ANNEX I
ELEMENTS REFERRED TO IN ARTICLE 3(1)
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Provision of Union law |
Elements referred to in Article 3(1) |
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Chapter 1: Organisational requirements |
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General provisions |
The third-country CCP has:
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The third-country CCP has established policies and procedures which are sufficiently effective so as to ensure compliance with the relevant third-country framework, including compliance with that framework by its managers and employees. |
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The third-country CCP:
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The third-country CCP implements and maintains a remuneration policy which promotes sound and effective risk management and which does not create incentives to relax risk standards. |
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Paragraphs 6, 7 and 8 of Article 26 of Regulation (EU) No 648/2012 |
The third-country CCP:
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Senior management and the board |
The senior management of a third-country CCP is of sufficiently good repute and has sufficient experience to ensure the sound and prudent management of the CCP. |
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Paragraphs 2 and 3 of Article 27 of Regulation (EU) No 648/2012 |
The third-country CCP has a board with a sufficient number of independent members that have clear roles and responsibilities, an adequate representation of clearing members and clients, and mechanisms to address any potential conflicts of interest within the CCP to ensure sound and prudent management of the CCP. |
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Risk Committee |
The third-country CCP:
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Record Keeping |
The third-country CCP maintains, for a period of at least 10 years, all the records on the services and activity provided so as to enable its competent authority to monitor its compliance with the relevant third-country framework. |
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The third-country CCP maintains, for a period of at least 10 years following the termination of a contract, all information on all contracts it has processed to enable the identification of the original terms of a transaction before clearing by that CCP. |
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The third-country CCP makes available to any relevant third-country authority, upon request, the records on the services and activity provided, the information on all contracts it has processed and all information on the positions of cleared contracts, irrespective of the venue where the transactions were executed. |
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Shareholders and members with qualifying holdings |
The third-country CCP informs its competent authority of the identities of the shareholders or members that have qualifying holdings and of the amounts of those holdings. |
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Paragraphs 2 and 4 of Article 30 of Regulation (EU) No 648/2012 |
The shareholders or members that have qualifying holdings in a third-country CCP:
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Close links between the third-country CCP and other natural or legal persons do not prevent the effective exercise of the supervisory functions of the competent authority of the third country. |
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The laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with which the CCP has close links, or difficulties involved in their enforcement, do not prevent the effective exercise of the supervisory functions of the competent authority. |
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The third-country CCP notifies its competent authority of any changes to its management and the third-country framework ensures that appropriate measures are taken where the conduct of a member of the board of a third-country CCP is likely to be prejudicial to the sound and prudent management of the CCP.,. |
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Conflict of Interest |
The third-country CCP maintains and operates effective arrangements to identify, manage and resolve any potential conflicts of interest between itself, including its managers, employees, or any person with direct or indirect control or close links, and its clearing members or their clients known to the CCP. |
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Where the arrangements of the third-country CCP to manage conflicts of interest are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of a clearing member or client are prevented, , that CCP discloses to clearing members and, where clients are known to that CCP, to those clients, the general nature or sources of conflicts of interest before accepting new transactions from those clearing members. |
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Where the third-country CCP is a parent undertaking or a subsidiary, , that CCP’s arrangements to manage conflicts of interest take into account any circumstances of which the CCP is or should be aware which may give rise to a conflict of interest due to the structure and business activities of other undertakings of which it is a parent or a subsidiary. |
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The third-country CCP takes all reasonable steps to prevent any misuse of information held in its systems and prevents the use of that information for other business activities. |
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Business Continuity |
The third-country CCP implements and maintains an adequate business continuity policy and disaster recovery plan aimed at ensuring the preservation of its functions, the timely recovery of operations and the fulfilment of the CCP’s obligations, including the recovery of all transactions at the time of disruption to enable the CCP to continue to operate with certainty and to complete settlement on the scheduled date. |
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The third-country CCP implements and maintains an adequate procedure ensuring the timely and orderly settlement or transfer of the assets and positions of clients and clearing members in the event of a withdrawal of authorisation. |
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Outsourcing |
When outsourcing operational functions, services or activities, the third-country CCP ensures that, at all times:
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Chapter 2: Conduct of business rules |
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General provisions |
The third-country CCP, when providing services to its clearing members, and where relevant, to their clients, acts fairly and professionally in accordance with the best interests of such clearing members and clients and sound risk management. |
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The third-country CCP has accessible, transparent and fair rules for the prompt handling of complaints. |
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Participation requirements Paragraphs 1 and 2 of Article 37 of Regulation (EU) No 648/2012 |
The third-country CCP establishes categories of admissible clearing members and non-discriminatory, transparent and objective admission criteria to ensure fair and open access to the CCP and sufficient financial resources and operational capacity of clearing members, enabling the CCP to control the risk it is exposed to, and monitors on an ongoing basis that those criteria are met. |
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The third-country CCP’s rules for clearing members enables it to gather relevant basic information to identify, monitor and manage relevant concentrations of risk relating to the provision of services to clients. |
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Paragraphs 4 and 5 of Article 37 of Regulation (EU) No 648/2012 |
The third-country CCP has objective and transparent procedures for the suspension and orderly exit of clearing members that no longer meet the admission criteria and can only deny access to clearing members meeting the admission criteria where duly justified in writing and based on a comprehensive risk analysis. |
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Specific additional obligations on clearing members, such as the participation in auctions of a defaulting clearing member’s position, are proportional to the risk brought by the clearing member and do not restrict participation to certain categories of clearing members. |
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Transparency |
The third-country CCP publicly discloses the prices and fees associated with each service provided, including discounts and rebates and the conditions to benefit from those reductions, and allows its clearing members and, where relevant, their clients, separate access to the specific services provided. |
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The third-country CCP discloses to clearing members and clients the risks associated with the services provided. |
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The third-country CCP discloses to its clearing members the price information used to calculate its end-of-day exposures to its clearing members, and publicly discloses the volumes of the cleared transactions for each class of instruments cleared by the CCP on an aggregated basis. |
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The third-country CCP publicly discloses the operational and technical requirements relating to the communication protocols covering content and message formats it uses to interact with third parties, including the operational and technical requirements related to access of trading venues to the CCP. |
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Paragraphs 6 and 7 of Article 38 of Regulation (EU) No 648/2012 |
The third-country CCP provides its clearing members with information on the initial margin models it uses, explaining how the models operate and describing the key assumptions and limitations of those models. |
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Segregation and Portability |
The third-country CCP keeps separate records and accounts for each clearing member, segregates the assets and positions of the clearing member from the assets and positions of the clients of the clearing member, and provides sufficient protection for the assets and positions of each clearing member and each client, as well as a choice of segregation of positions and assets and of options of portability to each client, including individual client segregation. |
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Chapter 3: Prudential requirements |
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Exposure management |
The third-country CCP maintains appropriate policies and mechanisms to manage, on a near to real time basis, intra-day exposures to sudden changes in market conditions and in positions. |
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Margin requirements |
The third-country CCP imposes, calls and collects margins to limit its credit exposures from its clearing members and, where relevant, from CCPs with which it has interoperability arrangements, and that CCP regularly monitors and, if necessary, revises the level of its margins to reflect current market conditions taking into account any potentially procyclical effects of such revisions. Such margins shall be sufficient:
Those margins ensure that a CCP fully collateralises its exposures with all its clearing members, and, where relevant, with CCPs with which it has interoperability arrangements, at least on a daily basis. |
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The third-country CCP applies models and parameters in setting its margin requirements that capture the risk characteristics of the products cleared and take into account the interval between margin collections, market liquidity and the possibility of changes over the duration of the transaction. |
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The third-country CCP calls and collects margins on an intraday basis, at least when predefined thresholds are exceeded. |
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The third-country CCP calculates, calls and collects margins that are adequate to cover the risk stemming from the positions registered in each account with respect to specific financial instruments, or to a portfolio of financial instruments provided that the methodology used is prudent and robust. |
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Default Fund and Other Financial Resources Paragraphs 1 and 4 of Article 42 of Regulation (EU) No 648/2012 |
The third-country CCP:
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The third-country CCP establishes the minimum size of contributions to the default fund and the criteria to calculate the contributions of the single clearing members. The contributions are proportional to the exposures of each clearing member. |
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The third-country CCP develops scenarios of extreme but plausible market conditions, including the most volatile periods that have been experienced by the markets for which that CCP provides its services, and a range of potential future scenarios, taking into account sudden sales of financial resources and rapid reductions in market liquidity, and the default fund of that CCP enables it, at all times, to withstand the default of at least the two clearing members to which it has the largest exposures under extreme but plausible market conditions. |
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The default fund of the third-country CCP maintains sufficient pre-funded available financial resources to cover potential losses that exceed the losses to be covered by margins. Those pre-funded available financial resources include dedicated resources of the CCP, are freely available to the CCP and are not used to meet capital requirements. |
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The third-country CCP ensures that the exposures of the clearing members toward that CCP are limited. |
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Liquidity risk controls |
The third-country CCP:
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Default waterfall Paragraphs 1 and 2 of Article 45 of Regulation (EU) No 648/2012 |
The third-country CCP uses the margins posted by a defaulting clearing member prior to other financial resources in covering losses and thereafter, where the margins posted by that clearing member are not sufficient to cover the losses incurred by the CCP, the default fund contribution of that clearing member to cover those losses. |
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Paragraphs 3 and 4 of Article 45 of Regulation (EU) No 648/2012 |
The third-country CCP:
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Collateral requirements |
The third-country CCP accepts only highly liquid collateral with minimal credit and market risk to cover its initial and ongoing exposure to its clearing members, and applies adequate haircuts to asset values that reflect the potential for their value to decline over the interval between their last revaluation and the time by which they can reasonably be assumed to be liquidated, taking into account the liquidity risk following the default of a market participant and the concentration risk on certain assets that may result in establishing the acceptable collateral and the relevant haircuts. |
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Investment Policy |
The third-country CCP invests its financial resources only in cash or in highly liquid financial instruments with minimal market and credit risk, and its investments are capable of being liquidated rapidly with minimal adverse price effect. |
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The third-country CCP deposits financial instruments posted as margins or as default fund contributions with, where available, operators of securities settlement systems that ensure the full protection of those financial instruments, or with other authorised financial institutions using alternative highly secure arrangements. |
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Cash deposits of the third-country CCP are performed through highly secure arrangements with authorised financial institutions or, alternatively, through the use of the standing deposit facilities of central banks or other comparable means provided for by central banks. |
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When depositing assets with a third party, the third-country CCP:
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The third-country CCP does not invest its capital or the sums arising from margins, default fund contributions, liquidity or other financial resources, in its own securities or those of its parent undertaking or its subsidiary. |
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The third-country CCP takes into account its overall credit risk exposures to individual obligors in making its investment decisions and ensures that its overall risk exposure to any individual obligor remains within acceptable concentration limits. |
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Default procedures |
The third-country CCP has procedures in place to be followed where a clearing member does not comply with the participation requirements of the CCP or when that clearing member is declared in default either by the CCP or by a third party. |
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The third-country CCP takes prompt action to contain losses and liquidity pressures resulting from defaults and ensures that the closing out of any clearing member’s positions does not disrupt its operations or expose the non-defaulting clearing members to losses that they cannot anticipate or control. |
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The third-country framework ensures that the third-country CCP promptly informs its competent authority before the default procedure is declared or triggered. |
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The third-country CCP verifies that its default procedures are enforceable. |
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Paragraphs 5, 6 and 7 of Article 48 of Regulation (EU) No 648/2012 |
The third-country CCP:
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Review of models, stress testing and back testing |
The third-country CCP:
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The third-country CCP regularly tests the key aspects of its default procedures and takes all reasonable steps to ensure that all clearing members understand them and have appropriate arrangements in place to respond to a default event. |
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The third-country CCP publicly discloses key information on its risk-management model and assumptions adopted to perform the stress tests on the models and parameters adopted to calculate its margin requirements, default fund contributions, collateral requirements and other risk control mechanisms. |
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Settlement |
The third-country CCP uses, where practical and available, central bank money to settle its transactions or, where central bank money is not used, takes steps to strictly limit cash settlement risks. |
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The third-country CCP clearly states its obligations with respect to deliveries of financial instruments including whether it has an obligation to make or receive delivery of a financial instrument or whether it indemnifies participants for losses incurred in the delivery process. |
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Where the third-country CCP has an obligation to make or receive deliveries of financial instruments, that CCP eliminates principal risk through the use of delivery-versus-payment mechanisms to the extent possible. |
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Chapter 4: Calculations and reporting for the purposes of Regulation (EU) No 575/2013of the European Parliament and of the Council (1) |
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Calculations and reporting |
The third-country CCP applies reporting requirements on capital requirements calculations in accordance with the respective third-country framework applicable to rules on accounting and capital requirements. |
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(1) Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ L 176, 27.6.2013, p. 1).