       adverse price effect.
   Article 47(3) of  The third-country CCP deposits financial instruments posted as margins
   Regulation (EU)   or as default fund contributions with, where available, operators of
   No 648/2012       securities settlement systems that ensure the full protection of those
                     financial instruments, or with other authorised financial institutions using
                     alternative highly secure arrangements.
   Article 47(4) of  Cash deposits of the third-country CCP are performed through highly
   Regulation (EU)   secure arrangements with authorised financial institutions or,
   No 648/2012       alternatively, through the use of the standing deposit facilities of central
                     banks or other comparable means provided for by central banks.
   Article 47(5) of  When depositing assets with a third party, the third-country CCP:
   Regulation (EU)   (a) ensures that the assets belonging to the clearing members are
   No 648/2012       identifiable separately from the assets belonging to that CCP and from
                     assets belonging to that third party by means of differently titled accounts
                     on the books of the third party or any other equivalent measures that
                     achieve the same level of protection;
                     (b) has prompt access to the financial instruments when required.
   Article 47(6) of  The third-country CCP does not invest its capital or the sums arising from
   Regulation (EU)   margins, default fund contributions, liquidity or other financial resources,
   No 648/2012       in its own securities or those of its parent undertaking or its subsidiary.
   Article 47(7) of  The third-country CCP takes into account its overall credit risk exposures
   Regulation (EU)   to individual obligors in making its investment decisions and ensures that
   No 648/2012       its overall risk exposure to any individual obligor remains within
                     acceptable concentration limits.
                     The third-country CCP has procedures in place to be followed where a
   Default
   procedures        clearing member does not comply with the participation requirements of
                     the CCP or when that clearing member is declared in default either by the
   Article 48(1) of
   Regulation (EU)   CCP or by a third party.
   No 648/2012
   Article 48(2) of  The third-country CCP takes prompt action to contain losses and liquidity
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 ---pagebreak---    Regulation (EU)     pressures resulting from defaults and ensures that the closing out of any
   No 648/2012         clearing member’s positions does not disrupt its operations or expose the
                       non-defaulting clearing members to losses that they cannot anticipate or
                       control.
   Article 48(3) of    The third-country framework ensures that the third-country CCP promptly
   Regulation (EU)     informs its competent authority before the default procedure is declared or
   No 648/2012         triggered.
   Article 48(4) of    The third-country CCP verifies that its default procedures are enforceable.
   Regulation (EU)
   No 648/2012
   Paragraphs 5, 6     The third-country CCP:
   and 7 of Article 48 (a) acts in accordance with the rules of protection of collateral and
   of Regulation (EU)  positions of the client accounts applicable in the third country;
   No 648/2012         (b)implements procedures facilitating the porting of clients’ positions and
                       collateral in accordance with the rules applicable in the third country.
                       The third-country CCP:
   Review of models,
   stress testing and  (a) regularly reviews the models and parameters adopted to calculate its
   back testing        margin requirements, default fund contributions, collateral requirements
   Article 49(1) of    and other risk control mechanisms;
   Regulation (EU)     (b) subjects those models to rigorous and frequent stress tests to assess
   No 648/2012         their resilience in extreme but plausible market conditions;
                       (c) performs back tests to assess the reliability of the methodology
                       adopted;
                       (d) obtains either an independent validation or a validation by its
                       competent authority of those models and of any significant changes
                       thereto.
   Article 49(2) of    The third-country CCP regularly tests the key aspects of its default
   Regulation (EU)     procedures and takes all reasonable steps to ensure that all clearing
   No 648/2012         members understand them and have appropriate arrangements in place to
                       respond to a default event.
   Article 49(3) of    The third-country CCP publicly discloses key information on its risk-
   Regulation (EU)     management model and assumptions adopted to perform the stress tests
   No 648/2012         on the models and parameters adopted to calculate its margin
                       requirements, default fund contributions, collateral requirements and other
                       risk control mechanisms.
                       The third-country CCP uses, where practical and available, central bank
   Settlement
                       money to settle its transactions or, where central bank money is not used,
   Article 50(1) of    takes steps to strictly limit cash settlement risks.
   Regulation (EU)
   No 648/2012
   Article 50(2) of    The third-country CCP clearly states its obligations with respect to
   Regulation (EU)     deliveries of financial instruments including whether it has an obligation
                       to make or receive delivery of a financial instrument or whether it
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 ---pagebreak---    No 648/2012          indemnifies participants for losses incurred in the delivery process.
   Article 50(3) of     Where the third-country CCP has an obligation to make or receive
   Regulation (EU)      deliveries of financial instruments, that CCP eliminates principal risk
   No 648/2012          through the use of delivery-versus-payment mechanisms to the extent
                        possible.
   Chapter 4: Calculations and reporting for the purposes of Regulation (EU) No 575/2013of
   the European Parliament and of the Council1
                        The third-country CCP applies reporting requirements on capital
   Calculations and
   reporting            requirements calculations in accordance with the respective third-country
                        framework applicable to rules on accounting and capital requirements.
   Articles 50a to 50d
   of Regulation (EU)
   No 648/2012
   1
           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 (OJ L 176, 27.6.2013, p. 1).
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 ---pagebreak---                                             ANNEX II
                      ELEMENTS REFERRED TO IN ARTICLE 4(1)
      Provision of                         Elements referred to in Article 4(1)
       Union law
   Interoperability    Where an interoperability arrangement is established to provide services
   arrangements        to a particular trading venue, the third-country CCP has non-
                       discriminatory access both to the data that it needs for the performance of
   Article 51(2)of
                       its functions from that particular trading venue and to the relevant
   Regulation (EU)
                       settlement system;
   No 648/2012
   Article 51(3)of     The third-country CCP rejects or restricts entering into an interoperability
   Regulation (EU)     arrangement or accessing a data feed or a settlement system, directly or
   No 648/2012         indirectly, only in order to control any risk arising from that arrangement
                       or access.
   Risk management     The CCPs that have entered into an interoperability arrangement :
   Paragraphs 1 and 2  (a) have in place adequate policies, procedures and systems to effectively
   of Article 52 of    identify, monitor and manage the risks arising from that interoperability
   Regulation (EU)     arrangement so that they can meet their obligations in a timely manner;
   No 648/2012         (b) agree on their respective rights and obligations, including the
                       applicable law governing their relationships;
                       (c) identify, monitor and effectively manage credit and liquidity risks so
                       that a default of a clearing member of one CCP does not affect an
                       interoperable CCP;
                       (d) identify, monitor and address potential interdependences and
                       correlations that arise from an interoperability arrangement that may
                       affect credit and liquidity risks relating to clearing member
                       concentrations, and pooled financial resources;
                       (e) where the risk-management models used by the interoperable CCPs to
                       cover their exposure to their clearing members or their reciprocal
                       exposures are different, those CCPs identify those differences, assess risks
                       that may arise therefrom and take measures, including securing additional
                       financial resources, that limit their impact on the interoperability
                       arrangement as well as their potential consequences in terms of contagion
                       risks and ensure that these differences do not affect each CCP’s ability to
                       manage the consequences of the default of a clearing member.
   Provision of        The third-country CCP distinguishes in accounts the assets and positions
   margins among       held for the account of CCPs with which it has entered into an
   CCPs                interoperability arrangement.
   Article 53 of       The third-country CCP only provides initial margins to that CCP under a
   Regulation (EU)     security financial collateral arrangement by which the receiving CCP has
   No 648/2012         no right of use over the margins provided by the other CCP.
                       Collateral received in the form of financial instruments is protected in
                       either of the following manners:
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 ---pagebreak---          (i)      it is deposited with operators of securities settlement
                  systems that ensure the full protection of those financial
                  instruments;
         (ii)     other highly secure arrangements with authorised financial
                  institutions are used;
   Assets are available to the receiving CCP only in case of default of the
   CCP which has provided the collateral in the context of an interoperability
   arrangement.
   In case of default of the CCP which has received the collateral in the
   context of an interoperability arrangement, the collateral provided is
   readily returned to the providing CCP.
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