Article 29
Termination of contracts – partial or full
1. The resolution authority may terminate some or all of the following contracts of the CCP under resolution:
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(a) |
the contracts with the clearing member in default; |
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(b) |
the contracts of the affected clearing service or asset class; |
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(c) |
the other contracts of the CCP under resolution. |
The resolution authority shall terminate the contracts referred to in point (a) of the first subparagraph of this paragraph only where the transfer of the assets and positions resulting from those contracts has not taken place within the meaning of Article 48(5) and (6) of Regulation (EU) No 648/2012.
When using the power under the first subparagraph, the resolution authority shall terminate contracts referred to under each of points (a), (b) and (c) of the first subparagraph in a similar way, without discriminating between counterparties to those contracts, with the exception of those contractual obligations that cannot be enforced in a reasonable timeframe.
2. The resolution authority shall give notice to all relevant clearing members of the date on which any contract referred to in paragraph 1 is terminated.
3. Prior to the termination of any of the contracts referred to in paragraph 1, the resolution authority shall take the following steps:
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(a) |
require the CCP under resolution to value each contract, and update the account balances of each clearing member; |
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(b) |
determine the net amount payable by or to each clearing member, taking account of any due but unpaid variation margin, including variation margin due as a result of the contract valuations referred to in point (a); and |
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(c) |
notify each clearing member of the determined net amounts and require the CCP to pay or collect them accordingly. |
The clearing members shall, without undue delay, communicate the application of such tool to their clients and the way in which such application affects them.
4. The valuation referred in point (a) of paragraph 3 shall be based, as far as possible, on a fair market price determined on the basis of the CCP’s own rules and arrangements, unless the resolution authority deems necessary the use of another appropriate price discovery method.
5. Where a non-defaulting clearing member is unable to pay the net amount determined in accordance with paragraph 3 of this Article, the resolution authority may, having regard to Article 21 of this Regulation, require the CCP to place the non-defaulting clearing member in default and use its initial margin and default fund contribution in accordance with Article 45 of Regulation (EU) No 648/2012.
6. Where the resolution authority has terminated one or more contracts of the types referred to in paragraph 1, it may temporarily prevent the CCP from clearing any new contract of the same type as the one terminated.
The resolution authority may allow the CCP to resume the clearing of those types of contracts only where the following conditions are met:
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(a) |
the CCP complies with the requirements of Regulation (EU) No 648/2012; and |
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(b) |
the resolution authority issues and publishes a notice to that effect using the means referred to in Article 72(3). |
7. ESMA shall by 12 February 2022 issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 further specifying the methodology to be used by the resolution authority for determining the valuation referred in point (a) of paragraph 3 of this Article.