This response represents the views of European CCPs’ on ESMA public consultation on guidelines on CCPs conflict of interest of management. Below you can find some of the key points included in our response:
- Definition and scope – EACH agrees with the definition and scope of conflicts of interest to the extent that they are affecting the interests of the CCP and therefore are manageable by the CCP, however conflicts of interest that do not affect interests of the CCP should be excluded from the scope. EACH has strong concerns about the requirement to address/consider potential conflicts of interest between clearing members, clients or between a clearing member and a client in the CCPs conflicts of interest management and particularly that a CCP would not necessarily be aware of the identity of the clients of its clearing members. A CCP cannot therefore be aware of all conflicting interests within its customer base and, more importantly, has no legal basis for managing conflicts of interest within the customer base and/or enforcing mitigating measures at that level.
- Confidential information – In general, a CCP already has existing provisions covering all relevant confidentiality obligations. For instance, a committee’s terms of reference or the CCP’s employment contracts may already include sufficient confidentiality provisions. In that case, we do not see the need to sign additional (specific) confidentiality agreements, as it would not add any additional benefits, it would be duplicative and bring about unnecessary burdens for compliance staff.
- Limitation of number of contacts or mandates for board members and executive directors – EACH recommends that the limitation remains proportionate. It is in the interest of a CCP to have board members that allow representation on a group board level or in other subsidiaries, taking rules of conduct into account. As CCPs are often part of a bigger corporate group, group mandates are common and have proven to work effectively, including with possible conflicts of interest being appropriately managed.
- Ownership of the financial instruments:
- Pre-approval process – A CCP should be able to determine on a risk based approach, for which department or staff a pre-approval request for specific financial instruments appears necessary. This means that only areas with a potential vulnerability for these kinds of conflicts should be considered in the approach. Thus, the pre-approval process should only be one option rather than a mandatory approach.
- Portfolio disclosure – In our experience, only selected persons or groups face risks for potential conflicts of interest based on their portfolio. Thus, a portfolio disclosure requirement for all staff members does not appear proportionate. It is more important to ensure that all staff members are aware of potential areas that could lead to a conflict of interest. Therefore, we would recommend excluding the portfolio disclosure requirement from Article 31 or allowing the CCP to limit the disclosure to specific financial instruments, specific persons or determined thresholds of financial instruments on a risk based approach
