On August 5, 2014, the European Securities and Markets Authority ("ESMA") published Guidelines and Recommendations on the implementation of the Principles for Financial Market Infrastructures (the "PFMIs") for CCPs. ESMA has published the Guidelines because a review is currently being undertaken of the EU's implementation of the PFMIs, and ESMA is concerned that any assessment will not result in the correct outcome without the Guidelines. The European Market Infrastructure Regulation ("EMIR") and its secondary legislation do not use the same operative language as that which is used in the PFMIs. The issue is of concern because of the competitive disadvantage for EU CCPs that could occur if it is deemed that the PFMIs have not been implemented properly in the EU. Under Basel III, if the regulatory requirements for CCPs are not implemented consistently with the PFMIs then banks might have to hold additional capital for exposures to such CCPs. This would not affect EU banks but would affect banks established outside of the EU. In addition, a EU CCP that wishes to gain access to markets outside of the EU would be disadvantaged if the requirement for such access was the proper implementation of the PFMIs in its host country. ESMA is of the view that the EMIR framework was established in accordance with the PFMIs but that the operative language difference may not make that apparent. The results would have unintended consequences on EU CCPs. The Guidelines direct national regulators to ensure that a CCP established in its country complies with the PFMIs.
The Guidelines are available at: http://www.esma.europa.eu/news/ESMA-issues-guidelinesimplementation-CPSS-IOSCO-Principles-market-infrastructures-respect-CCPs?t=326&o=home .
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