PensionsEurope has voiced its support for the European Securities and Markets Authority’s (ESMA) proposals that would require EU counterparties, including pension funds, active in certain derivatives to hold an operational and representative active account at a Central Counterparty (CCP).

While the association backed the overall proposals, noting that European pension funds can have multiple accounts to be able to enjoy the best market conditions, it raised several concerns that it believed needed addressing.

In its response to the consultation, PensionsEurope urged ESMA to confirm the timelines for making the notification to ESMA and National Competent Authorities (NCA) about becoming subject to the active account requirement and establishing active accounts, warning of potential confusion.

It also cited concerns that the new active account requirement would be “operationally burdensome” for IORPs and other pension funds, particularly in the Netherlands and Denmark.

PensionsEurope therefore proposed that demonstrating a cleared portfolio with an EU CCP should provide sufficient evidence of operational and function connectivity, and a written statement by the CCP should be sufficient to satisfy this condition.

While it agreed that certification by the CCP was an appropriate approach, it stated that this would be the case if the responsibility for producing and providing the statements fell on the CCP, and that CPPs should be required to provide these statements without additional costs being imposed on counterparties.

It also objected to the proposal that would require the appointment of at least one member of staff with sufficient knowledge of the clearing arrangements’ functions at all times, as it felt firms should have the flexibility to decide how to embed expertise concerning these clearing arrangements.

On ESMA’s proposed approach to annual stress testing, PensionsEurope said it would expect the stress tests to be run by the CCP, and it was unclear what counterparties were expected to do to meet this requirement.

Furthermore, the association said it was “very concerned” about providing market-sensitive data and confidential information to the CCP, and the information should instead be shared between the clearing member and clearing house.

Other concerns raised by PensionsEurope included the proposed approach to reporting the activity and risk exposures of counterparties, and the proposed requirement for information on margin activity in active account requirement reporting.

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