Proposal to amend Regulation (EU) No 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority) and amending Regulation (EU) No 648/2012 as regards the procedures and authorities involved for the authorisation of CCPs and requirements for the recognition of third-country CCPs

Derivatives contracts are a key tool for Europe's banks and businesses to manage their risks, whether they are related to changes in interest rates, currency fluctuations or the default of a business counterpart. However, opaque derivatives markets also acted as an unwelcome contagion channel. Derivatives markets must therefore be regulated and supervised effectively to safeguard financial stability.

Given the global nature of derivatives markets and in accordance with the 2009 G20 Pittsburgh agreement to reduce the systemic risk linked to extensive use of derivatives, the EU adopted the European Market Infrastructure Regulation (EMIR) in 2012. As a key pillar of EMIR standardised over-the-counter (OTC) derivatives contracts must be cleared through a Central Counterparty (CCP). A CCP is a market infrastructure that reduces systemic risk and enhances financial stability by standing between the two counterparties to a derivatives contract (i.e. acting as buyer to the seller and seller to the buyer of risk) and thereby reducing the risk for both. EMIR also introduced strict prudential, organisational and business conduct requirements for CCPs and established arrangements for their prudential supervision to minimise any risk to users of a CCP and underpin systemic stability.

Since 2012 when EMIR was adopted, central clearing has been significantly expanding and CCPs have become increasingly concentrated and integrated across the EU and with third countries.

The present proposal ensures that supervisory arrangements keep pace with these developments. It is proposed that the EU equips its Capital Markets Union with a more effective and consistent supervisory system for CCPs, in the interest of further market integration, financial stability and a level-playing field.

EUR-Lex: COM(2017)331: Follow the progress of this proposal through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2017:331:FIN

EP: EPRS: Briefing: EU Legislation in Progress, September 2018: Review of the European Market Infrastructure Regulation (EMIR): Updated rules on supervision of central counterparties (CCPs) http://www.europeansources.info/record/regulation-of-otc-derivatives-amending-the-european-market-infrastructure-regulation-emir/

EUR-Lex: SWD(2017)246: Impact assessment http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2017:246:FIN

EUR-Lex: SWD(2017)247: Executive summary of the impact assessment http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD:2017:247:FIN

EP: EPRS: Briefing: Initial Appraisal of a European Commissi on Impact Assessment, January 2018: European Market Infrastructure Regulation http://www.europarl.europa.eu/RegData/etudes/BRIE/2018/611002/EPRS_BRI(2018)611002_EN.pdf

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