Monday December 18 2017

News Source: Fund Regulation

Focus: MIFID and MIFIR

Type: General

Country: European Union




On 14th December 2017, the European Securities and Markets Authority (ESMA) updated its Question and Answers (Q&As) on post-trading issues regarding the implementation of the Markets in Financial Instruments Directive (MiFID II) and Regulation (MiFIR).

Please see below updated questions:

  1. In the event of a clearing member default, is it permissible for a CCP to liquidate all of the collateral recorded in all the gross omnibus indirect client accounts (referred to in paragraph 2(b)) together and apply the resulting sum collectively in order to cover losses or to enable the netting of positions across different accounts?
  2. No, Article 4(4)(b) of the Indirect Clearing RTS requires that a clearing member shall open and maintain in the CCP a segregated account for the exclusive purpose of holding the assets and positions of indirect clients of each client held by the clearing member in an account as referred to in paragraph 2(b). Therefore, a clearing member would have to open a separate account at the CCP for each client’s pool of Indirect Clients who have elected the account referred to in paragraph (2)(b).

In the event of a clearing member default, Recital 6 of the Indirect Clearing RTS provides that indirect clients’ assets and positions which are held in an indirect clearing account, including gross omnibus accounts referred to in Article 4(2)(b), may still be exposed to the losses of another indirect client within the same account. However, to the extent a clearing member has opened at the CCP several gross omni-bus indirect client accounts referred to in Article 4(2)(b) for each of its clients, positions recorded in those different gross omnibus indirect client accounts at the CCP may not be netted against each other and assets covering the positions in one of these gross omnibus indirect client accounts may not be ex-posed to losses connected to positions held in a different account.

Please click on the above link for more information.