On 13 July 2022, the European Securities and Markets Authority (ESMA) published a speech by Klaus Löber (Chair of ESMA’s CCP Supervisory Committee (CCP SC)). Key points in the speech include:
- The COVID-19 pandemic and then the Russian invasion of Ukraine have had major repercussions on financial markets. But from a central counterparty (CCP) perspective the impact so far seems to have been contained: there were no CCP defaults and only minor member defaults, which were swiftly and effectively managed.
- But looking at the broader clearing ecosystem, a number of non-financial clearing members and clients were in significant distress and in certain cases needed financial assistance. There was also extreme stress in certain commodities, like the nickel market, where the market was closed for six days after prices more than doubled.
- The ESMA published a consultation at the beginning of the year on APC margin measures and the European Supervisory Authority will review the responses and conduct additional research to make sure the potential changes remain valid following the market developments following Russia’s invasion of Ukraine.
- CCP membership due diligence will be the topic of the ESMA’s CCP Peer Review for 2022 which has just been launched in the CCP SC.
- Concentration risks will be the topic of the CCP Peer Review in 2023/2024 including risks in relation to commodity derivatives and emission certificates.
- The results of the EU’s fourth stress test for CCPs identified some gaps between the necessary and available buffers or add-ons for concentration risks for some CCPs, particularly in commodity derivatives markets and to a lesser extent for equity products.