Central Counterparties Current Affairs

SEBI inks pact with ESMA for information exchange on CCPs

Markets regulator Securities and Exchange Board of India (SEBI) has entered into a Memorandum of Understanding (MoU) with the European Securities and Markets Authority (ESMA).

The MoU was signed for exchange of information concerning Central Counterparties (CCPs) under the European Markets Infrastructure Regulation (EMIR). CCPs are entities that help facilitate clearing and settlement activities.

Key Facts

The MoU establishes cooperation arrangements, including exchange of information regarding CCPs which are established and authorised or recognised in India by SEBI and which have applied for EU recognition under EMIR.

EMIR provides for signing of a cooperation arrangement between ESMA and relevant non-EU authorities, whose legal and supervisory framework for CCPs have been deemed equivalent to EMIR by the European Commission. Signing of MoU is one of the conditions for recognition of third country CCPs by ESMA under EMIR.

About Central Counterparty (CCP)

CCP is a corporate entity that exists in various European countries to help facilitate trading done in European derivatives and equities markets. It reduces counterparty, operational, settlement, market, legal and default risk for traders. It provides efficiency and stability to the financial markets in which they operate. CCP bear most of the credit risk of buyers and sellers when clearing and settling market transactions.

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