European Union: Investment Firms Quarterly Legal And Regulatory Update - 1 April 2015 To 30 June 2015

European Markets Infrastructure Regulation ("EMIR")

(i) ESMA consults on clearing obligations under EMIR

On 11 May 2015, the European Securities and Markets Authority ("ESMA") published its fourth consultation paper (ESMA/2015/807) on the clearing obligation under EMIR (the Regulation on over-the counter ("OTC") derivate transactions, central counterparties ("CCPs") and trade repositories ("TRs").

This consultation paper seeks stakeholders' views on proposed regulatory technical standards ("RTS") on the clearing obligation under EMIR.

The aim of the consultation paper is to seek interested parties views on the RTS that ESMA has to draft and submit to the European Commission.

The input from stakeholders will help ESMA in finalising the relevant technical standards to be drafted and submitted to the European Commission. The consultation process closes on 15 July 2015.

The consultation is available via the following link:

http://www.esma.europa.eu/system/files/esma-2015-807_-_consultation_paper_no_4_on_the_clearing_obligation_irs_2.pdf

(ii) ESMA publishes opinion on the composition of CPP colleges

On 21 May 2015, ESMA published a draft opinion (dated 7 May 2015) on the CCP Colleges to clarify which authorities qualify as a college member under Article 18(2)(c) of EMIR following the establishment of the Single Supervisory Mechanism (the "SSM") and to resulting voting rights.

Under Article 18(2) of EMIR, a CCP college (that is, a college to facilitate the granting or refusal of authorisation of a CCP) should include, among other authorities, the competent authorities responsible for the supervision of the clearing members of the CCP that are established in the three member states with the largest contributions to the CCP's default fund.

Under the SSM Regulation (Regulation 1024/2013), the European Central Bank ("ECB") may take over from national competent authorities ("NCAs") the direct prudential supervision of certain clearing members that are credit institutions.

The opinion clarifies that where the ECB has taken over the direct prudential supervision of any of the clearing members of the CCP that are established in the three Member States with the largest contributions to the default fund of the CCP, it should join the college pursuant to Article 18(2)(c) of EMIR.

The opinion in full is available via the following link:

http://www.esma.europa.eu/system/files/2015-838_esma_opinion_on_the_composition_of_the_colleges.pdf

(iii) ESMA updates list of authorised CCPs under EMIR

On 27 March 2015, ESMA published an update to its list of CCPs that are authorised under EMIR as well as its Public Register for the Clearing Obligation under EMIR ("Public Register").

Following this, on 27 April 2015, ESMA recognised ten third country CCPs established in Australia, Hong Kong, Japan and Singapore.

The recognition by ESMA allows third country CCPs to provide clearing services to clearing members or trading venues established in the EU.

Those CCPs are established in jurisdictions which have been assessed as equivalent by the European Commission with regard to their legal and supervisory arrangements for CCPs. Several other steps led to the recognition of those third-country CCPs, including the conclusion of cooperation agreements with the relevant third-country authorities, as well as the consultation of certain European competent authorities and central banks, as foreseen by EMIR.

As a result, ESMA has published a list of the recognised third-country CCPs as well as the classes of financial instruments covered by the recognition of the following CCPs: ASX Clear (Futures) Pty Ltd, ASX Clear Pty Ltd, HKFE Clearing Corporation Limited, Hong Kong Securities Clearing Company Limited, OTC Clearing Hong Kong Limited, SEHK Options Clearing House Limited, Japan Securities Clearing Corporation, Tokyo Financial Exchange Inc, Singapore Exchange Derivatives Clearing Limited and The Central Depository (Pte) Limited.

This list will be updated after each new decision on the recognition of third-country CCPs.

The updated lists of CCPs are available via the following links:

http://www.esma.europa.eu/system/files/ccps_authorised_under_emir.pdf

https://www.esma.europa.eu/system/files/third-country_ccps_recognised_under_emir.pdf

The updated Public Register can be found via the following link:

http://www.esma.europa.eu/system/files/public_register_for_the_clearing_obligation_under_emir.pdf

(iv) ESMA publishes updated EMIR Q&A

On 27 April 2015, ESMA issued the thirteenth update of its questions and answers ("Q&A") document (ESMA/2015/775) on the implementation of EMIR. The update relates to the second level of the EMIR validation specifications to be commonly applied by TRs to ensure that reporting is performed according to the EMIR regime.

The validation specifications involve verifying that the values reported in the fields comply with the format and content rules set out in the technical standards on reporting. It is expected that upon implementation by the TRs, a failure to comply with the requirements will trigger a rejection of the report by the TR. This is a key step for achieving better data quality as a rejected report will indicate which fields are not reported in compliance with EMIR and need to be corrected, which will allow counterparties to improve their reporting to meet the EMIR standards.

The validation controls that TRs will put in place are based on the original rules specified in the EMIR technical standards which were published in December 2012 and entered into force on 12 February 2014. No additional reporting requirements are introduced.

In order to allow sufficient lead time to implement the second level validation, ESMA expects the TRs to be able to implement the validation by end October 2015.

The Q&A is available via the following link:

http://www.esma.europa.eu/system/files/2015_775_qa_xii_on_emir_implementation_april_2015.pdf

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