30 January 2014

ESMA delivers second set of advice on EMIR equivalence

Following its technical advice published on 9 September 2013, ESMA has published a supplement to its advice to the Commission on the equivalence of the regulatory regime for CCPs of Japan with the EMIR.

This supplement to the September 2013 Final report sets out ESMA’s advice to the European Commission is in respect of the equivalence between the Japanese regulatory regime for commodity CCPs and the regulatory regime for CCPs under EMIR. As for ESMA’s advice to the Commission in respect of Japan for CCPs which clear transactions relating to securities, currencies, interest rates, credit, weather, GDP and other indices, ESMA considers that the Japanese regulatory regime for commodity CCPs contains legal provisions and involves supervision and enforcement similar to that of EMIR.

ESMA advises the Commission to consider that Commodities CCPs authorised in Japan and that the legal framework of Japan provides for an effective equivalent system for the recognition of CCPs authorised under third-country legal regimes.

ESMA also advises the Commission to consider that the legal and supervisory arrangements of Japan ensure that Commodities CCPs authorised in Japan 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

If a CCP authorised in Japan that was granted recognition by ESMA subsequently made changes to its internal policies, procedures, rules, models and methodologies in a way which meant that the CCP no longer complied with standards that were broadly equivalent to the legally binding requirements for CCPs under EMIR, then that CCP would no longer qualify for recognition, and would be subject to the withdrawal of its recognition pursuant to Article 25(5) of EMIR.

The Commission is expected to use ESMA’s technical advice to prepare possible equivalence decisions. Where it adopts such a decision, certain provisions of EMIR may be disapplied in favour of equivalent third-country rules. In particular, ESMA may recognise within the EU a CCP which is authorised outside the EU.

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