EUROPE: Commission consults on CCP Clearing for OTC Derivatives

Tuesday June 15 2010

The European Commission has published a consultation paperon Derivatives and Market Infrastructures. The consultation paper focuses on standards for central counterparties that clear OTC (over-the-counter) derivatives and included questions relating to the eligibility of derivatives contracts for clearing, the requirements for CCPs, interoperability between CCPs and reporting obligations for trade repositories.

These consultation paper seeks views from stakeholders on policy measures announced in October 2009, where the commission adopted a Communication on “Ensuring efficient, safe and sound derivatives markets: future policy actions” after a full consultation on a previous Communication of July 2009 (COM(2009)332) and accompanying Staff Working Paper and Consultation Paper (IP/09/1546).

With reference to Mandatory Clearing of all Standardised OTC Derivatives, the consultation seeks views on the clearing obligation, the process to determine the eligibility of OTC derivate contracts for mandatory clearing, minimum threshold requirements for non-financial counterparties and whether access from trading venues to CCPs clearing eligible contracts should be guaranteed?

In regards to requirements for Central Counterparties, comments are sought on new organisational requirements for CCPs in particular on the role and function of a Risk Committee; whether the proposed governance arrangements and specific requirements are sufficient to prevent and manage potential conflicts of interest.

Comments are also invited on the stringent outsourcing requirements proposed, Initial Capital and Exposure levels as well as a proposed approach on segregation and portability of assets and positions.

For Trade Repositories, the commission seeks views on proposed reporting obligations on how to ensure regulators` access to information with trade repositories in addition to specific requirements on operational reliability and transparency issues.

In this consultation, the Commission also seeks views on a proposed general approach with the aim of ensuring interoperability between CCPs and Trade Repositories as well as how CCPs and trade repositories in third countries can continue to provide services in the EU.

The final section of the consultation calls for views on definitions set out by the Commission including a definition for Central Counterparty.