Article 75 Equivalence and international agreements
1. The Commission may adopt an implementing act determining that the legal and supervisory arrangements of a third country ensure that: (a) trade repositories authorised in that third country comply with legally binding requirements which are equivalent to those laid down in this Regulation; (b) effective supervision and enforcement of trade repositories takes place in that third country on an ongoing basis; and (c) guarantees of professional secrecy exist, including the protection of business secrets shared with third parties by the authorities, and they are at least equivalent to those set out in this Regulation. That implementing act shall be adopted in accordance with the examination procedure referred to in Article 86(2). 2. Where appropriate, and in any case after adopting an implementing act as referred to in paragraph 1, the Commission shall submit recommendations to the Council for the negotiation of international agreements with the relevant third countries regarding mutual access to, and exchange of information on, derivative contracts held in trade repositories which are established in that third country, in a way that ensures that Union authorities, including ESMA, have immediate and continuous access to all the information needed for the exercise of their duties. 3. After conclusion of the agreements referred to in paragraph 2, and in accordance with them, ESMA shall establish cooperation arrangements with the competent authorities of the relevant third countries. Those arrangements shall specify at least: (a) a mechanism for the exchange of information between ESMA and any other Union authorities that exercise responsibilities in accordance with this Regulation on the one hand and the relevant competent authorities of third countries concerned on the other; and (b) procedures concerning the coordination of supervisory activities. 4. ESMA shall apply Regulation (EC) No 45/2001 with regard to the transfer of personal data to a third country.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Under the heading “An Economy that Works for People”, the Commission Work Programme for 2020 provides for a review of its regulation on financial benchmarks, the “Benchmark Regulation” (“BMR”). Financial benchmarks are indices by reference to which the amount payable under a financial instrument or a financial contract or the value of a financial instrument is determined. By setting out governance and data quality standards for benchmarks that are referenced in financial contracts, the Benchmark Regulation aims to strengthen the trust of capital market participants in indices used as benchmarks in the Union. It contributes to the Commission’ efforts in favour of a Capital Markets Union (CMU). The BMR introduces an authorisation requirement for administrators of financial benchmarks as well as requirements for contributors of input data used to calculate the financial benchmark. The BMR also regulates the use of financial benchmarks 1 . In particular, the BMR rules require EU supervised entities (such as banks, investment firms, insurance undertakings, UCITS 2 ) to use only indices whose administrator has been authorised. Benchmarks administered in third countries can only be used in the EU following an equivalence, recognition or endorsement procedure. The Benchmark Regulation applies since January 2018 3 . However, EU market participants can continue to use benchmarks administered in a country outside the Union - regardless of whether an equivalence decision is in place, the index has been recognised or endorsed for use in the Union 4 – until the transitional regime expires at the end of December 2021. 1.1.1. The orderly cessation of financial benchmarks Due to concerns about whether the London Interbank Offered Rate (LIBOR) adequately represents an underlying market or economic reality reflective of interbank borrowing, the national competent authority for LIBOR (the UK Financial Conduct Authority or “FCA”) has announced the likely cessation of LIBOR after the end of 2021. The FCA, in all its public statements, has been clear that, where a benchmark loses representativeness and its representativeness will not be restored, use of the benchmark by supervised entities must cease. Relying on a very small number of panel banks such that LIBOR was no longer representative of the underlying market or economic reality that LIBOR sought to measure, means that its value could deviate significantly from that economic reality, as well as becoming more volatile. As documented in the Commission’s impact assessment, many financial instruments and contracts that reference LIBOR will not have reached maturity by the expected cessation date after the end of 2021. Many of these contracts involve debt issued by supervised entities, debt instruments held on the balance sheet by supervised entities, the loan portfolio of supervised entities and derivative contracts that these entities have concluded to hedge their positions. As mentioned above, supervised entities within the scope of the EU Benchmark Regulation may only use indices that are authorised as compliant with the BMR. The disappearance of LIBOR will have significant economic impacts that EU supervised entities could not have anticipated when concluding these often longer maturity contracts. Many of these contracts, especially those concluded before adoption of the BMR in 2016, often lack any contractual “fall-back” provisions that deal with the permanent discontinuation of the LIBOR rate. Amending the terms of thousands of contracts that currently contain references to LIBOR will not always be possible in the short period remaining until the expected end of the LIBOR at the end of 2021. Many currently existing debt, loan, deposit and many of the derivative contracts would, upon a permanent cessation of an interest rate benchmark, such as LIBOR, lack a contractual fall-back rate that allows parties to continue to comply with their contractual obligations. If no remedies were envisaged, the discontinuation of a widely used interest rate benchmark will have negative consequences for EU supervised entities and their contractual counterparts from whom these entities either borrow or to whom they lend funds. All counterparts in contracts referencing such a benchmark that are still pending at the date of cessation will face legal uncertainty as to the validity and enforcement of their contractual obligations. The range of contracts that will be affected by the cessation of a widely used interest rate benchmark includes: (1) debt issuances by supervised entities; (2) debt held on the balance sheet of supervised entities; (3) loans; (4) deposits and (5) derivative contracts. A large part of the financial contracts that reference widely used interest rate benchmarks involve supervised entities within the scope of the BMR. The legal uncertainty and potentially adverse economic impact that may result from difficulties in the ability to enforce contractual obligations will pose a risk for financial stability in the Union. To mitigate the risk of contract frustration and the ensuing risk to financial stability, central banks in various currency areas have set up working groups to recommend fall-back rates that would apply to the legacy stock of contracts that reference interest rate benchmarks in cessation and that could not be renegotiated by the date of the permanent cessation of this benchmark. For example, the Alternative Reference Rate Committee (ARRC) in the United State has recommended a waterfall that includes a replacement rate calculation based on a risk-free overnight rate (SOFR) plus a spread adjustment to make the replacement rate resemble, as close as possible, the economic properties of the discontinued benchmark. The aim of these replacement rates would therefore be to mimic, to the extent possible, what the contract parties intended to achieve by references to the benchmark in cessation. It is a deliberate policy choice underpinning all recommendations for a replacement rate for legacy contracts that no new contracts (defined as contracts concluded after cessation of the benchmark) may reference the replacement rate. This is because the replacement rate is most likely a synthetic version of the benchmark in cessation and is meant to ease the transition to a new rate. For example, a replacement rate for USD LIBOR will most likely be calculated based on a risk-free overnight rate in borrowing (SOFR) plus a spread adjustment to reflect the historical spread between the risk-free overnight rate and the replaced LIBOR rate. While a synthetic version of a benchmark should be stable enough to accompany the wind-down of legacy portfolios, it is not a permanent solution, reflective of a supervised entity’s forward looking financing cost. However, even once these replacement rates are available, it will be difficult to amend all existing legacy contracts given the scale of the LIBOR references and the short period of time before LIBOR is expected to be discontinued. A reform of the BMR is therefore the right tool to establish a statutory replacement rate that mitigates the adverse consequences for legal certainty and financial stability that might ensue if LIBOR, or any other benchmark whose cessation would result in significant disruption in the functioning of financial markets in the Union, was discontinued without such a replacement rate being both available and integrated into legacy contracts that involve a supervised entity within the scope of the BMR. 1.1.2. Spot f oreign exchange rates While spot foreign exchange rates play a crucial role for the international economy, for several currencies, the rates that are available are largely unregulated and are often reflective of central bank monetary policies. In some countries, central banks have implemented controls to restrict the publication of spot foreign exchange rates outside their local jurisdiction. In addition to preventing publication of off-shore foreign exchange rates, certain countries have in place capital controls that limit the convertibility of their currencies. Since their currencies are not freely convertible, the availability of on-shore currency hedging tools, such as currency forwards, swaps or options, is limited. Demand for hedging tools against currency volatility in these countries outstrips the shallow liquidity offered by the on-shore market. In consequence, European financial institutions have developed off-shore derivatives markets that, due to the convertibility restrictions in place, settle into the base currency of the hedging entity, albeit by reference to the foreign exchange rate published at the moment of the hedging contract’s expiry. Therefore, hedging against movements in currencies subject to such convertibility restrictions is done with off-shore derivative contracts. These include financial instruments such as non-deliverable currency forwards and non-deliverable swaps. Where these forwards and swaps are offered by an EU supervised entity (a dealer bank ) 1 and traded on an EU trading venue or via an EU systematic internaliser, the spot currency rate that is used to determine the pay-out due under the forward or swap agreement constitutes a “use” of the spot exchange rate which brings the offer of forwards and swaps by a supervised entity within the scope of the BMR. At the end of the current transitional period set out in Article 51 of the BMR the reference to foreign exchange spot rates in EU-traded currency forwards or swaps will no longer be allowed. This means that, at the beginning of 2022, EU supervised entities are at risk of losing access to many public policy rates administered outside the EU, including spot foreign exchange rates that they reference in derivative contracts that they offer corporate counterparts to help them manage their day-to-day hedging of currency risk. The urgency of the issue arises as almost no other jurisdiction apart from the EU regulates spot exchange rates. Due to the absence of regulation, currency spot rates could not, therefore, be the subject of an equivalence assessment under the BMR. Neither can they be recognised or endorsed for use in the Union under the BMR, as both of these mechanisms, in turn, require some form of regulation and oversight. In conclusion, foreign exchange spot rates are not suitable candidates for equivalence, endorsement or recognition by the end of the transition period. This proposal, therefore, makes targeted modification of the scope of the BMR in order to ensure that European companies retain access to hedging tools against volatility of currencies that are not freely convertible into their base currency, ensuring seamless continuation of their business activities abroad after the expiry of the transitional period at the end of 2021. 
Revised version (Article 75 Equivalence and international agreements):
The Commission may adopt an implementing act determining that the legal and supervisory arrangements of a third country ensure that: (a) trade repositories authorised in that third country comply with legally binding requirements which are equivalent to those laid down in this Regulation; (b) effective supervision and enforcement of trade repositories takes place in that third country on an ongoing basis; and (c) guarantees of professional secrecy exist, including the protection of business secrets shared with third parties by the authorities, and they are at least equivalent to those set out in this Regulation. That implementing act shall be adopted in accordance with the examination procedure referred to in Article 86(2). 2. Where appropriate, and in any case after adopting an implementing act as referred to in paragraph 1, the Commission shall submit recommendations to the Council for the negotiation of international agreements with the relevant third countries regarding mutual access to, and exchange of information on, derivative contracts held in trade repositories which are established in that third country, in a way that ensures that Union authorities, including ESMA, have immediate and continuous access to all the information needed for the exercise of their duties. 3. After conclusion of the agreements referred to in paragraph 2, and in accordance with them, ESMA shall establish cooperation arrangements with the competent authorities of the relevant third countries. Those arrangements shall specify at least: (a) a mechanism for the exchange of information between ESMA and any other Union authorities that exercise responsibilities in accordance with this Regulation on the one hand and the relevant competent authorities of third countries concerned on the other; and (b) procedures concerning the coordination of supervisory activities. After conclusion of the agreements referred to in paragraph 2, and in accordance with them, ESMA shall establish cooperation arrangements with the competent authorities of the relevant third countries. Those arrangements shall specify at least: (a) a mechanism for the exchange of information between ESMA and any other Union authorities that exercise responsibilities in accordance with this Regulation on the one hand and the relevant competent authorities of third countries concerned on the other; and (b) procedures concerning the coordination of supervisory activities. 4. ESMA shall apply Regulation (EC) No 45/2001 with regard to the transfer of personal data to a third country.
Article 76 Cooperation arrangements
Relevant authorities of third countries that do not have any trade repository established in their jurisdiction may contact ESMA with a view to establishing cooperation arrangements to access information on derivatives contracts held in Union trade repositories. ESMA may establish cooperation arrangements with those relevant authorities regarding access to information on derivatives contracts held in Union trade repositories that these authorities need to fulfil their respective responsibilities and mandates, provided that guarantees of professional secrecy exist, including the protection of business secrets shared by the authorities with third parties.
Article 77 Recognition of trade repositories
1. A trade repository established in a third country may provide its services and activities to entities established in the Union for the purposes of Article 9 only after its recognition by ESMA in accordance with paragraph 2. 2. A trade repository referred to in paragraph 1 shall submit to ESMA its application for recognition together with all necessary information, including at least the information necessary to verify that the trade repository is authorised and subject to effective supervision in a third country which: (a) has been recognised by the Commission, by means of an implementing act pursuant to Article 75(1), as having an equivalent and enforceable regulatory and supervisory framework; (b) has entered into an international agreement with the Union pursuant to Article 75(2); and (c) has entered into cooperation arrangements pursuant to Article 75(3) to ensure that Union authorities, including ESMA, have immediate and continuous access to all the necessary information. Within 30 working days of receipt of the application, ESMA shall assess whether the application is complete. If the application is not complete, ESMA shall set a deadline by which the applicant trade repository has to provide additional information. Within 180 working days of the submission of a complete application, ESMA shall inform the applicant trade repository in writing with a fully reasoned explanation whether the recognition has been granted or refused. ESMA shall publish on its website a list of the trade repositories recognised in accordance with this Regulation.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 64 8 /2012 1 (the European Market Infrastructure Regulation or “EMIR”) regulates derivatives transactions, including measures to limit their risks through clearing in central counterparties (CCPs). 2 CCPs take on the risks faced by the parties to a trade, becoming the buyer to every seller and the seller to every buyer. By doing so, they increase market transparency and efficiency and reduce the risks in financial markets, especially for derivatives . EMIR 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. EMIR requires that derivatives transactions are reported to ensure market transparency for regulators and supervisors and that their risks are appropriately mitigated through central clearing at a CCP or by exchanging collateral, known as ‘margin’, in bilateral transactions. CCPs, and the risks they manage, have grown considerably since the adoption of EMIR. In 2017, the Commission published two legislative proposals amending EMIR, both of which were adopted by the co-legislators in 2019. EMIR REFIT 3 recalibrated some of the requirements under EMIR 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 4 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 5 , adopted in 2020, 6 to prepare for the unlikely – though massively impactful - event that an EU CCP faces severe financial distress. 7 Whilst EMIR has established a robust framework for central clearing, certain areas of the current supervisory framework have proven overly complex. This limits EU CCPs’ ability to attract business both within the EU and internationally. The supervisory approval procedures for launching new clearing services and activities by EU CCPs, as well as changes in their risk models, are in many cases unnecessarily long and burdensome. The current rules are there to ensure the safety and soundness of EU CCPs, but this could be done in many ways and the existing processes have been challenged as too slow and, at times, disproportionate in light of the envisaged change. It should not take years for approving a new product, and changes to risk models need to be swift to reflect changing market and economic circumstances. Delays in approvals increase costs and reduce the attractiveness of EU CCPs, and consequently of the EU as a place to do business. The proposal aims at mitigating these obstacles in order to foster modern and competitive CCPs in the EU that can attract business. EMIR provides a comprehensive and robust prudential framework for CCPs and the newly adopted CCP Recovery and Resolution Regulation further strengthens the soundness of EU CCPs. This proposal aims for the EU to continue to base the evolution of its central clearing ecosystem on the strength of its rules and supervision. Robust and safe CCPs enhance the trust of the financial system and crucially support the liquidity of key markets. A safe, robust and resilient clearing ecosystem is a pre-condition for it to grow further. The EU central clearing ecosystem should enable EU firms to hedge their risks efficiently and safely, while at the same time safeguarding the wider financial stability. In this way, central clearing will support the EU economy. This proposal aims to put firms in a better position by being able to predict the liquidity needs associated with central clearing. A competitive and efficient EU clearing ecosystem will increase central clearing activities, but central clearing also entails risks by centralising transactions in a few CCPs being financially systemically important. Hence, those risks must be appropriately managed by CCPs and CCPs must continue to be thoroughly supervised both at the national and the wider EU level. Therefore, this proposal aims at ensuring a robust and joined-up supervision, building on the supervisory system the EU currently has in place. In addition, 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 a stress scenario. H igh-risk but low-probability events can happen, and the EU must be prepared to face them 8 . While EU CCPs have generally proven resilient, experience has shown that the EU clearing ecosystem can be made stronger, to the benefit of financial stability. However, open strategic autonomy also means that the EU needs to safeguard itself against the financial stability risks which can arise when EU market participants are excessively reliant on third-country entities, as this can be a source of vulnerabilit y . Therefore, this proposal aims at making the equivalence framework in EMIR more proportionate and to better tailor cooperation with foreign supervisors taking into account the risks posed by CCPs based in third countries – and without compromising on the need for third countries to have sound rules in place . It is also proposed that the equivalence procedure is made simpler when the risks involved in central clearing in a third country are particularly low. In addition, this proposal seeks to build up the EU’s central clearing capacity and thereby increase liquidity at EU CCPs with the aim to reduce the risks posed to the EU financial stability by excessive exposures to third-country CCPs. Therefore, this proposal requires all market participants subject to a clearing obligation, to hold active accounts at EU CCPs for clearing products that have been identified by ESMA as of substantial systemic importance for the EU financial stability. T his proposal is complemented by a proposal for a Directive introducing a limited number of changes to Directive 2013/36/EU 9 (Capital Requirements Directive or ‘CRD’), Directive (EU) 2019/2034 10 (Investment Firms Directive or ‘IFD’) and Directive 2009/65/EU 11 (Undertakings for Collective Investment in Transferable Securities Directive or ‘UCITS Directive’) as regards the treatment of concentration risk towards CCPs and the counterparty risk on centrally cleared derivative transactions. These amendments are necessary to ensure that the objectives of this EMIR review are achieved as well as to assure coherence. The two proposals should therefore be read in conjunction.
Revised version (Article 77 Recognition of trade repositories):
1. A trade repository established in a third country may provide its services and activities to entities established in the Union for the purposes of Article 9 only after its recognition by ESMA in accordance with paragraph 2. 2. Within 30 working days of receipt of the application, ESMA shall assess whether the application is complete. If the application is not complete, ESMA shall set a deadline by which the applicant trade repository has to provide additional information. Within 180 working days of the submission of a complete application, ESMA shall inform the applicant trade repository in writing with a fully reasoned explanation whether the recognition has been granted or refused. ESMA shall publish on its website a list of the trade repositories recognised in accordance with this Regulation.
Article 78 General requirements
1. A trade repository shall have robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility and adequate internal control mechanisms, including sound administrative and accounting procedures, which prevent any disclosure of confidential information. 2. A trade repository shall maintain and operate effective written organisational and administrative arrangements to identify and manage any potential conflicts of interest concerning its managers, employees, or any person directly or indirectly linked to them by close links. 3. A trade repository shall establish adequate policies and procedures sufficient to ensure its compliance, including of its managers and employees, with all the provisions of this Regulation. 4. A trade repository shall maintain and operate an adequate organisational structure to ensure continuity and orderly functioning of the trade repository in the performance of its services and activities. It shall employ appropriate and proportionate systems, resources and procedures. 5. Where a trade repository offers ancillary services such as trade confirmation, trade matching, credit event servicing, portfolio reconciliation or portfolio compression services, the trade repository shall maintain those ancillary services operationally separate from the trade repository’s function of centrally collecting and maintaining records of derivatives. 6. The senior management and members of the board of a trade repository shall be of sufficiently good repute and experience so as to ensure the sound and prudent management of the trade repository. 7. A trade repository shall have objective, non-discriminatory and publicly disclosed requirements for access by undertakings subject to the reporting obligation under Article 9. A trade repository shall grant service providers non-discriminatory access to information maintained by the trade repository, on condition that the relevant counterparties have provided their consent. Criteria that restrict access shall only be permitted to the extent that their objective is to control the risk to the data maintained by a trade repository. 8. A trade repository shall publicly disclose the prices and fees associated with services provided under this Regulation. It shall disclose the prices and fees of each service provided separately, including discounts and rebates and the conditions to benefit from those reductions. It shall allow reporting entities to access specific services separately. The prices and fees charged by a trade repository shall be cost-related.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Under the heading “An Economy that Works for People”, the Commission Work Programme for 2020 provides for a review of its regulation on financial benchmarks, the “Benchmark Regulation” (“BMR”). Financial benchmarks are indices by reference to which the amount payable under a financial instrument or a financial contract or the value of a financial instrument is determined. By setting out governance and data quality standards for benchmarks that are referenced in financial contracts, the Benchmark Regulation aims to strengthen the trust of capital market participants in indices used as benchmarks in the Union. It contributes to the Commission’ efforts in favour of a Capital Markets Union (CMU). The BMR introduces an authorisation requirement for administrators of financial benchmarks as well as requirements for contributors of input data used to calculate the financial benchmark. The BMR also regulates the use of financial benchmarks 1 . In particular, the BMR rules require EU supervised entities (such as banks, investment firms, insurance undertakings, UCITS 2 ) to use only indices whose administrator has been authorised. Benchmarks administered in third countries can only be used in the EU following an equivalence, recognition or endorsement procedure. The Benchmark Regulation applies since January 2018 3 . However, EU market participants can continue to use benchmarks administered in a country outside the Union - regardless of whether an equivalence decision is in place, the index has been recognised or endorsed for use in the Union 4 – until the transitional regime expires at the end of December 2021. 1.1.1. The orderly cessation of financial benchmarks Due to concerns about whether the London Interbank Offered Rate (LIBOR) adequately represents an underlying market or economic reality reflective of interbank borrowing, the national competent authority for LIBOR (the UK Financial Conduct Authority or “FCA”) has announced the likely cessation of LIBOR after the end of 2021. The FCA, in all its public statements, has been clear that, where a benchmark loses representativeness and its representativeness will not be restored, use of the benchmark by supervised entities must cease. Relying on a very small number of panel banks such that LIBOR was no longer representative of the underlying market or economic reality that LIBOR sought to measure, means that its value could deviate significantly from that economic reality, as well as becoming more volatile. As documented in the Commission’s impact assessment, many financial instruments and contracts that reference LIBOR will not have reached maturity by the expected cessation date after the end of 2021. Many of these contracts involve debt issued by supervised entities, debt instruments held on the balance sheet by supervised entities, the loan portfolio of supervised entities and derivative contracts that these entities have concluded to hedge their positions. As mentioned above, supervised entities within the scope of the EU Benchmark Regulation may only use indices that are authorised as compliant with the BMR. The disappearance of LIBOR will have significant economic impacts that EU supervised entities could not have anticipated when concluding these often longer maturity contracts. Many of these contracts, especially those concluded before adoption of the BMR in 2016, often lack any contractual “fall-back” provisions that deal with the permanent discontinuation of the LIBOR rate. Amending the terms of thousands of contracts that currently contain references to LIBOR will not always be possible in the short period remaining until the expected end of the LIBOR at the end of 2021. Many currently existing debt, loan, deposit and many of the derivative contracts would, upon a permanent cessation of an interest rate benchmark, such as LIBOR, lack a contractual fall-back rate that allows parties to continue to comply with their contractual obligations. If no remedies were envisaged, the discontinuation of a widely used interest rate benchmark will have negative consequences for EU supervised entities and their contractual counterparts from whom these entities either borrow or to whom they lend funds. All counterparts in contracts referencing such a benchmark that are still pending at the date of cessation will face legal uncertainty as to the validity and enforcement of their contractual obligations. The range of contracts that will be affected by the cessation of a widely used interest rate benchmark includes: (1) debt issuances by supervised entities; (2) debt held on the balance sheet of supervised entities; (3) loans; (4) deposits and (5) derivative contracts. A large part of the financial contracts that reference widely used interest rate benchmarks involve supervised entities within the scope of the BMR. The legal uncertainty and potentially adverse economic impact that may result from difficulties in the ability to enforce contractual obligations will pose a risk for financial stability in the Union. To mitigate the risk of contract frustration and the ensuing risk to financial stability, central banks in various currency areas have set up working groups to recommend fall-back rates that would apply to the legacy stock of contracts that reference interest rate benchmarks in cessation and that could not be renegotiated by the date of the permanent cessation of this benchmark. For example, the Alternative Reference Rate Committee (ARRC) in the United State has recommended a waterfall that includes a replacement rate calculation based on a risk-free overnight rate (SOFR) plus a spread adjustment to make the replacement rate resemble, as close as possible, the economic properties of the discontinued benchmark. The aim of these replacement rates would therefore be to mimic, to the extent possible, what the contract parties intended to achieve by references to the benchmark in cessation. It is a deliberate policy choice underpinning all recommendations for a replacement rate for legacy contracts that no new contracts (defined as contracts concluded after cessation of the benchmark) may reference the replacement rate. This is because the replacement rate is most likely a synthetic version of the benchmark in cessation and is meant to ease the transition to a new rate. For example, a replacement rate for USD LIBOR will most likely be calculated based on a risk-free overnight rate in borrowing (SOFR) plus a spread adjustment to reflect the historical spread between the risk-free overnight rate and the replaced LIBOR rate. While a synthetic version of a benchmark should be stable enough to accompany the wind-down of legacy portfolios, it is not a permanent solution, reflective of a supervised entity’s forward looking financing cost. However, even once these replacement rates are available, it will be difficult to amend all existing legacy contracts given the scale of the LIBOR references and the short period of time before LIBOR is expected to be discontinued. A reform of the BMR is therefore the right tool to establish a statutory replacement rate that mitigates the adverse consequences for legal certainty and financial stability that might ensue if LIBOR, or any other benchmark whose cessation would result in significant disruption in the functioning of financial markets in the Union, was discontinued without such a replacement rate being both available and integrated into legacy contracts that involve a supervised entity within the scope of the BMR. 1.1.2. Spot f oreign exchange rates While spot foreign exchange rates play a crucial role for the international economy, for several currencies, the rates that are available are largely unregulated and are often reflective of central bank monetary policies. In some countries, central banks have implemented controls to restrict the publication of spot foreign exchange rates outside their local jurisdiction. In addition to preventing publication of off-shore foreign exchange rates, certain countries have in place capital controls that limit the convertibility of their currencies. Since their currencies are not freely convertible, the availability of on-shore currency hedging tools, such as currency forwards, swaps or options, is limited. Demand for hedging tools against currency volatility in these countries outstrips the shallow liquidity offered by the on-shore market. In consequence, European financial institutions have developed off-shore derivatives markets that, due to the convertibility restrictions in place, settle into the base currency of the hedging entity, albeit by reference to the foreign exchange rate published at the moment of the hedging contract’s expiry. Therefore, hedging against movements in currencies subject to such convertibility restrictions is done with off-shore derivative contracts. These include financial instruments such as non-deliverable currency forwards and non-deliverable swaps. Where these forwards and swaps are offered by an EU supervised entity (a dealer bank ) 1 and traded on an EU trading venue or via an EU systematic internaliser, the spot currency rate that is used to determine the pay-out due under the forward or swap agreement constitutes a “use” of the spot exchange rate which brings the offer of forwards and swaps by a supervised entity within the scope of the BMR. At the end of the current transitional period set out in Article 51 of the BMR the reference to foreign exchange spot rates in EU-traded currency forwards or swaps will no longer be allowed. This means that, at the beginning of 2022, EU supervised entities are at risk of losing access to many public policy rates administered outside the EU, including spot foreign exchange rates that they reference in derivative contracts that they offer corporate counterparts to help them manage their day-to-day hedging of currency risk. The urgency of the issue arises as almost no other jurisdiction apart from the EU regulates spot exchange rates. Due to the absence of regulation, currency spot rates could not, therefore, be the subject of an equivalence assessment under the BMR. Neither can they be recognised or endorsed for use in the Union under the BMR, as both of these mechanisms, in turn, require some form of regulation and oversight. In conclusion, foreign exchange spot rates are not suitable candidates for equivalence, endorsement or recognition by the end of the transition period. This proposal, therefore, makes targeted modification of the scope of the BMR in order to ensure that European companies retain access to hedging tools against volatility of currencies that are not freely convertible into their base currency, ensuring seamless continuation of their business activities abroad after the expiry of the transitional period at the end of 2021. 
Revised version (Article 78 General requirements):
1. A trade repository shall have robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility and adequate internal control mechanisms, including sound administrative and accounting procedures, which prevent any disclosure of confidential information. 2. A trade repository shall maintain and operate effective written organisational and administrative arrangements to identify and manage any potential conflicts of interest concerning its managers, employees, or any person directly or indirectly linked to them by close links. 3. A trade repository shall establish adequate policies and procedures sufficient to ensure its compliance, including of its managers and employees, with all the provisions of this Regulation. 4. A trade repository shall maintain and operate an adequate organisational structure to ensure continuity and orderly functioning of the trade repository in the performance of its services and activities. It shall employ appropriate and proportionate systems, resources and procedures. 5. Where a trade repository offers ancillary services such as trade confirmation, trade matching, credit event servicing, portfolio reconciliation or portfolio compression services, the trade repository shall maintain those ancillary services operationally separate from the trade repository’s function of centrally collecting and maintaining records of derivatives. 6. The senior management and members of the board of a trade repository shall be of sufficiently good repute and experience so as to ensure the sound and prudent management of the trade repository. 7. A trade repository shall have objective, non-discriminatory and publicly disclosed requirements for access by undertakings subject to the reporting obligation under Article 9. A trade repository shall grant service providers non-discriminatory access to information maintained by the trade repository, on condition that the relevant counterparties have provided their consent. Criteria that restrict access shall only be permitted to the extent that their objective is to control the risk to the data maintained by a trade repository. 8. A trade repository shall publicly disclose the prices and fees associated with services provided under this Regulation. It shall disclose the prices and fees of each service provided separately, including discounts and rebates and the conditions to benefit from those reductions. It shall allow reporting entities to access specific services separately. The prices and fees charged by a trade repository shall be cost-related. A trade repository shall establish the following procedures and policies: (a) procedures for the effective reconciliation of data between trade repositories; (b) procedures to verify the completeness and correctness of the data reported; (c) policies for the orderly transfer of data to other trade repositories where requested by the counterparties or CCPs referred to in Article 9 or where otherwise necessary. 10. To ensure the consistent application of this Article, ESMA shall develop draft regulatory technical standards specifying: (a) the procedures for the reconciliation of data between trade repositories; (b) the procedures to be applied by the trade repository to verify the compliance by the reporting counterparty or submitting entity with the reporting requirements and to verify the completeness and correctness of the data reported under Article 9. To ensure the consistent application of this Article, ESMA shall develop draft regulatory technical standards specifying: (a) the procedures for the reconciliation of data between trade repositories; (b) the procedures to be applied by the trade repository to verify the compliance by the reporting counterparty or submitting entity with the reporting requirements and to verify the completeness and correctness of the data reported under Article 9. ESMA shall submit those draft regulatory technical standards to the Commission by 18 June 2020. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 79 Operational reliability
1. A trade repository shall identify sources of operational risk and minimise them through the development of appropriate systems, controls and procedures. Such systems shall be reliable and secure and have adequate capacity to handle the information received. 2. A trade repository shall establish, implement and maintain an adequate business continuity policy and disaster recovery plan aiming at ensuring the maintenance of its functions, the timely recovery of operations and the fulfilment of the trade repository’s obligations. Such a plan shall at least provide for the establishment of backup facilities. 3. A trade repository from which registration has been withdrawn shall ensure orderly substitution including the transfer of data to other trade repositories and the redirection of reporting flows to other trade repositories.
Article 80 Safeguarding and recording
1. A trade repository shall ensure the confidentiality, integrity and protection of the information received under Article 9. 2. A trade repository may only use the data it receives under this Regulation for commercial purposes if the relevant counterparties have provided their consent. 3. A trade repository shall promptly record the information received under Article 9 and shall maintain it for at least 10 years following the termination of the relevant contracts. It shall employ timely and efficient record keeping procedures to document changes to recorded information. 4. A trade repository shall calculate the positions by class of derivatives and by reporting entity based on the details of the derivative contracts reported in accordance with Article 9. 5. A trade repository shall allow the parties to a contract to access and correct the information on that contract in a timely manner. 6. A trade repository shall take all reasonable steps to prevent any misuse of the information maintained in its systems. A natural person who has a close link with a trade repository or a legal person that has a parent undertaking or a subsidiary relationship with the trade repository shall not use confidential information recorded in a trade repository for commercial purposes.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, whether they are related to changes in interest rates, currency fluctuations or the default of a business counterpart. However, opaque derivatives markets also acted as an unwelcome contagion channel. Derivatives markets must therefore be regulated and supervised effectively to safeguard financial stability. Given the global nature of derivatives markets and in accordance with the 2009 G20 Pittsburgh agreement 1 to reduce the systemic risk linked to extensive use of derivatives, the EU adopted the European Market Infrastructure Regulation (EMIR) in 2012. 2 As a key pillar of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing the risk for both. EMIR also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision to minimise any risk to users of a CCP and underpin systemic stability. Since 2012 when EMIR was adopted, central clearing has been significantly expanding and CCPs have become increasingly concentrated and integrated across the EU and with third countries. The present proposal ensures that supervisory arrangements keep pace with these developments. It is proposed that the EU equips its Capital Markets Union with a more effective and consistent supervisory system for CCPs, in the interest of further market integration, financial stability and a level-playing field. CCPs have grown in importance since the adoption of EMIR and will expand further in the coming years In the five years since the adoption of EMIR, the volume of CCP activity – in the EU and globally - has grown rapidly both in scale and in scope. This is a sign that the legislation works and is fulfilling its purpose. As of end of June 2016, around 62% of the global value of all OTC derivatives contracts and asset classes (interest rates, credit default, foreign exchange, etc.) were centrally cleared by CCPs 3 , which is equivalent to $337 trillion. About 97% ($328 trillion) of all centrally-cleared derivatives contracts are interest-rate derivatives. At the end of 2015, about 60% of all OTC interest-rate derivatives were centrally cleared, while the corresponding figure by the end of 2009 was 36% 4 . Central clearing has similarly gained in importance in the credit derivatives (so-called CDS) market, with the proportion of outstanding CDSs cleared through CCPs increasing steadily since these data were first reported, i.e. 37% at the end of June 2016 while the corresponding figure was 10% at the end of June 2010 5 . The rapidly expanding role of CCPs in the global financial system not only reflects the introduction of central clearing obligations across different asset classes 6 , but also increased voluntary use of central clearing amid growing awareness of the benefits of central clearing among market participants (clearing obligations have applied only since June 2016) 7 . EMIR requires certain interest-rate derivatives and CDSs to be centrally cleared in line with similar requirements in other G20 countries 8 . Bank capital rules have been changed to incentivise central clearing and make bilateral clearing a costlier option in relative terms 9 , while bilateral transactions are subject to additional collateral requirements since March 2017 10 . The expansion in CCP activity is set to continue in the coming years. Mandatory clearing obligations are likely for additional asset classes 11 and the incentives to mitigate risks and costs are likely to lead to even more voluntary clearing. The May 2017 proposal to amend EMIR in a targeted manner, to improve its effectiveness and proportionality, will reinforce this trend, by creating further incentives for CCPs to offer central clearing of derivatives to counterparties. 12 Finally, deeper and more integrated capital markets as a result of the Capital Markets Union (CMU) will further increase the need for cross-border clearing in the EU, thus increasing the importance and the interconnectedness of CCPs within the financial system. Expanding role of CCPs raises concerns about the need to upgrade supervisory arrangements under EMIR , also in light of the establishment of the Capital Markets Union The growing importance of CCPs in the financial system and the associated concentration of credit risk in these infrastructures have drawn the attention of governments, regulators, supervisors, central banks and market participants. While the scale and scope of centrally-cleared transactions has expanded, the number of CCPs has remained relatively limited. There are currently 17 CCPs established in the EU, all of which are authorised under EMIR to offer their services within the Union - although not all CCPs are authorised to clear all asset classes (e.g. only 2 CCPs clear credit derivatives, only 2 CCPs clear inflation derivatives 13 ). 14 An additional 28 third-country CCPs have been recognised under EMIR's equivalence provisions, allowing them to offer their services in the EU. 15 Accordingly, clearing markets are integrated across the EU and are highly concentrated in certain asset classes . They are also highly interconnected. 16 While increased clearing via properly regulated and supervised CCPs reinforces systemic stability overall, the concentration of risk makes the failure of a CCP a low-probability but potentially extremely high-impact event. Given the centrality of CCPs to the financial system, the increasing systemic importance of CCPs gives rise to concerns. CCPs have themselves become a source of macro-prudential risk, as their failure could cause significant disruption to the financial system and would have systemic effects. For instance, large scale, uncontrolled termination and close-out of contracts cleared by CCPs could lead to liquidity and collateral strains across the market, causing instability in the underlying asset market and the wider financial system. Like some other financial intermediaries, CCPs are also potentially susceptible to “runs” due to clearing members losing confidence in the solvency of a CCP. This could create a liquidity shock for the CCP as it attempts to meet its obligations to return the principal collateral (i.e. initial margin). The impact of a CCP failure due to increased concentration of risk would be amplified by a growing interconnectedness between CCPs both directly and indirectly via their members (usually large global banks) and clients. In response, and in line with the G20 consensus 17 , the Commission adopted a proposal for a Regulation on CCP Recovery and Resolution in November 2016 18 . The objective of the proposal is to ensure that authorities are appropriately prepared to address a failing CCP, safeguarding financial stability and limiting taxpayer costs. The CCP Recovery and Resolution proposal refocused attention on the supervisory arrangements for EU and third-country CCPs included in EMIR and the extent to which these arrangements can be made more effective five years after adoption of EMIR. This proposal is currently under negotiations in the European Parliament and the Council. That ongoing work-stream needs to be coordinated and consistent with the current proposal. Supervisory arrangements for EU CCPs Under EMIR, EU CCPs are supervised by colleges of national supervisors, the European Securities and Markets Authority (ESMA), relevant members of the European System of Central Banks (ESCB), and other relevant authorities (e.g. supervisors of the largest clearing members, supervisors of certain trading venues and central securities depositories). These colleges can include as many as 20 member authorities and they rely on coordination by the home-country authority. These arrangements raise certain concerns in light of the current state of integration in the market that needs to be reflected in the supervisory arrangements. This is also important in order to advance the Capital Markets Union . First, the growing concentration of clearing services in a limited number of CCPs, and the consequential increase in cross-border activity, implies that CCPs in a small number of individual Member States are increasingly relevant for the EU financial system as a whole. Against this trend, the current supervisory arrangements relying mainly on the home-country authority (e.g. the home-country authority is ultimately responsible for important decisions such as the extension of the authorisation or the approval of outsourcing and interoperability arrangements) need to be reconsidered. Second, diverging supervisory practices for CCPs (e.g. different conditions for authorisation or model validation processes) across the EU can create risks of regulatory and supervisory arbitrage for CCPs and indirectly for their clearing members or clients. The Commission has drawn attention to these emerging risks and the need for more supervisory convergence in its Communication on CMU of September 2016 19 and in the public consultation on the operations of the European Supervisory Authorities (ESAs) 20 , both of which highlighted the challenges posed by heterogeneous supervisory practices. Third, the role of central banks - as issuers of currency - is not adequately reflected in CCP colleges. While the mandates of central banks and supervisors may overlap (in particular in areas such as interoperability, liquidity-risk controls etc.), there is a potential for misalignment when supervisory actions impact on key responsibilities of central banks in areas such as price stability, monetary policy and the payment systems. In crisis situations, their misalignments can amplify the risks to financial stability if the assignment of responsibilities between authorities remains unclear. Supervisory arrangements for third-country CCPs Today, a significant amount of financial instruments denominated in the currencies of the Member States are cleared by recognised third-country CCPs. For example, the notional amount outstanding at Chicago Mercantile Exchange (CME) in the US is EUR 1.8 trillion for euro-denominated interest-rate derivatives, and SEK 348 billion for SEK denominated interest-rate derivatives. This also raises a series of concerns. First, the implementation of EMIR’s system of equivalence and recognition has shown certain shortcomings in particular regarding ongoing supervision. In particular, after a third-country CCP has been recognised, ESMA has encountered difficulties in accessing information from the CCP, in conducting on-site inspections of the CCP and in sharing information with the relevant EU regulators, supervisors and central banks. As a result, there is a risk that third-country CCP practices and/or adjustments to risk management models go undetected and/or unaddressed, which may have important financial-stability implications for the EU entities. Second, the potential for misalignments between supervisory and central-bank objectives within colleges acquires an additional dimension in the context of third-country CCPs where non-EU authorities are involved. Third, there is a risk that changes to the CCP rules and/or regulatory framework in a third-country could negatively affect regulatory or supervisory outcomes, leading to an un-level playing field between EU and third-country CCPs and creating scope for regulatory or supervisory arbitrage. There is currently no mechanism to ensure that the EU is informed automatically of such changes and can take appropriate measures. Such concerns are likely to become more significant in the coming years because the global nature of capital markets means that the role played by third-country CCPs is set to expand. In addition to the 28 third-country CCPs already recognised by ESMA, a further 12 CCPs from 10 jurisdictions have applied for recognition 21 and are awaiting a decision of the Commission for the equivalence of their regulatory and supervisory regimes. Moreover, a substantial volume of euro-denominated derivatives transactions (and other transactions subject to the EU clearing obligation) is currently cleared in CCPs located in the United Kingdom. When the United Kingdom exits the EU, there will therefore be a distinct shift in the proportion of such transactions being cleared in CCPs outside the EU's jurisdiction, exacerbating the concerns outlined above. This implies significant challenges for safeguarding financial stability in the EU that need to be addressed. In light of these considerations, the Commission adopted a Communication on 4 May 2017 on responding to challenges for critical financial market infrastructures and further developing the Capital Markets Union 22 . The Communication indicated that "further changes [to EMIR] will be necessary to improve the current framework that ensures financial stability and supports the further development and deepening of the Capital Markets Union (CMU)". Need to improve current supervisory arrangements As the EU clearing landscape continues to evolve, the arrangements for crisis prevention and management of CCPs must be as effective as possible. EMIR and the Commission proposal for a Regulation on CCP Recovery and Resolution are important steps in this regard. However, five years after the adoption of EMIR, the growing size, complexity and cross-border dimension of clearing in the EU and globally have highlighted shortcomings in the supervisory arrangements for EU and third-country CCPs. The present proposal therefore sets out specific amendments to EMIR and the ESMA Regulation 23 , in particular to establish clear and coherent supervisory arrangements both for EU and third-country CCPs. The impact assessment report accompanying this proposal considers the costs and benefits of these amendments. It sets out a number of options in order to enhance supervision of CCPs at EU level, involve further the central banks of issue in the supervision of CCPs, and strengthen the ability of the EU to monitor, identify and mitigate third-country CCP risks. The impact assessment provides comprehensive evidence that the proposed amendments contribute effectively to reinforce the overall stability of the EU financial system and to lower further the already low probability (but extremely high-impact) risk of a CCP failure, while keeping costs at a minimum for market participants. The proposed amendments also contribute to the further development and deepening of the CMU, in line with the political priorities of the Commission. 
Revised version (Article 80 Safeguarding and recording):
1. A trade repository shall ensure the confidentiality, integrity and protection of the information received under Article 9. 2. A trade repository may only use the data it receives under this Regulation for commercial purposes if the relevant counterparties have provided their consent. 3. A trade repository shall promptly record the information received under Article 9 and shall maintain it for at least 10 years following the termination of the relevant contracts. It shall employ timely and efficient record keeping procedures to document changes to recorded information. 4. A trade repository shall calculate the positions by class of derivatives and by reporting entity based on the details of the derivative contracts reported in accordance with Article 9. 5. A trade repository shall allow the parties to a contract to access and correct the information on that contract in a timely manner. 5a. Upon request, a trade repository shall provide counterparties that are not required to report the details of their OTC derivative contracts pursuant to Article 9(1a) to (1d) and counterparties and CCPs which have delegated their reporting obligation pursuant to Article 9(1f) with access to the information reported on their behalf. 6. A trade repository shall take all reasonable steps to prevent any misuse of the information maintained in its systems. A natural person who has a close link with a trade repository or a legal person that has a parent undertaking or a subsidiary relationship with the trade repository shall not use confidential information recorded in a trade repository for commercial purposes.
Article 81 Transparency and data availability
1. A trade repository shall regularly, and in an easily accessible way, publish aggregate positions by class of derivatives on the contracts reported to it. 2. A trade repository shall collect and maintain data and shall ensure that the entities referred to in paragraph 3 have direct and immediate access to the details of derivatives contracts they need to fulfil their respective responsibilities and mandates. 3. A trade repository shall make the necessary information available to the following entities to enable them to fulfil their respective responsibilities and mandates: (a) ESMA; (b) EBA; (c) EIOPA; (d) the ESRB; (e) the competent authority supervising CCPs accessing the trade repositories; (f) the competent authority supervising the trading venues of the reported contracts; (g) the relevant members of the ESCB, including the ECB in carrying out its tasks within a single supervisory mechanism under Council Regulation (EU) No 1024/2013 ( 12 ); (h) the relevant authorities of a third country that has entered into an international agreement with the Union as referred to in Article 75; (i) supervisory authorities designated under Article 4 of Directive 2004/25/EC of the European Parliament and of the Council ( 13 ); (j) the relevant Union securities and market authorities whose respective supervisory responsibilities and mandates cover contracts, markets, participants and underlyings which fall within the scope of this Regulation; (k) the relevant authorities of a third country that have entered into a cooperation arrangement with ESMA, as referred to in Article 76; (l) the Agency for the Cooperation of Energy Regulators established by Regulation (EC) No 713/2009 of the European Parliament and of the Council ( 14 ); (m) the resolution authorities designated under Article 3 of Directive 2014/59/EU of the European Parliament and the Council ( 15 ); (n) the Single Resolution Board established by Regulation (EU) No 806/2014; (o) competent authorities or national competent authorities within the meaning of Regulations (EU) No 1024/2013 and (EU) No 909/2014 and of Directives 2003/41/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU and, 2014/65/EU, and supervisory authorities within the meaning of Directive 2009/138/EC; (p) the competent authorities designated in accordance with Article 10(5) of this Regulation. A trade repository shall transmit data to competent authorities in accordance with the requirements under Article 26 of Regulation (EU) No 600/2014 ( 16 ). 4. ESMA shall share the information necessary for the exercise of their duties with other relevant Union authorities. 5. In order to ensure consistent application of this Article, ESMA shall, after consulting the members of the ESCB, develop draft regulatory technical standards specifying the frequency and the details of the information referred to in paragraphs 1 and 3 as well as operational standards required in order to aggregate and compare data across repositories and for the entities referred to in paragraph 3 to have access to information as necessary. Those draft regulatory technical standards shall aim to ensure that the information published under paragraph 1 is not capable of identifying a party to any contract. ESMA shall submit those draft regulatory technical standards to the Commission by 30 September 2012. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, whether they are related to changes in interest rates, currency fluctuations or the default of a business counterpart. However, opaque derivatives markets also acted as an unwelcome contagion channel. Derivatives markets must therefore be regulated and supervised effectively to safeguard financial stability. Given the global nature of derivatives markets and in accordance with the 2009 G20 Pittsburgh agreement 1 to reduce the systemic risk linked to extensive use of derivatives, the EU adopted the European Market Infrastructure Regulation (EMIR) in 2012. 2 As a key pillar of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing the risk for both. EMIR also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision to minimise any risk to users of a CCP and underpin systemic stability. Since 2012 when EMIR was adopted, central clearing has been significantly expanding and CCPs have become increasingly concentrated and integrated across the EU and with third countries. The present proposal ensures that supervisory arrangements keep pace with these developments. It is proposed that the EU equips its Capital Markets Union with a more effective and consistent supervisory system for CCPs, in the interest of further market integration, financial stability and a level-playing field. CCPs have grown in importance since the adoption of EMIR and will expand further in the coming years In the five years since the adoption of EMIR, the volume of CCP activity – in the EU and globally - has grown rapidly both in scale and in scope. This is a sign that the legislation works and is fulfilling its purpose. As of end of June 2016, around 62% of the global value of all OTC derivatives contracts and asset classes (interest rates, credit default, foreign exchange, etc.) were centrally cleared by CCPs 3 , which is equivalent to $337 trillion. About 97% ($328 trillion) of all centrally-cleared derivatives contracts are interest-rate derivatives. At the end of 2015, about 60% of all OTC interest-rate derivatives were centrally cleared, while the corresponding figure by the end of 2009 was 36% 4 . Central clearing has similarly gained in importance in the credit derivatives (so-called CDS) market, with the proportion of outstanding CDSs cleared through CCPs increasing steadily since these data were first reported, i.e. 37% at the end of June 2016 while the corresponding figure was 10% at the end of June 2010 5 . The rapidly expanding role of CCPs in the global financial system not only reflects the introduction of central clearing obligations across different asset classes 6 , but also increased voluntary use of central clearing amid growing awareness of the benefits of central clearing among market participants (clearing obligations have applied only since June 2016) 7 . EMIR requires certain interest-rate derivatives and CDSs to be centrally cleared in line with similar requirements in other G20 countries 8 . Bank capital rules have been changed to incentivise central clearing and make bilateral clearing a costlier option in relative terms 9 , while bilateral transactions are subject to additional collateral requirements since March 2017 10 . The expansion in CCP activity is set to continue in the coming years. Mandatory clearing obligations are likely for additional asset classes 11 and the incentives to mitigate risks and costs are likely to lead to even more voluntary clearing. The May 2017 proposal to amend EMIR in a targeted manner, to improve its effectiveness and proportionality, will reinforce this trend, by creating further incentives for CCPs to offer central clearing of derivatives to counterparties. 12 Finally, deeper and more integrated capital markets as a result of the Capital Markets Union (CMU) will further increase the need for cross-border clearing in the EU, thus increasing the importance and the interconnectedness of CCPs within the financial system. Expanding role of CCPs raises concerns about the need to upgrade supervisory arrangements under EMIR , also in light of the establishment of the Capital Markets Union The growing importance of CCPs in the financial system and the associated concentration of credit risk in these infrastructures have drawn the attention of governments, regulators, supervisors, central banks and market participants. While the scale and scope of centrally-cleared transactions has expanded, the number of CCPs has remained relatively limited. There are currently 17 CCPs established in the EU, all of which are authorised under EMIR to offer their services within the Union - although not all CCPs are authorised to clear all asset classes (e.g. only 2 CCPs clear credit derivatives, only 2 CCPs clear inflation derivatives 13 ). 14 An additional 28 third-country CCPs have been recognised under EMIR's equivalence provisions, allowing them to offer their services in the EU. 15 Accordingly, clearing markets are integrated across the EU and are highly concentrated in certain asset classes . They are also highly interconnected. 16 While increased clearing via properly regulated and supervised CCPs reinforces systemic stability overall, the concentration of risk makes the failure of a CCP a low-probability but potentially extremely high-impact event. Given the centrality of CCPs to the financial system, the increasing systemic importance of CCPs gives rise to concerns. CCPs have themselves become a source of macro-prudential risk, as their failure could cause significant disruption to the financial system and would have systemic effects. For instance, large scale, uncontrolled termination and close-out of contracts cleared by CCPs could lead to liquidity and collateral strains across the market, causing instability in the underlying asset market and the wider financial system. Like some other financial intermediaries, CCPs are also potentially susceptible to “runs” due to clearing members losing confidence in the solvency of a CCP. This could create a liquidity shock for the CCP as it attempts to meet its obligations to return the principal collateral (i.e. initial margin). The impact of a CCP failure due to increased concentration of risk would be amplified by a growing interconnectedness between CCPs both directly and indirectly via their members (usually large global banks) and clients. In response, and in line with the G20 consensus 17 , the Commission adopted a proposal for a Regulation on CCP Recovery and Resolution in November 2016 18 . The objective of the proposal is to ensure that authorities are appropriately prepared to address a failing CCP, safeguarding financial stability and limiting taxpayer costs. The CCP Recovery and Resolution proposal refocused attention on the supervisory arrangements for EU and third-country CCPs included in EMIR and the extent to which these arrangements can be made more effective five years after adoption of EMIR. This proposal is currently under negotiations in the European Parliament and the Council. That ongoing work-stream needs to be coordinated and consistent with the current proposal. Supervisory arrangements for EU CCPs Under EMIR, EU CCPs are supervised by colleges of national supervisors, the European Securities and Markets Authority (ESMA), relevant members of the European System of Central Banks (ESCB), and other relevant authorities (e.g. supervisors of the largest clearing members, supervisors of certain trading venues and central securities depositories). These colleges can include as many as 20 member authorities and they rely on coordination by the home-country authority. These arrangements raise certain concerns in light of the current state of integration in the market that needs to be reflected in the supervisory arrangements. This is also important in order to advance the Capital Markets Union . First, the growing concentration of clearing services in a limited number of CCPs, and the consequential increase in cross-border activity, implies that CCPs in a small number of individual Member States are increasingly relevant for the EU financial system as a whole. Against this trend, the current supervisory arrangements relying mainly on the home-country authority (e.g. the home-country authority is ultimately responsible for important decisions such as the extension of the authorisation or the approval of outsourcing and interoperability arrangements) need to be reconsidered. Second, diverging supervisory practices for CCPs (e.g. different conditions for authorisation or model validation processes) across the EU can create risks of regulatory and supervisory arbitrage for CCPs and indirectly for their clearing members or clients. The Commission has drawn attention to these emerging risks and the need for more supervisory convergence in its Communication on CMU of September 2016 19 and in the public consultation on the operations of the European Supervisory Authorities (ESAs) 20 , both of which highlighted the challenges posed by heterogeneous supervisory practices. Third, the role of central banks - as issuers of currency - is not adequately reflected in CCP colleges. While the mandates of central banks and supervisors may overlap (in particular in areas such as interoperability, liquidity-risk controls etc.), there is a potential for misalignment when supervisory actions impact on key responsibilities of central banks in areas such as price stability, monetary policy and the payment systems. In crisis situations, their misalignments can amplify the risks to financial stability if the assignment of responsibilities between authorities remains unclear. Supervisory arrangements for third-country CCPs Today, a significant amount of financial instruments denominated in the currencies of the Member States are cleared by recognised third-country CCPs. For example, the notional amount outstanding at Chicago Mercantile Exchange (CME) in the US is EUR 1.8 trillion for euro-denominated interest-rate derivatives, and SEK 348 billion for SEK denominated interest-rate derivatives. This also raises a series of concerns. First, the implementation of EMIR’s system of equivalence and recognition has shown certain shortcomings in particular regarding ongoing supervision. In particular, after a third-country CCP has been recognised, ESMA has encountered difficulties in accessing information from the CCP, in conducting on-site inspections of the CCP and in sharing information with the relevant EU regulators, supervisors and central banks. As a result, there is a risk that third-country CCP practices and/or adjustments to risk management models go undetected and/or unaddressed, which may have important financial-stability implications for the EU entities. Second, the potential for misalignments between supervisory and central-bank objectives within colleges acquires an additional dimension in the context of third-country CCPs where non-EU authorities are involved. Third, there is a risk that changes to the CCP rules and/or regulatory framework in a third-country could negatively affect regulatory or supervisory outcomes, leading to an un-level playing field between EU and third-country CCPs and creating scope for regulatory or supervisory arbitrage. There is currently no mechanism to ensure that the EU is informed automatically of such changes and can take appropriate measures. Such concerns are likely to become more significant in the coming years because the global nature of capital markets means that the role played by third-country CCPs is set to expand. In addition to the 28 third-country CCPs already recognised by ESMA, a further 12 CCPs from 10 jurisdictions have applied for recognition 21 and are awaiting a decision of the Commission for the equivalence of their regulatory and supervisory regimes. Moreover, a substantial volume of euro-denominated derivatives transactions (and other transactions subject to the EU clearing obligation) is currently cleared in CCPs located in the United Kingdom. When the United Kingdom exits the EU, there will therefore be a distinct shift in the proportion of such transactions being cleared in CCPs outside the EU's jurisdiction, exacerbating the concerns outlined above. This implies significant challenges for safeguarding financial stability in the EU that need to be addressed. In light of these considerations, the Commission adopted a Communication on 4 May 2017 on responding to challenges for critical financial market infrastructures and further developing the Capital Markets Union 22 . The Communication indicated that "further changes [to EMIR] will be necessary to improve the current framework that ensures financial stability and supports the further development and deepening of the Capital Markets Union (CMU)". Need to improve current supervisory arrangements As the EU clearing landscape continues to evolve, the arrangements for crisis prevention and management of CCPs must be as effective as possible. EMIR and the Commission proposal for a Regulation on CCP Recovery and Resolution are important steps in this regard. However, five years after the adoption of EMIR, the growing size, complexity and cross-border dimension of clearing in the EU and globally have highlighted shortcomings in the supervisory arrangements for EU and third-country CCPs. The present proposal therefore sets out specific amendments to EMIR and the ESMA Regulation 23 , in particular to establish clear and coherent supervisory arrangements both for EU and third-country CCPs. The impact assessment report accompanying this proposal considers the costs and benefits of these amendments. It sets out a number of options in order to enhance supervision of CCPs at EU level, involve further the central banks of issue in the supervision of CCPs, and strengthen the ability of the EU to monitor, identify and mitigate third-country CCP risks. The impact assessment provides comprehensive evidence that the proposed amendments contribute effectively to reinforce the overall stability of the EU financial system and to lower further the already low probability (but extremely high-impact) risk of a CCP failure, while keeping costs at a minimum for market participants. The proposed amendments also contribute to the further development and deepening of the CMU, in line with the political priorities of the Commission. 
Revised version (Article 81 Transparency and data availability):
1. A trade repository shall regularly, and in an easily accessible way, publish aggregate positions by class of derivatives on the contracts reported to it. 2. A trade repository shall collect and maintain data and shall ensure that the entities referred to in paragraph 3 have direct and immediate access to the details of derivatives contracts they need to fulfil their respective responsibilities and mandates. 3. A trade repository shall make the necessary information available to the following entities to enable them to fulfil their respective responsibilities and mandates: (a) ESMA; (b) EBA; (c) EIOPA; (d) the ESRB; (e) the competent authority supervising CCPs accessing the trade repositories; (f) the competent authority supervising the trading venues of the reported contracts; (g) the relevant members of the ESCB, including the ECB in carrying out its tasks within a single supervisory mechanism under Council Regulation (EU) No 1024/2013 ( 18 ); (h) the relevant authorities of a third country that has entered into an international agreement with the Union as referred to in Article 75; (i) supervisory authorities designated under Article 4 of Directive 2004/25/EC of the European Parliament and of the Council ( 19 ); (j) the relevant Union securities and market authorities whose respective supervisory responsibilities and mandates cover contracts, markets, participants and underlyings which fall within the scope of this Regulation; (k) the relevant authorities of a third country that have entered into a cooperation arrangement with ESMA, as referred to in Article 76; (l) the Agency for the Cooperation of Energy Regulators established by Regulation (EC) No 713/2009 of the European Parliament and of the Council ( 20 ); (m) the resolution authorities designated under Article 3 of Directive 2014/59/EU of the European Parliament and the Council ( 21 ); (n) the Single Resolution Board established by Regulation (EU) No 806/2014; (o) competent authorities or national competent authorities within the meaning of Regulations (EU) No 1024/2013 and (EU) No 909/2014 and of Directives 2003/41/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU and, 2014/65/EU, and supervisory authorities within the meaning of Directive 2009/138/EC; (p) the competent authorities designated in accordance with Article 10(5) of this Regulation; (q) the relevant authorities of a third country in respect of which an implementing act pursuant to Article 76a has been adopted. A trade repository shall transmit data to competent authorities in accordance with the requirements under Article 26 of Regulation (EU) No 600/2014 ( 22 ). 4. ESMA shall share the information necessary for the exercise of their duties with other relevant Union authorities. 5. In order to ensure the consistent application of this Article, ESMA shall, after consulting the members of the ESCB, develop draft regulatory technical standards specifying the following: (a) the information to be published or made available in accordance with paragraphs 1 and 3; (b) the frequency of publication of the information referred to in paragraph 1; (c) the operational standards required to aggregate and compare data across trade repositories and for the entities referred to in paragraph 3 to access that information; (d) the terms and conditions, the arrangements and the required documentation under which trade repositories grant access to the entities referred to in paragraph 3. ESMA shall submit those draft regulatory technical standards to the Commission by 18 June 2020. In developing those draft regulatory technical standards, ESMA shall ensure that the publication of the information referred to paragraph 1 does not reveal the identity of any party to any contract. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 82 Exercise of the delegation
1. The power to adopt delegated acts is conferred to the Commission subject to the conditions laid down in this Article. 2. The delegation of power referred to in Article 1(6), Article 64(7), Article 70, Article 72(3) and Article 85(2) shall be conferred to the Commission for an indeterminate period of time. 3. Before adopting a delegated act, the Commission shall endeavour to consult ESMA. 4. A delegation of power referred to in Article 1(6), Article 64(7), Article 70, Article 72(3) and Article 85(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of power specified in that decision. The decision to revoke shall take effect on the day following that of its publication in the Official Journal of the European Union or on a later date specified therein. It shall not affect the validity of any delegated acts already in force. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 6. A delegated act adopted pursuant to Article 1(6), Article 64(7), Article 70, Article 72(3) and Article 85(2) shall enter into force only if no objection has been expressed by either the European Parliament or the Council within a period of three months of notification of the act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament or the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, whether they are related to changes in interest rates, currency fluctuations or the default of a business counterpart. However, opaque derivatives markets also acted as an unwelcome contagion channel. Derivatives markets must therefore be regulated and supervised effectively to safeguard financial stability. Given the global nature of derivatives markets and in accordance with the 2009 G20 Pittsburgh agreement 1 to reduce the systemic risk linked to extensive use of derivatives, the EU adopted the European Market Infrastructure Regulation (EMIR) in 2012. 2 As a key pillar of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing the risk for both. EMIR also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision to minimise any risk to users of a CCP and underpin systemic stability. Since 2012 when EMIR was adopted, central clearing has been significantly expanding and CCPs have become increasingly concentrated and integrated across the EU and with third countries. The present proposal ensures that supervisory arrangements keep pace with these developments. It is proposed that the EU equips its Capital Markets Union with a more effective and consistent supervisory system for CCPs, in the interest of further market integration, financial stability and a level-playing field. CCPs have grown in importance since the adoption of EMIR and will expand further in the coming years In the five years since the adoption of EMIR, the volume of CCP activity – in the EU and globally - has grown rapidly both in scale and in scope. This is a sign that the legislation works and is fulfilling its purpose. As of end of June 2016, around 62% of the global value of all OTC derivatives contracts and asset classes (interest rates, credit default, foreign exchange, etc.) were centrally cleared by CCPs 3 , which is equivalent to $337 trillion. About 97% ($328 trillion) of all centrally-cleared derivatives contracts are interest-rate derivatives. At the end of 2015, about 60% of all OTC interest-rate derivatives were centrally cleared, while the corresponding figure by the end of 2009 was 36% 4 . Central clearing has similarly gained in importance in the credit derivatives (so-called CDS) market, with the proportion of outstanding CDSs cleared through CCPs increasing steadily since these data were first reported, i.e. 37% at the end of June 2016 while the corresponding figure was 10% at the end of June 2010 5 . The rapidly expanding role of CCPs in the global financial system not only reflects the introduction of central clearing obligations across different asset classes 6 , but also increased voluntary use of central clearing amid growing awareness of the benefits of central clearing among market participants (clearing obligations have applied only since June 2016) 7 . EMIR requires certain interest-rate derivatives and CDSs to be centrally cleared in line with similar requirements in other G20 countries 8 . Bank capital rules have been changed to incentivise central clearing and make bilateral clearing a costlier option in relative terms 9 , while bilateral transactions are subject to additional collateral requirements since March 2017 10 . The expansion in CCP activity is set to continue in the coming years. Mandatory clearing obligations are likely for additional asset classes 11 and the incentives to mitigate risks and costs are likely to lead to even more voluntary clearing. The May 2017 proposal to amend EMIR in a targeted manner, to improve its effectiveness and proportionality, will reinforce this trend, by creating further incentives for CCPs to offer central clearing of derivatives to counterparties. 12 Finally, deeper and more integrated capital markets as a result of the Capital Markets Union (CMU) will further increase the need for cross-border clearing in the EU, thus increasing the importance and the interconnectedness of CCPs within the financial system. Expanding role of CCPs raises concerns about the need to upgrade supervisory arrangements under EMIR , also in light of the establishment of the Capital Markets Union The growing importance of CCPs in the financial system and the associated concentration of credit risk in these infrastructures have drawn the attention of governments, regulators, supervisors, central banks and market participants. While the scale and scope of centrally-cleared transactions has expanded, the number of CCPs has remained relatively limited. There are currently 17 CCPs established in the EU, all of which are authorised under EMIR to offer their services within the Union - although not all CCPs are authorised to clear all asset classes (e.g. only 2 CCPs clear credit derivatives, only 2 CCPs clear inflation derivatives 13 ). 14 An additional 28 third-country CCPs have been recognised under EMIR's equivalence provisions, allowing them to offer their services in the EU. 15 Accordingly, clearing markets are integrated across the EU and are highly concentrated in certain asset classes . They are also highly interconnected. 16 While increased clearing via properly regulated and supervised CCPs reinforces systemic stability overall, the concentration of risk makes the failure of a CCP a low-probability but potentially extremely high-impact event. Given the centrality of CCPs to the financial system, the increasing systemic importance of CCPs gives rise to concerns. CCPs have themselves become a source of macro-prudential risk, as their failure could cause significant disruption to the financial system and would have systemic effects. For instance, large scale, uncontrolled termination and close-out of contracts cleared by CCPs could lead to liquidity and collateral strains across the market, causing instability in the underlying asset market and the wider financial system. Like some other financial intermediaries, CCPs are also potentially susceptible to “runs” due to clearing members losing confidence in the solvency of a CCP. This could create a liquidity shock for the CCP as it attempts to meet its obligations to return the principal collateral (i.e. initial margin). The impact of a CCP failure due to increased concentration of risk would be amplified by a growing interconnectedness between CCPs both directly and indirectly via their members (usually large global banks) and clients. In response, and in line with the G20 consensus 17 , the Commission adopted a proposal for a Regulation on CCP Recovery and Resolution in November 2016 18 . The objective of the proposal is to ensure that authorities are appropriately prepared to address a failing CCP, safeguarding financial stability and limiting taxpayer costs. The CCP Recovery and Resolution proposal refocused attention on the supervisory arrangements for EU and third-country CCPs included in EMIR and the extent to which these arrangements can be made more effective five years after adoption of EMIR. This proposal is currently under negotiations in the European Parliament and the Council. That ongoing work-stream needs to be coordinated and consistent with the current proposal. Supervisory arrangements for EU CCPs Under EMIR, EU CCPs are supervised by colleges of national supervisors, the European Securities and Markets Authority (ESMA), relevant members of the European System of Central Banks (ESCB), and other relevant authorities (e.g. supervisors of the largest clearing members, supervisors of certain trading venues and central securities depositories). These colleges can include as many as 20 member authorities and they rely on coordination by the home-country authority. These arrangements raise certain concerns in light of the current state of integration in the market that needs to be reflected in the supervisory arrangements. This is also important in order to advance the Capital Markets Union . First, the growing concentration of clearing services in a limited number of CCPs, and the consequential increase in cross-border activity, implies that CCPs in a small number of individual Member States are increasingly relevant for the EU financial system as a whole. Against this trend, the current supervisory arrangements relying mainly on the home-country authority (e.g. the home-country authority is ultimately responsible for important decisions such as the extension of the authorisation or the approval of outsourcing and interoperability arrangements) need to be reconsidered. Second, diverging supervisory practices for CCPs (e.g. different conditions for authorisation or model validation processes) across the EU can create risks of regulatory and supervisory arbitrage for CCPs and indirectly for their clearing members or clients. The Commission has drawn attention to these emerging risks and the need for more supervisory convergence in its Communication on CMU of September 2016 19 and in the public consultation on the operations of the European Supervisory Authorities (ESAs) 20 , both of which highlighted the challenges posed by heterogeneous supervisory practices. Third, the role of central banks - as issuers of currency - is not adequately reflected in CCP colleges. While the mandates of central banks and supervisors may overlap (in particular in areas such as interoperability, liquidity-risk controls etc.), there is a potential for misalignment when supervisory actions impact on key responsibilities of central banks in areas such as price stability, monetary policy and the payment systems. In crisis situations, their misalignments can amplify the risks to financial stability if the assignment of responsibilities between authorities remains unclear. Supervisory arrangements for third-country CCPs Today, a significant amount of financial instruments denominated in the currencies of the Member States are cleared by recognised third-country CCPs. For example, the notional amount outstanding at Chicago Mercantile Exchange (CME) in the US is EUR 1.8 trillion for euro-denominated interest-rate derivatives, and SEK 348 billion for SEK denominated interest-rate derivatives. This also raises a series of concerns. First, the implementation of EMIR’s system of equivalence and recognition has shown certain shortcomings in particular regarding ongoing supervision. In particular, after a third-country CCP has been recognised, ESMA has encountered difficulties in accessing information from the CCP, in conducting on-site inspections of the CCP and in sharing information with the relevant EU regulators, supervisors and central banks. As a result, there is a risk that third-country CCP practices and/or adjustments to risk management models go undetected and/or unaddressed, which may have important financial-stability implications for the EU entities. Second, the potential for misalignments between supervisory and central-bank objectives within colleges acquires an additional dimension in the context of third-country CCPs where non-EU authorities are involved. Third, there is a risk that changes to the CCP rules and/or regulatory framework in a third-country could negatively affect regulatory or supervisory outcomes, leading to an un-level playing field between EU and third-country CCPs and creating scope for regulatory or supervisory arbitrage. There is currently no mechanism to ensure that the EU is informed automatically of such changes and can take appropriate measures. Such concerns are likely to become more significant in the coming years because the global nature of capital markets means that the role played by third-country CCPs is set to expand. In addition to the 28 third-country CCPs already recognised by ESMA, a further 12 CCPs from 10 jurisdictions have applied for recognition 21 and are awaiting a decision of the Commission for the equivalence of their regulatory and supervisory regimes. Moreover, a substantial volume of euro-denominated derivatives transactions (and other transactions subject to the EU clearing obligation) is currently cleared in CCPs located in the United Kingdom. When the United Kingdom exits the EU, there will therefore be a distinct shift in the proportion of such transactions being cleared in CCPs outside the EU's jurisdiction, exacerbating the concerns outlined above. This implies significant challenges for safeguarding financial stability in the EU that need to be addressed. In light of these considerations, the Commission adopted a Communication on 4 May 2017 on responding to challenges for critical financial market infrastructures and further developing the Capital Markets Union 22 . The Communication indicated that "further changes [to EMIR] will be necessary to improve the current framework that ensures financial stability and supports the further development and deepening of the Capital Markets Union (CMU)". Need to improve current supervisory arrangements As the EU clearing landscape continues to evolve, the arrangements for crisis prevention and management of CCPs must be as effective as possible. EMIR and the Commission proposal for a Regulation on CCP Recovery and Resolution are important steps in this regard. However, five years after the adoption of EMIR, the growing size, complexity and cross-border dimension of clearing in the EU and globally have highlighted shortcomings in the supervisory arrangements for EU and third-country CCPs. The present proposal therefore sets out specific amendments to EMIR and the ESMA Regulation 23 , in particular to establish clear and coherent supervisory arrangements both for EU and third-country CCPs. The impact assessment report accompanying this proposal considers the costs and benefits of these amendments. It sets out a number of options in order to enhance supervision of CCPs at EU level, involve further the central banks of issue in the supervision of CCPs, and strengthen the ability of the EU to monitor, identify and mitigate third-country CCP risks. The impact assessment provides comprehensive evidence that the proposed amendments contribute effectively to reinforce the overall stability of the EU financial system and to lower further the already low probability (but extremely high-impact) risk of a CCP failure, while keeping costs at a minimum for market participants. The proposed amendments also contribute to the further development and deepening of the CMU, in line with the political priorities of the Commission. 
Revised version (Article 82 Exercise of the delegation):
1. The power to adopt delegated acts is conferred to the Commission subject to the conditions laid down in this Article. 2. The delegation of power referred to in Articles 1(6), 4(3a), 64(7), Article 70, Articles 72(3), and 85(2) shall be conferred to the Commission for an indeterminate period of time. 3. The delegation of power referred to in Articles 1(6), 4(3a), 64(7), Article 70, Articles 72(3) and 85(2) may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force. 4. Before adopting a delegated act, the Commission shall endeavour to consult ESMA and shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 6. A delegated act adopted pursuant to Articles 1(6), 4(3a), 64(7), Article 70, Articles 72(3) and 85(2) shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.
Article 83 Professional secrecy
1. The obligation of professional secrecy shall apply to all persons who work or have worked for the competent authorities designated in accordance with Article 22 and the authorities referred to in Article 81(3), for ESMA, or for auditors and experts instructed by the competent authorities or ESMA. No confidential information that those persons receive in the course of their duties shall be divulged to any person or authority, except in summary or aggregate form such that an individual CCP, trade repository or any other person cannot be identified, without prejudice to cases covered by criminal or tax law or to this Regulation. 2. Where a CCP has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties may be divulged in civil or commercial proceedings where necessary for carrying out the proceeding. 3. Without prejudice to cases covered by criminal or tax law, the competent authorities, ESMA, bodies or natural or legal persons other than competent authorities which receive confidential information pursuant to this Regulation may use it only in the performance of their duties and for the exercise of their functions, in the case of the competent authorities, within the scope of this Regulation or, in the case of other authorities, bodies or natural or legal persons, for the purpose for which such information was provided to them or in the context of administrative or judicial proceedings specifically relating to the exercise of those functions, or both. Where ESMA, the competent authority or another authority, body or person communicating information consents thereto, the authority receiving the information may use it for other non-commercial purposes. 4. Any confidential information received, exchanged or transmitted pursuant to this Regulation shall be subject to the conditions of professional secrecy laid down in paragraphs 1, 2 and 3. However, those conditions shall not prevent ESMA, the competent authorities or the relevant central banks from exchanging or transmitting confidential information in accordance with this Regulation and with other legislation applicable to investment firms, credit institutions, pension funds, UCITS, AIFMs, insurance and reinsurance intermediaries, insurance undertakings, regulated markets or market operators or otherwise with the consent of the competent authority or other authority or body or natural or legal person that communicated the information. 5. Paragraphs 1, 2 and 3 shall not prevent the competent authorities from exchanging or transmitting confidential information, in accordance with national law, that has not been received from a competent authority of another Member State.
Article 84 Exchange of information
1. Competent authorities, ESMA, and other relevant authorities shall, without undue delay, provide one another with the information required for the purposes of carrying out their duties. 2. Competent authorities, ESMA, other relevant authorities and other bodies or natural and legal persons receiving confidential information in the exercise of their duties under this Regulation shall use it only in the course of their duties. 3. Competent authorities shall communicate information to the relevant members of the ESCB where such information is relevant for the exercise of their duties.
Article 85 Reports and review
1. By 17 August 2015, the Commission shall review and prepare a general report on this Regulation. The Commission shall submit the report to the European Parliament and the Council, together with any appropriate proposals. The Commission shall in particular: (a) assess, in cooperation with the members of the ESCB, the need for any measure to facilitate the access of CCPs to central bank liquidity facilities; (b) assess, in coordination with ESMA and the relevant sectoral authorities, the systemic importance of the transactions of non-financial firms in OTC derivatives and, in particular, the impact of this Regulation on the use of OTC derivatives by non-financial firms; (c) assess, in the light of experience, the functioning of the supervisory framework for CCPs, including the effectiveness of supervisory colleges, the respective voting modalities laid down in Article 19(3), and the role of ESMA, in particular during the authorisation process for CCPs; (d) assess, in cooperation with ESMA and ESRB, the efficiency of margining requirements to limit procyclicality and the need to define additional intervention capacity in this area; (e) assess in cooperation with ESMA the evolution of CCP’s policies on collateral margining and securing requirements and their adaptation to the specific activities and risk profiles of their users. The assessment referred to in point (a) of the first subparagraph shall take into account any result of ongoing work between central banks at Union and international level. The assessment shall also take into account the principle of independence of central banks and their right to provide access to liquidity facilities at their own discretion as well as the potential unintended effect on the behaviour of the CCPs or the internal market. Any accompanying proposals shall not, either directly or indirectly, discriminate against any Member State or group of Member States as a venue for clearing services. 2. By 17 August 2014, the Commission shall prepare a report, after consulting ESMA and EIOPA, assessing the progress and effort made by CCPs in developing technical solutions for the transfer by pension scheme arrangements of non-cash collateral as variation margins, as well as the need for any measures to facilitate such solution. If the Commission considers that the necessary effort to develop appropriate technical solutions has not been made and that the adverse effect of centrally clearing derivative contracts on the retirement benefits of future pensioners remain unchanged, it shall be empowered to adopt delegated acts in accordance with Article 82 to extend the three-year period referred to in Article 89(1) once by two years and once by one year. 3. ESMA shall submit to the Commission reports: (a) on the application of the clearing obligation under Title II and in particular the absence of clearing obligation for OTC derivative contracts entered into before the date of entry into force of this Regulation; (b) on the application of the identification procedure under Article 5(3); (c) on the application of the segregation requirements laid down in Article 39; (d) on the extension of the scope of interoperability arrangements under Title V to transactions in classes of financial instruments other than transferable securities and money-market instruments; (e) on the access of CCPs to trading venues, the effects on competitiveness of certain practices, and the impact on liquidity fragmentation; (f) on ESMA’s staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation; (g) on the impact of the application of additional requirements by Member States pursuant to Article 14(5). Those reports shall be communicated to the Commission by 30 September 2014 for the purposes of paragraph 1. They shall also be submitted to the European Parliament and the Council. 4. The Commission shall, in cooperation with the Member States and ESMA, and after requesting the assessment of the ESRB, draw up an annual report assessing any possible systemic risk and cost implications of interoperability arrangements. The report shall focus at least on the number and complexity of such arrangements, and the adequacy of risk-management systems and models. The Commission shall submit the report to the European Parliament and the Council, together with any appropriate proposals. The ESRB shall provide the Commission with its assessment of any possible systemic risk implications of interoperability arrangements. 5. ESMA shall present an annual report to the European Parliament, the Council and the Commission on the penalties imposed by competent authorities, including supervisory measures, fines and periodic penalty payments.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, whether they are related to changes in interest rates, currency fluctuations or the default of a business counterpart. However, opaque derivatives markets also acted as an unwelcome contagion channel. Derivatives markets must therefore be regulated and supervised effectively to safeguard financial stability. Given the global nature of derivatives markets and in accordance with the 2009 G20 Pittsburgh agreement 1 to reduce the systemic risk linked to extensive use of derivatives, the EU adopted the European Market Infrastructure Regulation (EMIR) in 2012. 2 As a key pillar of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing the risk for both. EMIR also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision to minimise any risk to users of a CCP and underpin systemic stability. Since 2012 when EMIR was adopted, central clearing has been significantly expanding and CCPs have become increasingly concentrated and integrated across the EU and with third countries. The present proposal ensures that supervisory arrangements keep pace with these developments. It is proposed that the EU equips its Capital Markets Union with a more effective and consistent supervisory system for CCPs, in the interest of further market integration, financial stability and a level-playing field. CCPs have grown in importance since the adoption of EMIR and will expand further in the coming years In the five years since the adoption of EMIR, the volume of CCP activity – in the EU and globally - has grown rapidly both in scale and in scope. This is a sign that the legislation works and is fulfilling its purpose. As of end of June 2016, around 62% of the global value of all OTC derivatives contracts and asset classes (interest rates, credit default, foreign exchange, etc.) were centrally cleared by CCPs 3 , which is equivalent to $337 trillion. About 97% ($328 trillion) of all centrally-cleared derivatives contracts are interest-rate derivatives. At the end of 2015, about 60% of all OTC interest-rate derivatives were centrally cleared, while the corresponding figure by the end of 2009 was 36% 4 . Central clearing has similarly gained in importance in the credit derivatives (so-called CDS) market, with the proportion of outstanding CDSs cleared through CCPs increasing steadily since these data were first reported, i.e. 37% at the end of June 2016 while the corresponding figure was 10% at the end of June 2010 5 . The rapidly expanding role of CCPs in the global financial system not only reflects the introduction of central clearing obligations across different asset classes 6 , but also increased voluntary use of central clearing amid growing awareness of the benefits of central clearing among market participants (clearing obligations have applied only since June 2016) 7 . EMIR requires certain interest-rate derivatives and CDSs to be centrally cleared in line with similar requirements in other G20 countries 8 . Bank capital rules have been changed to incentivise central clearing and make bilateral clearing a costlier option in relative terms 9 , while bilateral transactions are subject to additional collateral requirements since March 2017 10 . The expansion in CCP activity is set to continue in the coming years. Mandatory clearing obligations are likely for additional asset classes 11 and the incentives to mitigate risks and costs are likely to lead to even more voluntary clearing. The May 2017 proposal to amend EMIR in a targeted manner, to improve its effectiveness and proportionality, will reinforce this trend, by creating further incentives for CCPs to offer central clearing of derivatives to counterparties. 12 Finally, deeper and more integrated capital markets as a result of the Capital Markets Union (CMU) will further increase the need for cross-border clearing in the EU, thus increasing the importance and the interconnectedness of CCPs within the financial system. Expanding role of CCPs raises concerns about the need to upgrade supervisory arrangements under EMIR , also in light of the establishment of the Capital Markets Union The growing importance of CCPs in the financial system and the associated concentration of credit risk in these infrastructures have drawn the attention of governments, regulators, supervisors, central banks and market participants. While the scale and scope of centrally-cleared transactions has expanded, the number of CCPs has remained relatively limited. There are currently 17 CCPs established in the EU, all of which are authorised under EMIR to offer their services within the Union - although not all CCPs are authorised to clear all asset classes (e.g. only 2 CCPs clear credit derivatives, only 2 CCPs clear inflation derivatives 13 ). 14 An additional 28 third-country CCPs have been recognised under EMIR's equivalence provisions, allowing them to offer their services in the EU. 15 Accordingly, clearing markets are integrated across the EU and are highly concentrated in certain asset classes . They are also highly interconnected. 16 While increased clearing via properly regulated and supervised CCPs reinforces systemic stability overall, the concentration of risk makes the failure of a CCP a low-probability but potentially extremely high-impact event. Given the centrality of CCPs to the financial system, the increasing systemic importance of CCPs gives rise to concerns. CCPs have themselves become a source of macro-prudential risk, as their failure could cause significant disruption to the financial system and would have systemic effects. For instance, large scale, uncontrolled termination and close-out of contracts cleared by CCPs could lead to liquidity and collateral strains across the market, causing instability in the underlying asset market and the wider financial system. Like some other financial intermediaries, CCPs are also potentially susceptible to “runs” due to clearing members losing confidence in the solvency of a CCP. This could create a liquidity shock for the CCP as it attempts to meet its obligations to return the principal collateral (i.e. initial margin). The impact of a CCP failure due to increased concentration of risk would be amplified by a growing interconnectedness between CCPs both directly and indirectly via their members (usually large global banks) and clients. In response, and in line with the G20 consensus 17 , the Commission adopted a proposal for a Regulation on CCP Recovery and Resolution in November 2016 18 . The objective of the proposal is to ensure that authorities are appropriately prepared to address a failing CCP, safeguarding financial stability and limiting taxpayer costs. The CCP Recovery and Resolution proposal refocused attention on the supervisory arrangements for EU and third-country CCPs included in EMIR and the extent to which these arrangements can be made more effective five years after adoption of EMIR. This proposal is currently under negotiations in the European Parliament and the Council. That ongoing work-stream needs to be coordinated and consistent with the current proposal. Supervisory arrangements for EU CCPs Under EMIR, EU CCPs are supervised by colleges of national supervisors, the European Securities and Markets Authority (ESMA), relevant members of the European System of Central Banks (ESCB), and other relevant authorities (e.g. supervisors of the largest clearing members, supervisors of certain trading venues and central securities depositories). These colleges can include as many as 20 member authorities and they rely on coordination by the home-country authority. These arrangements raise certain concerns in light of the current state of integration in the market that needs to be reflected in the supervisory arrangements. This is also important in order to advance the Capital Markets Union . First, the growing concentration of clearing services in a limited number of CCPs, and the consequential increase in cross-border activity, implies that CCPs in a small number of individual Member States are increasingly relevant for the EU financial system as a whole. Against this trend, the current supervisory arrangements relying mainly on the home-country authority (e.g. the home-country authority is ultimately responsible for important decisions such as the extension of the authorisation or the approval of outsourcing and interoperability arrangements) need to be reconsidered. Second, diverging supervisory practices for CCPs (e.g. different conditions for authorisation or model validation processes) across the EU can create risks of regulatory and supervisory arbitrage for CCPs and indirectly for their clearing members or clients. The Commission has drawn attention to these emerging risks and the need for more supervisory convergence in its Communication on CMU of September 2016 19 and in the public consultation on the operations of the European Supervisory Authorities (ESAs) 20 , both of which highlighted the challenges posed by heterogeneous supervisory practices. Third, the role of central banks - as issuers of currency - is not adequately reflected in CCP colleges. While the mandates of central banks and supervisors may overlap (in particular in areas such as interoperability, liquidity-risk controls etc.), there is a potential for misalignment when supervisory actions impact on key responsibilities of central banks in areas such as price stability, monetary policy and the payment systems. In crisis situations, their misalignments can amplify the risks to financial stability if the assignment of responsibilities between authorities remains unclear. Supervisory arrangements for third-country CCPs Today, a significant amount of financial instruments denominated in the currencies of the Member States are cleared by recognised third-country CCPs. For example, the notional amount outstanding at Chicago Mercantile Exchange (CME) in the US is EUR 1.8 trillion for euro-denominated interest-rate derivatives, and SEK 348 billion for SEK denominated interest-rate derivatives. This also raises a series of concerns. First, the implementation of EMIR’s system of equivalence and recognition has shown certain shortcomings in particular regarding ongoing supervision. In particular, after a third-country CCP has been recognised, ESMA has encountered difficulties in accessing information from the CCP, in conducting on-site inspections of the CCP and in sharing information with the relevant EU regulators, supervisors and central banks. As a result, there is a risk that third-country CCP practices and/or adjustments to risk management models go undetected and/or unaddressed, which may have important financial-stability implications for the EU entities. Second, the potential for misalignments between supervisory and central-bank objectives within colleges acquires an additional dimension in the context of third-country CCPs where non-EU authorities are involved. Third, there is a risk that changes to the CCP rules and/or regulatory framework in a third-country could negatively affect regulatory or supervisory outcomes, leading to an un-level playing field between EU and third-country CCPs and creating scope for regulatory or supervisory arbitrage. There is currently no mechanism to ensure that the EU is informed automatically of such changes and can take appropriate measures. Such concerns are likely to become more significant in the coming years because the global nature of capital markets means that the role played by third-country CCPs is set to expand. In addition to the 28 third-country CCPs already recognised by ESMA, a further 12 CCPs from 10 jurisdictions have applied for recognition 21 and are awaiting a decision of the Commission for the equivalence of their regulatory and supervisory regimes. Moreover, a substantial volume of euro-denominated derivatives transactions (and other transactions subject to the EU clearing obligation) is currently cleared in CCPs located in the United Kingdom. When the United Kingdom exits the EU, there will therefore be a distinct shift in the proportion of such transactions being cleared in CCPs outside the EU's jurisdiction, exacerbating the concerns outlined above. This implies significant challenges for safeguarding financial stability in the EU that need to be addressed. In light of these considerations, the Commission adopted a Communication on 4 May 2017 on responding to challenges for critical financial market infrastructures and further developing the Capital Markets Union 22 . The Communication indicated that "further changes [to EMIR] will be necessary to improve the current framework that ensures financial stability and supports the further development and deepening of the Capital Markets Union (CMU)". Need to improve current supervisory arrangements As the EU clearing landscape continues to evolve, the arrangements for crisis prevention and management of CCPs must be as effective as possible. EMIR and the Commission proposal for a Regulation on CCP Recovery and Resolution are important steps in this regard. However, five years after the adoption of EMIR, the growing size, complexity and cross-border dimension of clearing in the EU and globally have highlighted shortcomings in the supervisory arrangements for EU and third-country CCPs. The present proposal therefore sets out specific amendments to EMIR and the ESMA Regulation 23 , in particular to establish clear and coherent supervisory arrangements both for EU and third-country CCPs. The impact assessment report accompanying this proposal considers the costs and benefits of these amendments. It sets out a number of options in order to enhance supervision of CCPs at EU level, involve further the central banks of issue in the supervision of CCPs, and strengthen the ability of the EU to monitor, identify and mitigate third-country CCP risks. The impact assessment provides comprehensive evidence that the proposed amendments contribute effectively to reinforce the overall stability of the EU financial system and to lower further the already low probability (but extremely high-impact) risk of a CCP failure, while keeping costs at a minimum for market participants. The proposed amendments also contribute to the further development and deepening of the CMU, in line with the political priorities of the Commission. 
Revised version (Article 85 Reports and review):
1. By 18 June 2024 the Commission shall assess the application of this Regulation and prepare a general report. The Commission shall submit that report to the European Parliament and to the Council, together with any appropriate proposals. 1a. By 17 June 2023 ESMA shall submit a report to the Commission on the following: (a) the impact of Regulation (EU) 2019/834 of the European Parliament and of the Council ( 23 ) on the level of clearing by financial and non-financial counterparties and on the distribution of clearing within each type of counterparty, in particular with regard to financial counterparties that have a limited volume of activity in OTC derivatives and with regard to the appropriateness of the clearing thresholds referred to in Article 10(4); (b) the impact of Regulation (EU) 2019/834 on the quality and accessibility of the data reported to trade repositories, as well as the quality of the information made available by trade repositories; (c) the changes to the reporting framework, including the take-up and implementation of delegated reporting as laid down in Article 9(1a) and in particular its impact on the reporting burden for non-financial counterparties that are not subject to the clearing obligation; (d) the accessibility of clearing services, in particular whether the requirement to provide clearing services, directly or indirectly, under fair, reasonable, non-discriminatory and transparent commercial terms referred to in Article 4(3a) has been effective in facilitating access to clearing. 2. By 18 June 2020, and every 12 months thereafter until the final extension referred to in the third subparagraph, the Commission shall prepare a report assessing whether viable technical solutions have been developed for the transfer by pension scheme arrangements of cash and non-cash collateral as variation margins and the need for any measures to facilitate those viable technical solutions. ESMA shall, by 18 December 2019, and every 12 months thereafter until the final extension referred to in the third subparagraph, in cooperation with EIOPA, EBA and the ESRB, submit a report to the Commission, assessing the following: (a) whether CCPs, clearing members and pension scheme arrangements have undertaken an appropriate effort and have developed viable technical solutions facilitating the participation of such arrangements in central clearing by posting cash and non-cash collateral as variation margins, including the implications of those solutions on market liquidity and procyclicality and their potential legal or other implications; (b) the volume and the nature of the activity of pension scheme arrangements in cleared and non-cleared OTC derivatives markets, within each asset class, and any related systemic risk to the financial system; (c) the consequences of pension scheme arrangements fulfilling the clearing requirement on their investment strategies, including any shift in their cash and non-cash asset allocation; (d) the implications of the clearing thresholds specified pursuant to point (b) of Article 10(4) for pension scheme arrangements; (e) the impact of other legal requirements on the cost differentials between cleared and non-cleared OTC derivative contracts, including margin requirements for non-cleared derivatives and the calculation of the leverage ratio in accordance with Regulation (EU) No 575/2013; (f) whether any further measures are necessary to facilitate a clearing solution for pension scheme arrangements. The Commission may adopt a delegated act in accordance with Article 82 to extend the two-year period referred to in Article 89(1) twice, each time by one year, where it concludes that no viable technical solution has been developed and that the adverse effect of centrally clearing derivative contracts on the retirement benefits of future pensioners remains unchanged. CCPs, clearing members and pension scheme arrangements shall make their best efforts to contribute to the development of viable technical solutions that facilitate the clearing of OTC derivative contracts by such arrangements. The Commission shall set up an expert group composed of representatives of CCPs, clearing members, pension scheme arrangements and other relevant parties to such viable technical solutions to monitor their efforts and assess the progress made in the development of viable technical solutions that facilitate the clearing of OTC derivative contracts by pension scheme arrangements, including the transfer by such arrangements of cash and non-cash collateral as variation margins. That expert group shall meet at least every six months. The Commission shall consider the efforts made by CCPs, clearing members and pension scheme arrangements when drafting its report pursuant to the first subparagraph. 3. By 18 December 2020 the Commission shall prepare a report assessing: (a) whether the obligations to report transactions under Article 26 of Regulation (EU) No 600/2014 and under this Regulation create a duplicative transaction reporting obligation for non-OTC derivatives and whether reporting of non-OTC transactions could be reduced or simplified for all counterparties without undue loss of information; (b) the necessity and appropriateness of aligning the trading obligation for derivatives under Regulation (EU) No 600/2014 with changes made under Regulation (EU) 2019/834 to the clearing obligation for derivatives, in particular to the scope of the entities that are subject to the clearing obligation; (c) whether any trades that directly result from post-trade risk reduction services, including portfolio compression, should be exempted from the clearing obligation referred to in Article 4(1), taking into account the extent to which those services mitigate risk, in particular counterparty credit risk and operational risk, the potential for circumvention of the clearing obligation and the potential disincentive to central clearing. The Commission shall submit the report referred to in the first subparagraph to the European Parliament and to the Council, together with any appropriate proposals. 3a. By 18 May 2020, ESMA shall submit a report to the Commission. That report shall assess: (a) the consistency of the reporting requirements for non-OTC derivatives under Regulation (EU) No 600/2014 and under Article 9 of this Regulation, both in terms of the details of the derivative contracts that are to be reported and access to data by the relevant entities and whether those requirements should be aligned; (b) the feasibility of further simplifying the reporting chains for all counterparties, including for all indirect clients, taking into account the need for timely reporting and taking into account the measures adopted pursuant to Article 4(4) of this Regulation and Article 30(2) of Regulation (EU) No 600/2014; (c) the alignment of the trading obligation for derivatives under Regulation (EU) No 600/2014 with changes made under Regulation (EU) 2019/834 to the clearing obligation for derivatives, in particular to the scope of the entities that are subject to the clearing obligation; (d) in cooperation with the ESRB, whether any trades that directly result from post-trade risk reduction services, including portfolio compression, should be exempted from the clearing obligation referred to in Article 4(1); that report shall: (i) investigate portfolio compression and other available non-price forming post-trade risk reduction services which reduce non-market risks in derivatives portfolios without changing the market risk of the portfolios, such as rebalancing transactions; (ii) explain the purposes and functioning of such post-trade risk reduction services, the extent to which they mitigate risk, in particular counterparty credit risk and operational risk, and assess the need to clear such trades or to exempt them from clearing, in order to manage systemic risk; and (iii) assess to what extent any exemption from the clearing obligation for such services discourages central clearing and may lead to counterparties circumventing the clearing obligation; (e) whether the list of financial instruments that are considered highly liquid with minimal market and credit risk, in accordance with Article 47, could be extended and whether that list could include one or more money market funds authorised in accordance with Regulation (EU) 2017/1131 of the European Parliament and of the Council ( 24 ). 4. The Commission shall, in cooperation with the Member States and ESMA, and after requesting the assessment of the ESRB, draw up an annual report assessing any possible systemic risk and cost implications of interoperability arrangements. The report shall focus at least on the number and complexity of such arrangements, and the adequacy of risk-management systems and models. The Commission shall submit the report to the European Parliament and the Council, together with any appropriate proposals. The ESRB shall provide the Commission with its assessment of any possible systemic risk implications of interoperability arrangements. 5. ESMA shall present an annual report to the European Parliament, the Council and the Commission on the penalties imposed by competent authorities, including supervisory measures, fines and periodic penalty payments.
Article 86 Committee procedure
1. The Commission shall be assisted by the European Securities Committee established by Commission Decision 2001/528/EC ( 17 ). That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.
Amendment rationale: CONTEXT OF THE PROPOSAL 1.1. Reasons for and objectives of the proposal Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, whether they are related to changes in interest rates, currency fluctuations or the default of a business counterpart. However, opaque derivatives markets also acted as an unwelcome contagion channel. Derivatives markets must therefore be regulated and supervised effectively to safeguard financial stability. Given the global nature of derivatives markets and in accordance with the 2009 G20 Pittsburgh agreement 1 to reduce the systemic risk linked to extensive use of derivatives, the EU adopted the European Market Infrastructure Regulation (EMIR) in 2012. 2 As a key pillar of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing the risk for both. EMIR also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision to minimise any risk to users of a CCP and underpin systemic stability. Since 2012 when EMIR was adopted, central clearing has been significantly expanding and CCPs have become increasingly concentrated and integrated across the EU and with third countries. The present proposal ensures that supervisory arrangements keep pace with these developments. It is proposed that the EU equips its Capital Markets Union with a more effective and consistent supervisory system for CCPs, in the interest of further market integration, financial stability and a level-playing field. CCPs have grown in importance since the adoption of EMIR and will expand further in the coming years In the five years since the adoption of EMIR, the volume of CCP activity – in the EU and globally - has grown rapidly both in scale and in scope. This is a sign that the legislation works and is fulfilling its purpose. As of end of June 2016, around 62% of the global value of all OTC derivatives contracts and asset classes (interest rates, credit default, foreign exchange, etc.) were centrally cleared by CCPs 3 , which is equivalent to $337 trillion. About 97% ($328 trillion) of all centrally-cleared derivatives contracts are interest-rate derivatives. At the end of 2015, about 60% of all OTC interest-rate derivatives were centrally cleared, while the corresponding figure by the end of 2009 was 36% 4 . Central clearing has similarly gained in importance in the credit derivatives (so-called CDS) market, with the proportion of outstanding CDSs cleared through CCPs increasing steadily since these data were first reported, i.e. 37% at the end of June 2016 while the corresponding figure was 10% at the end of June 2010 5 . The rapidly expanding role of CCPs in the global financial system not only reflects the introduction of central clearing obligations across different asset classes 6 , but also increased voluntary use of central clearing amid growing awareness of the benefits of central clearing among market participants (clearing obligations have applied only since June 2016) 7 . EMIR requires certain interest-rate derivatives and CDSs to be centrally cleared in line with similar requirements in other G20 countries 8 . Bank capital rules have been changed to incentivise central clearing and make bilateral clearing a costlier option in relative terms 9 , while bilateral transactions are subject to additional collateral requirements since March 2017 10 . The expansion in CCP activity is set to continue in the coming years. Mandatory clearing obligations are likely for additional asset classes 11 and the incentives to mitigate risks and costs are likely to lead to even more voluntary clearing. The May 2017 proposal to amend EMIR in a targeted manner, to improve its effectiveness and proportionality, will reinforce this trend, by creating further incentives for CCPs to offer central clearing of derivatives to counterparties. 12 Finally, deeper and more integrated capital markets as a result of the Capital Markets Union (CMU) will further increase the need for cross-border clearing in the EU, thus increasing the importance and the interconnectedness of CCPs within the financial system. Expanding role of CCPs raises concerns about the need to upgrade supervisory arrangements under EMIR , also in light of the establishment of the Capital Markets Union The growing importance of CCPs in the financial system and the associated concentration of credit risk in these infrastructures have drawn the attention of governments, regulators, supervisors, central banks and market participants. While the scale and scope of centrally-cleared transactions has expanded, the number of CCPs has remained relatively limited. There are currently 17 CCPs established in the EU, all of which are authorised under EMIR to offer their services within the Union - although not all CCPs are authorised to clear all asset classes (e.g. only 2 CCPs clear credit derivatives, only 2 CCPs clear inflation derivatives 13 ). 14 An additional 28 third-country CCPs have been recognised under EMIR's equivalence provisions, allowing them to offer their services in the EU. 15 Accordingly, clearing markets are integrated across the EU and are highly concentrated in certain asset classes . They are also highly interconnected. 16 While increased clearing via properly regulated and supervised CCPs reinforces systemic stability overall, the concentration of risk makes the failure of a CCP a low-probability but potentially extremely high-impact event. Given the centrality of CCPs to the financial system, the increasing systemic importance of CCPs gives rise to concerns. CCPs have themselves become a source of macro-prudential risk, as their failure could cause significant disruption to the financial system and would have systemic effects. For instance, large scale, uncontrolled termination and close-out of contracts cleared by CCPs could lead to liquidity and collateral strains across the market, causing instability in the underlying asset market and the wider financial system. Like some other financial intermediaries, CCPs are also potentially susceptible to “runs” due to clearing members losing confidence in the solvency of a CCP. This could create a liquidity shock for the CCP as it attempts to meet its obligations to return the principal collateral (i.e. initial margin). The impact of a CCP failure due to increased concentration of risk would be amplified by a growing interconnectedness between CCPs both directly and indirectly via their members (usually large global banks) and clients. In response, and in line with the G20 consensus 17 , the Commission adopted a proposal for a Regulation on CCP Recovery and Resolution in November 2016 18 . The objective of the proposal is to ensure that authorities are appropriately prepared to address a failing CCP, safeguarding financial stability and limiting taxpayer costs. The CCP Recovery and Resolution proposal refocused attention on the supervisory arrangements for EU and third-country CCPs included in EMIR and the extent to which these arrangements can be made more effective five years after adoption of EMIR. This proposal is currently under negotiations in the European Parliament and the Council. That ongoing work-stream needs to be coordinated and consistent with the current proposal. Supervisory arrangements for EU CCPs Under EMIR, EU CCPs are supervised by colleges of national supervisors, the European Securities and Markets Authority (ESMA), relevant members of the European System of Central Banks (ESCB), and other relevant authorities (e.g. supervisors of the largest clearing members, supervisors of certain trading venues and central securities depositories). These colleges can include as many as 20 member authorities and they rely on coordination by the home-country authority. These arrangements raise certain concerns in light of the current state of integration in the market that needs to be reflected in the supervisory arrangements. This is also important in order to advance the Capital Markets Union . First, the growing concentration of clearing services in a limited number of CCPs, and the consequential increase in cross-border activity, implies that CCPs in a small number of individual Member States are increasingly relevant for the EU financial system as a whole. Against this trend, the current supervisory arrangements relying mainly on the home-country authority (e.g. the home-country authority is ultimately responsible for important decisions such as the extension of the authorisation or the approval of outsourcing and interoperability arrangements) need to be reconsidered. Second, diverging supervisory practices for CCPs (e.g. different conditions for authorisation or model validation processes) across the EU can create risks of regulatory and supervisory arbitrage for CCPs and indirectly for their clearing members or clients. The Commission has drawn attention to these emerging risks and the need for more supervisory convergence in its Communication on CMU of September 2016 19 and in the public consultation on the operations of the European Supervisory Authorities (ESAs) 20 , both of which highlighted the challenges posed by heterogeneous supervisory practices. Third, the role of central banks - as issuers of currency - is not adequately reflected in CCP colleges. While the mandates of central banks and supervisors may overlap (in particular in areas such as interoperability, liquidity-risk controls etc.), there is a potential for misalignment when supervisory actions impact on key responsibilities of central banks in areas such as price stability, monetary policy and the payment systems. In crisis situations, their misalignments can amplify the risks to financial stability if the assignment of responsibilities between authorities remains unclear. Supervisory arrangements for third-country CCPs Today, a significant amount of financial instruments denominated in the currencies of the Member States are cleared by recognised third-country CCPs. For example, the notional amount outstanding at Chicago Mercantile Exchange (CME) in the US is EUR 1.8 trillion for euro-denominated interest-rate derivatives, and SEK 348 billion for SEK denominated interest-rate derivatives. This also raises a series of concerns. First, the implementation of EMIR’s system of equivalence and recognition has shown certain shortcomings in particular regarding ongoing supervision. In particular, after a third-country CCP has been recognised, ESMA has encountered difficulties in accessing information from the CCP, in conducting on-site inspections of the CCP and in sharing information with the relevant EU regulators, supervisors and central banks. As a result, there is a risk that third-country CCP practices and/or adjustments to risk management models go undetected and/or unaddressed, which may have important financial-stability implications for the EU entities. Second, the potential for misalignments between supervisory and central-bank objectives within colleges acquires an additional dimension in the context of third-country CCPs where non-EU authorities are involved. Third, there is a risk that changes to the CCP rules and/or regulatory framework in a third-country could negatively affect regulatory or supervisory outcomes, leading to an un-level playing field between EU and third-country CCPs and creating scope for regulatory or supervisory arbitrage. There is currently no mechanism to ensure that the EU is informed automatically of such changes and can take appropriate measures. Such concerns are likely to become more significant in the coming years because the global nature of capital markets means that the role played by third-country CCPs is set to expand. In addition to the 28 third-country CCPs already recognised by ESMA, a further 12 CCPs from 10 jurisdictions have applied for recognition 21 and are awaiting a decision of the Commission for the equivalence of their regulatory and supervisory regimes. Moreover, a substantial volume of euro-denominated derivatives transactions (and other transactions subject to the EU clearing obligation) is currently cleared in CCPs located in the United Kingdom. When the United Kingdom exits the EU, there will therefore be a distinct shift in the proportion of such transactions being cleared in CCPs outside the EU's jurisdiction, exacerbating the concerns outlined above. This implies significant challenges for safeguarding financial stability in the EU that need to be addressed. In light of these considerations, the Commission adopted a Communication on 4 May 2017 on responding to challenges for critical financial market infrastructures and further developing the Capital Markets Union 22 . The Communication indicated that "further changes [to EMIR] will be necessary to improve the current framework that ensures financial stability and supports the further development and deepening of the Capital Markets Union (CMU)". Need to improve current supervisory arrangements As the EU clearing landscape continues to evolve, the arrangements for crisis prevention and management of CCPs must be as effective as possible. EMIR and the Commission proposal for a Regulation on CCP Recovery and Resolution are important steps in this regard. However, five years after the adoption of EMIR, the growing size, complexity and cross-border dimension of clearing in the EU and globally have highlighted shortcomings in the supervisory arrangements for EU and third-country CCPs. The present proposal therefore sets out specific amendments to EMIR and the ESMA Regulation 23 , in particular to establish clear and coherent supervisory arrangements both for EU and third-country CCPs. The impact assessment report accompanying this proposal considers the costs and benefits of these amendments. It sets out a number of options in order to enhance supervision of CCPs at EU level, involve further the central banks of issue in the supervision of CCPs, and strengthen the ability of the EU to monitor, identify and mitigate third-country CCP risks. The impact assessment provides comprehensive evidence that the proposed amendments contribute effectively to reinforce the overall stability of the EU financial system and to lower further the already low probability (but extremely high-impact) risk of a CCP failure, while keeping costs at a minimum for market participants. The proposed amendments also contribute to the further development and deepening of the CMU, in line with the political priorities of the Commission. 
Revised version (Article 86 Committee procedure):
1. The Commission shall be assisted by the European Securities Committee established by Commission Decision 2001/528/EC ( 25 ). That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply. 3. Where reference is made to this paragraph, Article 8 of Regulation (EU) No 182/2011, in conjunction with Article 5 thereof, shall apply.
Article 87 Amendment to Directive 98/26/EC
1. In Article 9(1) of Directive 98/26/EC, the following subparagraph is added: ‘Where a system operator has provided collateral security to another system operator in connection with an interoperable system, the rights of the providing system operator to that collateral security shall not be affected by insolvency proceedings against the receiving system operator.’. 2. Member States shall adopt and publish the laws, regulations and administrative provisions necessary to comply with point (1) by 17 August 2014. They shall forthwith inform the Commission thereof. When Member States adopt those measures, they shall contain a reference to Directive 98/26/EC or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 64 8 /2012 1 (the European Market Infrastructure Regulation or “EMIR”) regulates derivatives transactions, including measures to limit their risks through clearing in central counterparties (CCPs). 2 CCPs take on the risks faced by the parties to a trade, becoming the buyer to every seller and the seller to every buyer. By doing so, they increase market transparency and efficiency and reduce the risks in financial markets, especially for derivatives . EMIR 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. EMIR requires that derivatives transactions are reported to ensure market transparency for regulators and supervisors and that their risks are appropriately mitigated through central clearing at a CCP or by exchanging collateral, known as ‘margin’, in bilateral transactions. CCPs, and the risks they manage, have grown considerably since the adoption of EMIR. In 2017, the Commission published two legislative proposals amending EMIR, both of which were adopted by the co-legislators in 2019. EMIR REFIT 3 recalibrated some of the requirements under EMIR 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 4 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 5 , adopted in 2020, 6 to prepare for the unlikely – though massively impactful - event that an EU CCP faces severe financial distress. 7 Whilst EMIR has established a robust framework for central clearing, certain areas of the current supervisory framework have proven overly complex. This limits EU CCPs’ ability to attract business both within the EU and internationally. The supervisory approval procedures for launching new clearing services and activities by EU CCPs, as well as changes in their risk models, are in many cases unnecessarily long and burdensome. The current rules are there to ensure the safety and soundness of EU CCPs, but this could be done in many ways and the existing processes have been challenged as too slow and, at times, disproportionate in light of the envisaged change. It should not take years for approving a new product, and changes to risk models need to be swift to reflect changing market and economic circumstances. Delays in approvals increase costs and reduce the attractiveness of EU CCPs, and consequently of the EU as a place to do business. The proposal aims at mitigating these obstacles in order to foster modern and competitive CCPs in the EU that can attract business. EMIR provides a comprehensive and robust prudential framework for CCPs and the newly adopted CCP Recovery and Resolution Regulation further strengthens the soundness of EU CCPs. This proposal aims for the EU to continue to base the evolution of its central clearing ecosystem on the strength of its rules and supervision. Robust and safe CCPs enhance the trust of the financial system and crucially support the liquidity of key markets. A safe, robust and resilient clearing ecosystem is a pre-condition for it to grow further. The EU central clearing ecosystem should enable EU firms to hedge their risks efficiently and safely, while at the same time safeguarding the wider financial stability. In this way, central clearing will support the EU economy. This proposal aims to put firms in a better position by being able to predict the liquidity needs associated with central clearing. A competitive and efficient EU clearing ecosystem will increase central clearing activities, but central clearing also entails risks by centralising transactions in a few CCPs being financially systemically important. Hence, those risks must be appropriately managed by CCPs and CCPs must continue to be thoroughly supervised both at the national and the wider EU level. Therefore, this proposal aims at ensuring a robust and joined-up supervision, building on the supervisory system the EU currently has in place. In addition, 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 a stress scenario. H igh-risk but low-probability events can happen, and the EU must be prepared to face them 8 . While EU CCPs have generally proven resilient, experience has shown that the EU clearing ecosystem can be made stronger, to the benefit of financial stability. However, open strategic autonomy also means that the EU needs to safeguard itself against the financial stability risks which can arise when EU market participants are excessively reliant on third-country entities, as this can be a source of vulnerabilit y . Therefore, this proposal aims at making the equivalence framework in EMIR more proportionate and to better tailor cooperation with foreign supervisors taking into account the risks posed by CCPs based in third countries – and without compromising on the need for third countries to have sound rules in place . It is also proposed that the equivalence procedure is made simpler when the risks involved in central clearing in a third country are particularly low. In addition, this proposal seeks to build up the EU’s central clearing capacity and thereby increase liquidity at EU CCPs with the aim to reduce the risks posed to the EU financial stability by excessive exposures to third-country CCPs. Therefore, this proposal requires all market participants subject to a clearing obligation, to hold active accounts at EU CCPs for clearing products that have been identified by ESMA as of substantial systemic importance for the EU financial stability. T his proposal is complemented by a proposal for a Directive introducing a limited number of changes to Directive 2013/36/EU 9 (Capital Requirements Directive or ‘CRD’), Directive (EU) 2019/2034 10 (Investment Firms Directive or ‘IFD’) and Directive 2009/65/EU 11 (Undertakings for Collective Investment in Transferable Securities Directive or ‘UCITS Directive’) as regards the treatment of concentration risk towards CCPs and the counterparty risk on centrally cleared derivative transactions. These amendments are necessary to ensure that the objectives of this EMIR review are achieved as well as to assure coherence. The two proposals should therefore be read in conjunction.
Revised version (Article 87 Amendment to Directive 98/26/EC):
2. Member States shall adopt and publish the laws, regulations and administrative provisions necessary to comply with point (1) by 17 August 2014. They shall forthwith inform the Commission thereof. When Member States adopt those measures, they shall contain a reference to Directive 98/26/EC or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States.
Article 88 Websites
1. ESMA shall maintain a website which provides details of the following: (a) contracts eligible for the clearing obligation under Article 5; (b) penalties imposed for breaches of Articles 4, 5 and 7 to 11; (c) CCPs authorised to offer services or activities in the Union that are established in the Union, and the services or activities which they are authorised to provide or perform, including the classes of financial instruments covered by their authorisation; (d) penalties imposed for breaches of Titles IV and V; (e) CCPs authorised to offer services or activities in the Union established in a third country, and the services or activities which they are authorised to provide or perform, including the classes of financial instruments covered by their authorisation; (f) trade repositories authorised to offer services or activities in the Union; (g) fines and periodic penalty payments imposed in accordance with Articles 65 and 66; (h) the public register referred to in Article 6. 2. For the purposes of points (b), (c) and (d) of paragraph 1, competent authorities shall maintain websites, which shall be linked to the ESMA website. 3. All websites referred to in this Article shall be publicly accessible and regularly updated, and shall provide information in a clear format.
Amendment rationale: CONTEXT OF THE PROPOSAL Reasons for and objectives of the proposal Regulation (EU) No 64 8 /2012 1 (the European Market Infrastructure Regulation or “EMIR”) regulates derivatives transactions, including measures to limit their risks through clearing in central counterparties (CCPs). 2 CCPs take on the risks faced by the parties to a trade, becoming the buyer to every seller and the seller to every buyer. By doing so, they increase market transparency and efficiency and reduce the risks in financial markets, especially for derivatives . EMIR 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. EMIR requires that derivatives transactions are reported to ensure market transparency for regulators and supervisors and that their risks are appropriately mitigated through central clearing at a CCP or by exchanging collateral, known as ‘margin’, in bilateral transactions. CCPs, and the risks they manage, have grown considerably since the adoption of EMIR. In 2017, the Commission published two legislative proposals amending EMIR, both of which were adopted by the co-legislators in 2019. EMIR REFIT 3 recalibrated some of the requirements under EMIR 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 4 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 5 , adopted in 2020, 6 to prepare for the unlikely – though massively impactful - event that an EU CCP faces severe financial distress. 7 Whilst EMIR has established a robust framework for central clearing, certain areas of the current supervisory framework have proven overly complex. This limits EU CCPs’ ability to attract business both within the EU and internationally. The supervisory approval procedures for launching new clearing services and activities by EU CCPs, as well as changes in their risk models, are in many cases unnecessarily long and burdensome. The current rules are there to ensure the safety and soundness of EU CCPs, but this could be done in many ways and the existing processes have been challenged as too slow and, at times, disproportionate in light of the envisaged change. It should not take years for approving a new product, and changes to risk models need to be swift to reflect changing market and economic circumstances. Delays in approvals increase costs and reduce the attractiveness of EU CCPs, and consequently of the EU as a place to do business. The proposal aims at mitigating these obstacles in order to foster modern and competitive CCPs in the EU that can attract business. EMIR provides a comprehensive and robust prudential framework for CCPs and the newly adopted CCP Recovery and Resolution Regulation further strengthens the soundness of EU CCPs. This proposal aims for the EU to continue to base the evolution of its central clearing ecosystem on the strength of its rules and supervision. Robust and safe CCPs enhance the trust of the financial system and crucially support the liquidity of key markets. A safe, robust and resilient clearing ecosystem is a pre-condition for it to grow further. The EU central clearing ecosystem should enable EU firms to hedge their risks efficiently and safely, while at the same time safeguarding the wider financial stability. In this way, central clearing will support the EU economy. This proposal aims to put firms in a better position by being able to predict the liquidity needs associated with central clearing. A competitive and efficient EU clearing ecosystem will increase central clearing activities, but central clearing also entails risks by centralising transactions in a few CCPs being financially systemically important. Hence, those risks must be appropriately managed by CCPs and CCPs must continue to be thoroughly supervised both at the national and the wider EU level. Therefore, this proposal aims at ensuring a robust and joined-up supervision, building on the supervisory system the EU currently has in place. In addition, 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 a stress scenario. H igh-risk but low-probability events can happen, and the EU must be prepared to face them 8 . While EU CCPs have generally proven resilient, experience has shown that the EU clearing ecosystem can be made stronger, to the benefit of financial stability. However, open strategic autonomy also means that the EU needs to safeguard itself against the financial stability risks which can arise when EU market participants are excessively reliant on third-country entities, as this can be a source of vulnerabilit y . Therefore, this proposal aims at making the equivalence framework in EMIR more proportionate and to better tailor cooperation with foreign supervisors taking into account the risks posed by CCPs based in third countries – and without compromising on the need for third countries to have sound rules in place . It is also proposed that the equivalence procedure is made simpler when the risks involved in central clearing in a third country are particularly low. In addition, this proposal seeks to build up the EU’s central clearing capacity and thereby increase liquidity at EU CCPs with the aim to reduce the risks posed to the EU financial stability by excessive exposures to third-country CCPs. Therefore, this proposal requires all market participants subject to a clearing obligation, to hold active accounts at EU CCPs for clearing products that have been identified by ESMA as of substantial systemic importance for the EU financial stability. T his proposal is complemented by a proposal for a Directive introducing a limited number of changes to Directive 2013/36/EU 9 (Capital Requirements Directive or ‘CRD’), Directive (EU) 2019/2034 10 (Investment Firms Directive or ‘IFD’) and Directive 2009/65/EU 11 (Undertakings for Collective Investment in Transferable Securities Directive or ‘UCITS Directive’) as regards the treatment of concentration risk towards CCPs and the counterparty risk on centrally cleared derivative transactions. These amendments are necessary to ensure that the objectives of this EMIR review are achieved as well as to assure coherence. The two proposals should therefore be read in conjunction.
Revised version (Article 88 Websites):
2. For the purposes of points (b), (c) and (d) of paragraph 1, competent authorities shall maintain websites, which shall be linked to the ESMA website. 3. All websites referred to in this Article shall be publicly accessible and regularly updated, and shall provide information in a clear format.