Commission Delegated Regulation (EU) No 149/2013 of 19 December 2012 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council with regard to regulatory technical standards on indirect clearing arrangements, the clearing obligation, the public register, access to a trading venue, non-financial counterparties, and risk mitigation techniques for OTC derivatives contracts not cleared by a CCP Text with EEA relevance

CHAPTER I

GENERAL

Article 1

Definitions

For the purposes of this Regulation the following definitions apply:

(a) ‘indirect client’ means the client of a client of a clearing member;

(b) ‘indirect clearing arrangements’ means the set of contractual relationships between providers and recipients of indirect clearing services provided by a client, an indirect client or a second indirect client;

(c) ‘confirmation’ means the documentation of the agreement of the counterparties to all the terms of an over the counter (OTC) derivative contract;

(d) ‘second indirect client’ means a client of an indirect client;

(e) ‘third indirect client’ means a client of a second indirect client.

CHAPTER II

INDIRECT CLEARING ARRANGEMENTS

(Article 4(4) of Regulation (EU) No 648/2012)

Article 2

Requirements for the provision of indirect clearing services by clients

A client may only provide indirect clearing services to indirect clients provided that all of the following conditions are fulfilled:

(a) the client is an authorised credit institution or investment firm or an entity established in a third country that would be considered to be a credit institution or investment firm if that entity were established in the Union;

(b) the client provides indirect clearing services on reasonable commercial terms and publicly discloses the general terms and conditions under which it provides those services;

(c) the clearing member has agreed to the general terms and conditions referred to in point (b) of this paragraph.

The client referred to in paragraph 1 and the indirect client shall conclude, in writing, an indirect clearing arrangement. The indirect clearing arrangement shall include at least the following contractual terms:

(a) the general terms and conditions referred to in paragraph 1(b);

(b) the client's commitment to honour all obligations of the indirect client towards the clearing member with regard to the transactions covered by the indirect clearing arrangement.

All aspects of the indirect clearing arrangement shall be clearly documented.

Article 3

Obligations of CCPs

Article 4

Obligations of clearing members

The general terms and conditions referred to in the first subparagraph shall include the minimum financial resources and operational capacity requirements for clients that provide indirect clearing services.

A clearing member that provides indirect clearing services shall open and maintain at least the following accounts in accordance with the request of the client:

(a) an omnibus account with the assets and positions held by that client for the account of its indirect clients;

(b) an omnibus account with the assets and positions held by that client for the account of its indirect clients, in which the clearing member shall ensure that the positions of an indirect client do not offset the positions of another indirect client and that the assets of an indirect client cannot be used to cover the positions of another indirect client.

A clearing member that provides indirect clearing services shall at least open and maintain in the CCP the following accounts in accordance with the request made by the client:

(a) a segregated account for the exclusive purpose of holding the assets and positions of indirect clients held by the clearing member in an account as referred to in paragraph 2(a);

(b) a segregated account for the exclusive purpose of holding the assets and positions of indirect clients of each client held by the clearing member in an account as referred to in paragraph 2(b).

A clearing member holding the assets and positions of indirect clients in an account as referred to in paragraph 2(a) shall:

(a) ensure that the procedures referred to in paragraph 5 allow for the prompt liquidation of those assets and positions following the default of a client, including the liquidation of those assets and positions at the level of the CCP, and include a detailed procedure to communicate to the indirect clients the default of the client and the expected period of time to liquidate the assets and positions of those indirect clients;

(b) after the completion of the default management process for the default of a client, readily return to that client, for the account of the indirect clients, any balance owed from the liquidation of those assets and positions.

A clearing member holding assets and positions of indirect clients in an account as referred to in paragraph 2(b) shall:

(a) include in the procedures referred to in paragraph 5: (i) the steps to transfer the assets and positions held by a defaulting client for the account of its indirect clients to another client or to a clearing member; (ii) the steps to pay each indirect client the proceeds from the liquidation of the assets and positions of that indirect client; (iii) a detailed procedure to communicate to the indirect clients the default of the client and the expected period of time to liquidate the assets and positions of those indirect clients;

(b) contractually commit itself to trigger the procedures for the transfer of the assets and positions held by a defaulting client for the account of its indirect clients to another client or clearing member that has been designated by the relevant indirect clients of the defaulting client at the request of those indirect clients and without obtaining the consent of the defaulting client. That other client or clearing member shall be obliged to accept those assets and positions only where that other client or clearing member has previously entered into a contractual relationship with those relevant indirect clients committing to do so;

(c) ensure that the procedures referred to in paragraph 5 allow for the prompt liquidation of those assets and positions following the default of a client, including the liquidation of those assets and positions at the level of the CCP, in case the transfer referred to in point (b) has not taken place for any reason within a predefined transfer period specified in the indirect clearing arrangement;

(d) following the liquidation of those assets and positions, contractually commit itself to trigger the procedures for the payment of the liquidation proceeds to each of the indirect clients;

(e) where the clearing member has not been able to identify the indirect clients or to complete the payment of the liquidation proceeds referred to in point (d) to each of the indirect clients, readily return to the client for the account of the indirect clients any balance owed from the liquidation of those assets and positions.

Article 5

Obligations of clients

Article 5a

Requirements for the provision of indirect clearing services by indirect clients

An indirect client may only provide indirect clearing services to second indirect clients provided that the parties to the indirect clearing arrangements fulfil one of the requirements set out in paragraph 2 and that all of the following conditions are met:

(a) the indirect client is an authorised credit institution or investment firm or an entity established in a third country that would be considered to be a credit institution or investment firm if that entity were established in the Union;

(b) the indirect client and the second indirect client conclude, in writing, an indirect clearing arrangement. The indirect clearing arrangement shall include at least the following contractual terms: (i) the general terms and conditions referred to in Article 2(1)(b); (ii) the indirect client's commitment to honour all obligations of the second indirect client towards the client with regard to transactions covered by the indirect clearing arrangement;

(c) the assets and positions of the second indirect client are held by the clearing member in an account as referred to in Article 4(2)(a).

All aspects of the indirect clearing arrangement referred to in point (b) shall be clearly documented.

For the purposes of paragraph 1, the parties to the indirect clearing arrangements shall fulfil one of the following requirements:

(a) the clearing member and the client are part of the same group, but the indirect client is not part of that group;

(b) the client and the indirect client are part of the same group, but neither the clearing member nor the second indirect client is part of that group.

For indirect clearing arrangements entered into by parties in the situation referred to in paragraph 2(a):

(a) Articles 4(1), 4(5), 4(6) and 4(8) shall apply to the client as if that client were a clearing member;

(b) Articles 2(1)(b), 5(2), 5(3), 5(6), 5(8) and 5(9) shall apply to the indirect client as if that indirect client were a client.

For indirect clearing arrangements entered into by parties in the situation referred to in paragraph 2(b):

(a) Articles 4(5) and 4(6) shall apply to the client as if that client were a clearing member;

(b) Articles 2(1)(b), 5(2), 5(3), 5(6), 5(8) and 5(9) shall apply to the indirect client as if that indirect client were a client.

Article 5b

Requirements for the provision of indirect clearing services by second indirect clients

A second indirect client may only provide indirect clearing services to third indirect clients provided that all of the following conditions are met:

(a) the indirect client and the second indirect client are authorised credit institutions or an investment firms or entities established in a third country that would be considered to be a credit institution or an investment firm if that entity were established in the Union;

(b) the clearing member and the client are part of the same group, but the indirect client is not part of that group;

(c) the indirect client and the second indirect client are part of the same group, but the third indirect client is not part of that group;

(d) the second indirect client and the third indirect client conclude, in writing, an indirect clearing arrangement. The indirect clearing arrangement shall include at least the following contractual terms: (i) the general terms and conditions referred to in Article 2(1)(b); (ii) the second indirect client's commitment to honour all obligations of the third indirect client towards the indirect client with regard to transactions covered by the indirect clearing arrangement;

(e) the assets and positions of the third indirect client are held by the clearing member in an account as referred to in Article 4(2)(a).

All aspects of the indirect clearing arrangement referred to in point (d) of the first subparagraph shall be clearly documented.

Where second indirect clients provide indirect clearing services pursuant to paragraph 1:

(a) Articles 4(1), 4(5), 4(6) and 4(8) shall apply to both the client and to the indirect client as if they were clearing members;

(b) Articles 2(1)(b), 5(2), 5(3), 5(6), 5(8) and 5(9) shall apply to both the indirect client and the second indirect client as if they were clients.

CHAPTER III

NOTIFICATION TO ESMA FOR THE PURPOSE OF THE CLEARING OBLIGATION

(Article 5(1) of Regulation (EU) No 648/2012)

Article 6

Details to be included in the notification

The notification for the purpose of the clearing obligation shall include the following information:

(a) the identification of the class of OTC derivative contracts;

(b) the identification of the OTC derivative contracts within the class of OTC derivative contracts;

(c) other information to be included in the public register in accordance with Article 8;

(d) any further characteristics necessary to distinguish OTC derivative contracts within the class of OTC derivative contracts from OTC derivative contracts outside that class;

(e) evidence of the degree of standardisation of the contractual terms and operational processes for the relevant class of OTC derivative contracts;

(f) data on the volume of the class of OTC derivative contracts;

(g) data on the liquidity of the class of OTC derivative contracts;

(h) evidence of availability to market participants of fair, reliable and generally accepted pricing information for contracts in the class of OTC derivative contracts;

(i) evidence of the impact of the clearing obligation on availability to market participants of pricing information.

For the purpose of assessing the date or dates from which the clearing obligation takes effect, including any phasing-in and the categories of counterparties to which the clearing obligation applies, the notification for the purpose of the clearing obligation shall include:

(a) data relevant for assessing the expected volume of the class of OTC derivative contracts if it becomes subject to the clearing obligation;

(b) evidence of the ability of the CCP to handle the expected volume of the class of OTC derivative contracts if it becomes subject to the clearing obligation and to manage the risk arising from the clearing of the relevant class of OTC derivative contracts, including through client or indirect client clearing arrangements;

(c) the type and number of counterparties active and expected to be active within the market for the class of OTC derivative contracts if it becomes subject to the clearing obligation;

(d) an outline of the different tasks to be completed in order to start clearing with the CCP, together with the determination of the time required to fulfil each task;

(e) information on the risk management, legal and operational capacity of the range of counterparties active in the market for the class of OTC derivative contracts if it becomes subject to the clearing obligation.

The data pertaining to the volume and the liquidity shall contain for the class of OTC derivative contracts and for each derivative contract within the class, the relevant market information, including historical data, current data as well as any change that is expected to arise if the class of OTC derivative contracts becomes subject to the clearing obligation, including:

(a) the number of transactions;

(b) the total volume;

(c) the total open interest;

(d) the depth of orders including the average number of orders and of requests for quotes;

(e) the tightness of spreads;

(f) the measures of liquidity under stressed market conditions;

(g) the measures of liquidity for the execution of default procedures.

CHAPTER IV

CRITERIA FOR THE DETERMINATION OF THE CLASSES OF OTC DERIVATIVE CONTRACTS SUBJECT TO THE CLEARING OBLIGATION

(Article 5(4) of Regulation (EU) No 648/2012)

Article 7

Criteria to be assessed by ESMA

In relation to the degree of standardisation of the contractual terms and operational processes of the relevant class of OTC derivative contracts, the European Securities and Markets Authority (ESMA) shall take into consideration:

(a) whether the contractual terms of the relevant class of OTC derivative contracts incorporate common legal documentation, including master netting agreements, definitions, standard terms and confirmations which set out contract specifications commonly used by counterparties;

(b) whether the operational processes of that relevant class of OTC derivative contracts are subject to automated post-trade processing and lifecycle events that are managed in a common manner according to a timetable which is widely agreed among counterparties.

In relation to the volume and liquidity of the relevant class of OTC derivative contracts, ESMA shall take into consideration:

(a) whether the margins or financial requirements of the CCP would be proportionate to the risk that the clearing obligation intends to mitigate;

(b) the stability of the market size and depth in respect of the product over time;

(c) the likelihood that market dispersion would remain sufficient in the event of the default of a clearing member;

(d) the number and the value of the transactions.

CHAPTER V

PUBLIC REGISTER

(Article 6(4) of Regulation (EU) No 648/2012)

Article 8

Details to be included in ESMA’s Register

The ESMA public register shall include for each class of OTC derivative contracts subject to the clearing obligation:

(a) the asset class of OTC derivative contracts;

(b) the type of OTC derivative contracts within the class;

(c) the underlyings of OTC derivative contracts within the class;

(d) for underlyings which are financial instruments, an indication of whether the underlying is a single financial instrument or issuer or an index or portfolio;

(e) for other underlyings an indication of the category of the underlying;

(f) the notional and settlement currencies of OTC derivative contracts within the class;

(g) the range of maturities of OTC derivative contracts within the class;

(h) the settlement conditions of OTC derivative contracts within the class;

(i) the range of payment frequency of OTC derivative contracts within the class;

(j) the product identifier of the relevant class of OTC derivative contracts;

(k) any other characteristic required to distinguish one contract in the relevant class of OTC derivative contracts from another.

In relation to CCPs that are authorised or recognised for the purpose of the clearing obligation, the ESMA public register shall include for each CCP:

(a) the identification code, in accordance with Article 3 of Implementing Commission Regulation (EU) No 1247/2012 (¹);

(b) the full name;

(c) the country of establishment;

(d) the competent authority designated in accordance with Article 22 of Regulation (EU) No 648/2012.

In relation to the dates from which the clearing obligation takes effect, including any phased-in implementation, the ESMA public register shall include:

(a) the identification of the categories of counterparties to which each phase-in period applies;

(b) any other condition required pursuant to the regulatory technical standards adopted under Article 5(2) of Regulation (EU) No 648/2012, in order for the phase-in period to apply.

In relation to the CCP that has been notified to ESMA by the competent authority, the ESMA public register shall include at least:

(a) the identification of the CCP;

(b) the asset class of OTC derivative contracts that are notified;

(c) the type of OTC derivative contracts;

(d) the date of the notification;

(e) the identification of the notifying competent authority.

CHAPTER VI

LIQUIDITY FRAGMENTATION

(Article 8(5) of Regulation (EU) No 648/2012)

Article 9

Specification of the notion of liquidity fragmentation

Access by a CCP to a trading venue which is already served by another CCP shall not be deemed to give rise to liquidity fragmentation within the trading venue if, without the need to impose a requirement on clearing members of the incumbent CCP to become clearing members of the requesting CCP, all participants to the trading venue can clear, directly or indirectly, through one of the following:

(a) at least one CCP in common;

(b) clearing arrangements established by the CCPs.

CHAPTER VII

NON-FINANCIAL COUNTERPARTIES

Article 10

(Article 10(4)(a) of Regulation (EU) No 648/2012)