With ESMA’s (European Securities and Markets Authority) regulatory technical standards (RTS) codifying the European Market Infrastructure Regulation (EMIR) into an applicable set of rules entering into force on 15 March 2013, the implementation timeline for EMIR has now become much clearer.
The CCP registration process
Under EMIR CCPs apply for authorisation with ESMA to clear under EMIR. It is expected that this will happen sooner rather than later. CCPs will have the required paperwork ready to submit as soon as the regulatory technical standards (RTS) enter into force. Rumours are that up to 25 CCPs (EU as well as non-EU) might stand in line to apply. The national competent authority then has up to six months to review and approve the CCP application and authorise the CCP.
When does clearing become mandatory?
The clearing obligation needs to be defined and put into a respective regulatory standard. This is nothing more than defining which products ought to be cleared via a clearing house and in what time frame. The national competent authorities (NCAs) will have one month to notify ESMA of the classes of OTC derivatives already cleared by CCPs in their jurisdiction. With the authorisation of a CCP by a NCA a notification of the clearing obligation should be issued to all market participants. ESMA then has up to six months to prepare a draft RTS specifying the classes of derivatives to be cleared and from when.
As for the clearing obligation, following the submission by ESMA, the draft RTS will need to be endorsed by the European Commission (one to three months) and non-objected by the European Parliament and the Council (one to three months) to become effective. The actual date of application of the clearing obligation will depend on the date of entry into force of these RTS and the expected phase-in period per type of counterparty, to be defined in the RTS.
After the RTS enter into force, trade repositories (TRs) can immediately start sending their applications to ESMA. It is believed that up to eight TRs intend to apply. ESMA then has up to two months to authorise and register a TR but the exact duration of the registration process will depend on several factors including whether the application is complete, when it is filed, and whether additional information has to be submitted to ESMA.
Once the TRs have been registered, ESMA has up to 90 working days to enforce reporting to TRs for Interest Rate Swaps and Credit Default Swaps (there are ongoing discussions whether this already includes listed products or OTC only). All other product types will need to be reported from 1 January 2014 onwards. Reporting start dates for certain asset classes are only applicable if a TR has been registered for this asset class.
With timelines becoming clearer market participants now have guidelines for their own implementation projects. Those that have started already will feel relieved that some of the dates have moved back (again). But if you haven't initiated your own projects the time to start is now.