In response to the European Securities and Markets Authority ("ESMA") draft technical advice on criteria for tiering and comparable compliance, FIA, ISDA and the Association for Financial Markets in Europe ("AFME") (collectively, the "Associations") concluded that certain indicators are so broad they create legal ambiguity.

The ESMA consultation was intended to ensure that third-country clearing houses ("TC-CCP") offering clearing services to EU market participants are appropriately regulated and supervised. The Associations responded to the various indicators proposed by ESMA to be used in determining whether TC-CCPs are systemically important. The Associations concluded that because the indicators are so broad they create legal ambiguity, and that ESMA would benefit by making a number of improvements to its technical advice, such as:

  • providing more detail for each factor, to ensure the correct application of the criteria for tiering under certain sections of the European Market Infrastructure Regulation ("EMIR"); and

  • prioritizing indicators in accordance with how ESMA would consider which TC-CCP's business may have a systemic impact on the EU.

The Associations recommended that ESMA adopt an approach that implements de minimis exemptions for smaller TC-CCPs, so that they are required to provide only a limited subset of information. Further, the Associations stated that they support an "outcomes focused approach" for ESMA's comparability analysis, in order to lessen the burden of TC-CCPs compliance with EMIR requirements as well as their home jurisdiction. The Associations encouraged ESMA to liaise with third-country regulators, and in particular with those who already have assessed the comparability of the EU CCP regime, in order to ensure that ESMA has a comprehensive picture and understanding of the rules applicable to the TC-CCP in question as well as how their enforcement is ensured and monitored by the relevant third-country regulators across major derivatives markets.

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