Central counterparties (CCPs) are another core feature of EMIR. The CCP acts as central contractual partner, assumes the default risk and guarantees the fulfilment of the transaction. In order to do so, a CCP requires its clearing members to deposit collateral for contracts that they enter into. However, in the default event of one or more clearing members, the available collateral may not be sufficient to cover all payment obligations of the defaulting member or members. To ensure the CCP’s solvency pursuant to EMIR, it is required to set up a default fund, funded by the clearing participants. Per the default waterfall provisions set out in Article 45 EMIR, the CCP shall use its own resources to cover losses not covered by the defaulting clearing members’ available collateral and default fund contributions before using the default fund contributions of non-defaulting clearing members.
Harmonised authorisation requirements
CCPs are supervised by the national competent authorities; pursuant to Article 2 Central Counterparties and Trade Repositories Act (ZGVG), FMA is the national competent authority in Austria. EMIR stipulates that every CCP is required to have an authorisation by the national competent authorities of the Member State where it is established. Strict authorisation requirements apply for CCPs. A CCP shall have access to central bank funds, credit lines at commercial banks, or a combination of both. In addition, a CCP is expected to constantly hold available separate own funds of at least EUR 7.5 million. The members of a CCP are required to deposit highly liquid financial assets (margins) with the CCP. The amount and type of the margin shall be determined by appropriate margin models subject to approval by the national supervisory authority. The establishment of the default fund is also a requirement for authorisation. Additionally, CCPs are expected to have sufficient own funds in order to withstand a stress scenario under which the two largest members of the CCP both default at the same time. During the authorisation process of a CCP, the national competent authority must conduct a risk assessment of the CCP, establish an international supervisory college and take its chair, and ensure that all relevant EMIR requirements arefulfilled. The results of the risk analysis are discussed in the college; the authorisation decision is taken jointly by the college.
All important topics relating to the ongoing supervision of a CCP are always addressed with the supervisory college, chaired by the national competent authority.