The detail of the ESMA equivalence statement on the US September 4, 2013 at 2:10 pm

For real OTC geeks this, from ESMA’s Technical advice on third country regulatory equivalence under EMIR – US:

78. In addition to the legally binding requirements which are applicable at a jurisdictional level, to CCPs in the US, ESMA is aware that some CCPs authorised in the US might, on an individual basis, have adopted (or may in future adopt) internal policies, procedures, rules, models and methodologies which have the effect of subjecting the CCP to standards that are broadly equivalent to the legally binding requirements for CCPs under EMIR. The internal policies, procedures, rules, models and methodologies that some CCPs authorised in the US might, on an individual basis, have adopted, could constitute legally binding requirements for the purposes of Article 25(6) of EMIR where, (a) such internal policies, procedures, rules, models and methodologies cannot be changed without the approval or non-objection of the CFTC and/or the SEC (as relevant) and (b) any departure by the CCP from, or failure to implement, such internal policies, procedures, rules, models and methodologies can give rise to possible enforcement action…

80. Taking into account the legally binding requirements which are applicable, at a jurisdictional level, to CCPs in the US and the other legal and supervisory arrangements present in the US, ESMA advises the Commission to consider that CCPs authorised in the US do comply with legally binding requirements which are equivalent to the requirements laid down in Title IV of EMIR, where such CCPs have adopted internal policies, procedures, rules, models and methodologies that constitute legally binding requirements in accordance with the tests set out in paragraph 78 above and where they incorporate provisions which, on a holistic basis, are broadly equivalent to the legally binding requirements for CCPs under EMIR (i.e. where the internal policies,
procedures, rules, models and methodologies include provisions which, on a holistic basis, address the gaps identified in the relevant section of the detailed analysis set out at Annex III) in the following areas:

CCPs under the CFTC’s DCO regime

(1) Risk Committee requirements.
(2) Business continuity requirements.
(3) Margin requirements.
(4) Default fund requirements.
(5) Other financial resources requirements.
(6) Liquidity risk control requirements.
(7) Default waterfall requirements.
(8) Collateral requirements.
(9) Investment policy requirements.
(10) Review of models, stress testing and back testing requirements.

CCPs under the SEC regime

(1) Risk Committee requirements.
(2) Business continuity requirements.
(3) Outsourcing requirements.
(4) Segregation and portability requirements.
(5) Margin requirements.
(6) Default fund requirements (except for CAs clearing SBS).
(7) Other financial resources requirements (except for CAs clearing SBS).
(8) Liquidity risk control requirements.
(9) Default waterfall requirements.
(10) Collateral requirements.
(11) Investment policy requirements.
(12) Default procedure requirements.
(13) Review of models, stress testing and back testing requirements.

CCPs under the CFTC’s regime for SIDCOs and Opt-In DCOs

(1) Risk Committee requirements.
(2) Margin requirements.
(3) Default fund requirements.
(4) Other financial resources requirements (except when systemically important in multiple jurisdictions or involved in activities with a more complex risk profile).
(5) Default waterfall requirements.
(6) Collateral requirements.
(7) Investment policy requirements.
(8) Review of models, stress testing and back testing requirements…

ESMA advises the Commission to consider that CCPs authorised in the US are subject to effective supervision and enforcement on an on-going basis and that the legal framework of the US provides for an effective equivalent system for the recognition of CCPs authorised under third-country legal regimes. Although ESMA does note that the US authorities do not use the equivalent system on a long-term basis and ESMA highlights to the Commission that in practice the US authorities require that CCPs authorised outside of the US become subject to the direct jurisdiction of the SEC and CFTC and the application of two sets of rules. ESMA notes that this represents a departure from the third country CCP regime prescribed in EMIR.

ESMA also advises the Commission to consider that the legal and supervisory arrangements of the US ensure that CCPs authorised in the US comply with legally binding requirements which are equivalent to the requirements laid down in Title IV of EMIR in respect of CCPs that have adopted internal policies, procedures, rules, models and methodologies that constitute legally binding requirements in accordance with the tests set out in paragraph 78 above and where they incorporate provisions which, on a holisitic basis, are broadly equivalent to the legally binding requirements for CCPs under EMIR in the areas set out in paragraph 80 above.

84. On this basis, ESMA would only grant recognition to CCPs authorised in the US which have in fact adopted internal policies, procedures, rules, models and methodologies which, on a holistic basis, incorporate provisions that are broadly equivalent to the legally binding requirements for CCPs under EMIR in the specific areas identified above and where ESMA has assessed that the relevant internal policies, procedures, rules, models or methodology do constitute legally binding requirements in accordance with the tests set out in paragraph 78 above.

2 Responses to “The detail of the ESMA equivalence statement on the US”

  1. It seems kind of pointless to have an equivalence regime if you’re just going to recognise each CCP individually anyway.

  2. […] The detail of the ESMA equivalence statement on the US September 4, 2013 at 2:10 pm For real OTC geeks this, from ESMA’s Technical advice on third country regulatory equivalence under EMIR – US: http://blog.rivast.com/?p=7486 […]