On November 11, the European Securities and Markets Authority (ESMA) published three sets of technical advice on tiering, comparable compliance and fees charged to third-country central counterparties (TC-CCPs). The advice is directed towards the European Commission (EC) and concerns the revised European Market Infrastructure Regulation (EMIR 2.2).

The EC will develop Delegated Acts for implementation of the technical advice, which are expected to be published in early 2020.

ESMA’s Technical Advice on Tiering

Under EMIR 2.2, TC-CCPs will be categorized based on whether they are systemically important (Tier 2) or not important (Tier 1). A firm would also be in Tier 2 if it was likely to become systemically important.

In this technical advice, ESMA set out the criteria it will use to determine if a firm is Tier 1 or Tier 2. These criteria include:

  • the nature, size and complexity of TC-CCPs business in the European Union (EU);
  • the risk profile of the TC-CCP;
  • the structure of the business in the EU, such as the clearing membership structure and other relationships or interdependencies; and
  • the impact that failure of or disruption to the TC-CCP would have on financial markets and the broader financial system.

The technical advice is available here.

ESMA’s Technical Advice on Comparable Compliance

A Tier 2 TC-CCP will have to comply with both EMIR and its home country requirements. In this technical advice, ESMA explains that a Tier 2 TC-CCP can evidence that its compliance with their home country regime also satisfies the requirements under EMIR by submitting a “reasoned request” to ESMA, who will pass the request onto the ESMA third country CCP College to be assessed.

The technical advice is available here.

ESMA’s Technical Advice on Fees Charged to TC-CCPs

The final technical advice sets out the specific “recognition” (i.e. application) fees and annual fees to be charged to TC-CCPs under EMIR 2.2. Like all ESMA fees, they will be calculated as a proportion of ESMA’s costs to supervise the firms. The fees will be different for Tier 1 and Tier 2, and there are specific provisions for 2019 and 2020 while EMIR 2.2 is implemented.

The technical advice is available here.