EU Consultation on Clearing Service Provision under EMIR Refit

The European Securities and Markets Authority has opened a consultation on its draft technical advice on commercial terms for providing clearing services under the European Market Infrastructure Regulation. Responses to the consultation should be submitted by December 2, 2019.

EMIR Refit introduced a new, and somewhat controversial, obligation for clearing members and clients to provide clearing services, whether they are provided directly or indirectly, under fair, reasonable, non-discriminatory and transparent (FRANDT principle) commercial terms. EMIR Refit has applied directly across the EU since June 17, 2019, however the FRANDT requirements will only apply from June 18, 2021. The Commission must adopt legislation setting out the conditions under which commercial terms are to be considered to be fair, reasonable, non-discriminatory and transparent, based on:

• fairness and transparency requirements for fees, prices, discount policies and other general contractual terms and conditions regarding the price list, without prejudice to the confidentiality of contractual arrangements with individual counterparties;
• factors that constitute reasonable commercial terms to ensure unbiased and rational contractual arrangements;
• requirements that facilitate clearing services on a fair and non-discriminatory basis, having regard to related costs and risks, so that any differences in prices charged are proportionate to costs, risks and benefits; and
• risk control criteria for the clearing member or client related to the clearing services offered.

The Commission has asked ESMA to provide technical advice to assist it in developing the required legislation. ESMA intends to submit its report to the Commission in Q1 2020.

ESMA's consultation paper discusses the clearing obligation, incentives to clear, issues faced by some counterparties in gaining access to clearing services, the cost of clearing and the FRANDT principles. The paper then sets out ESMA's proposed requirements that a clearing service provider would need to comply with to satisfy the FRANDT principles.

View the consultation paper.

View details of EMIR Refit.

Return to main website.