On 5 September the FOA gave a presentation for FCA and BoE on EMIR Implementation: Segregation & Portability.
Implementation Timetable
This presentation will highlight the considerable implementation challenges facing clearing members, CCPs and end users and the implications for clearing members’ ability to meet the required compliance timelines. We would like to continue this open dialogue with FCA and BoE and work towards resolving these issues so that the industry can achieve compliance in an appropriate timeframe.
Steps to help mitigate the implementation risks
We would request that the FCA and the BoE encourage, where possible, all CCPs to:
- immediately provide their clearing members with all the relevant information included in their authorisation applications
- work closely with their clearing members to ensure that all client clearing CCP processes / procedures and associated systems are designed to allow clearing members to harness the same efficiencies that currently generate 99%+ STP rates.
- develop a migration plan with their clearing members that takes into account the conflicting demands of having to transition clients into individual segregation across multiple CCPs.
The need for further clarity on key areas of EMIR
We would request that the FCA work with the industry and ESMA to help clarify the remaining areas of uncertainty that exist in the interpretation of EMIR.
The implementation challenges associated with EMIR’s segregation and portability requirements mean there is systemic and operational risk in delivering to the proposed timeline.
Areas of significant uncertainty exist that will limit Clearing Member implementation progress until clarified:
- Limited transparency on rulebooks and disclosure statements being submitted to regulators and how these might change
- Significant Vendor dependencies that exist in the provision of key technology enablers for implementation
- Unknown levels and timing of client responsiveness and decision making around the new account models
- Lack of clarity in key definitions such as: “excess”, “offer”, and the geographic scope as regards non EU CMs and CCPs
Even when uncertainty is removed, implementation challenges remain, driven by the scale & complexity of change:
- The date that clients return signed documentation is, for the most part, completely outside of a clearing members’ control
- CCPs’ reluctance to cooperate in the development of standardised segregation models due to competition law and commercial drivers has led to a degree of variance across such CCP models.
- Limited client awareness of the implementation complexity, coordination and timings required for the new regime
- Range of parties impacted by new account models and the sheer scale of the uplift in accounts and balance lines
- High levels of systemic risk in new regime’s BAU, with potential for unintended consequences for the Client and the CM
