CCP.RO Bucharest resumes the Central Counterparty authorization process; what does Adrian Tănase say?

CCP.RO Bucharest resumes the Central Counterparty authorization process, given that, starting with December 24 of this year, the EMIR 3 regulation will enter into force, which regulates the authorization and operation of CCPs in the European Union, as shown in a report published yesterday by the Bucharest Stock Exchange (BVB).

Adrian Tănase, President of CCP.RO Bucharest, says that the measure is intended to ensure the predictability necessary for the Central Counterparty to be operationalized according to the business plan approved by the CCP shareholders in September of this year.

"Given the announcement of the entry into force of EMIR3 starting on December 24, 2024, following the clarification discussions we had with the authorities regarding the context of the adoption of EMIR 3 and the continuity of the CCP.RO authorization process, we also wanted to ensure a certain degree of predictability in the authorization process, predictability that was not achieved on a file initiated under one regulation and finalized (obviously, the authorization is to be issued under the new EMIR3 regulation) under another regulation. For these reasons, we made the decision to withdraw the application in order to re-initiate it under the new regulation. This measure allows us, from the perspective of the regime applicable from a formal point of view to the authorization file, to have the predictability we want, the final goal being the operationalization of CCP.RO according to the business plan", Adrian Tănase told us.

The previous application required CCP.RO Bucharest to submit the complete file required for Central Counterparty authorization by December 8 of this year, which would be evaluated by an EMIR College formed by the Financial Supervisory Authority, the National Bank of Romania and ESMA.

"The deadline of December 8 is a deadline derived from the provisions of art. 4 paragraph (6) of ASF Regulation no. 3/2013, with subsequent amendments and additions, and concerns CCP.RO's actions to complete the documentation and not a deadline for completing the assessment of the file by ASF. The deadline for the ASF to pronounce on the status of the documentation is "30 days from the expiration of this deadline" (art. 4 paragraph (7) of ASF Regulation no. 3/2013). Thus, the deadline of January 8, 2025, when the ASF should have pronounced on the file established under EMIR 2, is subsequent to the date of entry into force of EMIR 3, the regulatory framework that will be mandatorily applicable on that date, which led to the need to adopt a transitional measure that allows continuity in the assessment process", Adrian Tănase told us.

• "During this transitional period, work is also being done on the final conditions for authorization, namely moving CCP.RO to the new headquarters and resuming tests with the new technology service provider"

The differences between EMIR 2 and EMIR 3 regarding the authorization of the Central Counterparty are not major, a very large part of the documentation currently established will also be recognized within the new application that will probably be initiated in February of next year, according to the President of CCP.RO.

"Considering the fact that the documentation established for the authorization of CCP.RO was the subject of iterative evaluation within the EMIR College established in July 2023, the documents drawn up and the internal framework of rules of CCP.RO have already implemented, in a proactive manner, the provisions of the framework adopted by EMIR 3 that are directly applicable to it, since the publication of the draft European regulations. Thus, the differences are not major, a very large part of the documentation currently established will also be recognized within the new application that will be initiated", Adrian Tănase told us.

The President of CCP.RO added: "It is very important that, during this transitional period, we are also working on the last conditions for authorization, namely the relocation of CCP.RO to the new headquarters and the resumption of E2E tests with the new technology service provider after January 1, 2025, the date on which the service provision contract effectively enters into force. According to the estimates we have at the moment, we will manage to fulfill these last conditions in the first part of February 2025. We want to immediately after fulfilling them, to re-initiate the authorization application under the new regulation, EMIR3".

At the beginning of September, CCP.RO shareholders approved the new business plan of the Central Counterparty and the increase in the company's capital by five million euros, to finance the necessary expenses caused by the new coordinates of the project, which involved the use of a software solution that should have operated under a Euronext license, but provided by another entity, which was also to ensure the maintenance and further development of the platform. This after, in the spring, Euronext Clearing announced its intention to exit the contract with CCP.RO, recommending another service provider for the continuation of the Central Counterparty project, but under different conditions and at higher costs.

"The main goal is to comply with the business plan approved by CCP.RO shareholders on September 4, 2024; based on the current premises related to the authorization process, there is no need for a new capital increase," says Adrian Tănase now.

• The CCP should be operational in the second half of next year, according to the latest business plan approved by shareholders

According to the business plan of CCP.RO approved by shareholders in the fall, the entity should be operational in the second half of next year, the first instruments launched being futures contracts with underlying assets of shares, stock indices, electricity with cash settlement, as well as forward contracts for the electricity market. The share loans would not be available until June 2027.

The Central Counterparty project was approved by the shareholders of the Bucharest Stock Exchange in January 2019, and according to the initial business plan, the CCP was supposed to be ready in 2020. In addition, it was estimated that the entity would make a profit in the second year of operation, which should have been 2021.

The Bucharest Stock Exchange owns 53% of CCP.RO Bucharest, an entity whose shareholders also include OPCOM, PPC Energy (formerly Enel), Electrica, Banca Transilvania, former SIFs and brokerage houses. The Central Counterparty is the entity intended to facilitate the launch of derivatives in our country and certain operations specific to the capital market, such as short selling, which cannot be performed now.