On 11 June 2020, the European Commission published for consultation a draft Delegated Regulation supplementing the European Market Infrastructure Regulation (EMIR) with regard to the minimum elements to be assessed by the European Securities and Markets Authority (ESMA) when assessing third-country central counterparties’ (CCPs) requests for comparable compliance and the modalities and conditions for that assessment.

Article 25a of EMIR provides that a third-country CCP that is considered systemically important or likely to become systemically important for the financial stability of the EU or for one or more of its Member States (‘Tier 2’ CCP) may request ESMA to assess its ‘comparable compliance’, i.e. whether that CCP may be in compliance with EMIR through its compliance with its domestic law.

Article 25a(3) of EMIR empowers the Commission to adopt a delegated act specifying: (a) the minimum elements to be assessed by ESMA for the purpose of comparable compliance; and (b) the modalities and conditions for ESMA to carry out that assessment.

The draft delegated act is adopted in accordance with Article 82(2) of EMIR, which provides that the Commission shall endeavour to consult ESMA before adopting such an act.

The layout of the draft delegated act is as follows:

  • Article 1 sets out the procedure for a Tier 2 CCP to request comparable compliance, including timelines for that CCP to provide complete information to ESMA and for ESMA to complete its assessment.
  • Article 2 sets out the modalities for ESMA to assess whether a Tier 2 CCP’s compliance with the applicable third-country framework satisfies compliance with Article 16 of EMIR (‘Capital requirements’).
  • Article 3 introduces modalities for ESMA to assess whether a Tier 2 CCP’s compliance with the applicable third-country framework satisfies compliance with Title IV of EMIR (organisational requirements, conduct of business rules, prudential requirements) following a detailed assessment of certain elements.
  • Article 4 sets out modalities for ESMA to assess whether a Tier 2 CCP’s compliance with the applicable third-country framework satisfies compliance with Title V of EMIR (‘Interoperability arrangements’) following a detailed assessment of certain elements.
  • Article 5 sets out specific conditions to conduct the assessment of comparable compliance. It sets out that ESMA should not refuse comparable compliance merely because a Tier 2 CCP applies an exemption under its home rules which is comparable to any of those set out in EMIR. It also stipulates that, where a Tier 2 CCP’s compliance with a specific requirement of EMIR results in breaching the applicable third-country framework, ESMA should grant comparable compliance only where certain conditions are met.
  • Article 6 specifies that a Tier 2 CCP that benefits from comparable compliance should keep ESMA informed of any changes to the applicable third-country framework.
  • Annex I sets out the elements to assess comparable compliance with Title IV of EMIR.
  • Annex II sets out the elements to assess comparable compliance with Title V of EMIR.

The deadline for comments on the draft delegated act is 9 July 2020.