The European Securities and Markets Authority (ESMA) has recommended a two-step assessment for derogation criteria of data reporting service providers (DRSPs).
ESMA has published advice to the European Commission regarding DRSPs. The advice focuses on fees, fines and penalties applicable to DRSPs subject to EU supervision. It also covers the criteria for determining if certain DRSPs are exempt from ESMA supervision, which it refers to as the derogation criteria.
Its goal is to supply a simple and clear framework by leveraging existing frameworks for Trade Repositories and Securitisation Repositories and streamlining derogation criteria assessments.
The regulator said that following the ESA’s review, “authorisation and supervision of authorised reporting mechanisms (ARMs) and approved publication arrangements, (APAs) will transfer from competent authorities to ESMA.”
One of the key advice points from ESMA is a two-step assessment of derogation criteria. Currently there are four assessment points, but two are “much more significant for assessing whether the activity of an APA or ARM is of relevance for the internal market.”
These criteria are based on the number of investment firms in another member state to which the DRSP provides services as well as the one on the number and volume of transactions reported or published.
ESMA has proposed a framework for identifying DRSP’s eligibility for exemption from ESMA supervision where assessment of more significant criteria is cumulative and the assessment of the remaining two criteria is non-cumulative.
Other advice from the regulator includes using both application and authorisation fees, as well as an annual supervisory fee for DRSPs. For this it suggests using existing fee frameworks for Trade Repositories and Securitisation Repositories.
ESMA chair Steven Maijoor said, “The delivery of this advice is a major step in the preparation for the new supervisory responsibilities of ESMA. ESMA has taken into the feedback from the consultation into account and has refined the derogation criteria to assure a balanced allocation of supervisory responsibilities regarding DRSPs between NCAs and ESMA.
“It is of utmost importance for DRSPs to have certainty on the applicable regulatory framework prior to the transfer of supervisory responsibilities to ESMA. I would, therefore, welcome the swift adoption by the European Commission of the relevant delegated acts on the basis of this advice.”
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