The chain of potential clearing arrangements implied by the ESMA Consultation Paper goes beyond the client/indirect client relationship including clients of indirect clients as well. As mentioned above the contractual arrangements of the CCP are with its clearing members and only certain direct clients. The legal and functional relationships are however key for prudent clearing arrangements and should be addressed in the final RTS also covering obligations of the layer beyond indirect clients.
FESE does not believe that the CCP should be requested to allocate such excess to each indirect client in the account. It would be both costly and complex for the clearing members and the CCP to adopt a ‘gross omnibus with excess model’ as the clearing member would have to inform the CCP, at least daily, of the collateral value of each indirect client, for the CCP to be able to identify it in an omnibus structure. This model would imply additional links between the clearing member and the CCP which is not in the spirit of ESMA’s new proposal to reduce the complexity and costs for indirect client clearing.
FESE would support the introduction of the requirement in article 4(3) in both the revised EMIR RTS and the draft MiFIR RTS under which the clearing member will need to provide the CCP with all the necessary information to identify the positions held for the account of each indirect client in a gross omnibus account. This is key to allow the CCP to calculate the level of margins for each indirect client on a gross basis.
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