The European Securities and Markets Authority (ESMA) has excluded turnover derived from ancillary services in the calculation of annual fees trade repositories will pay as new rules governing OTC derivatives in Europe through the European market infrastructure regulation (EMIR) approach.
In advice to the European Commission, ESMA said "EMIR-like" services such as trade matching and confirmation should remain "a qualitative criterion" in assessing variable registration fees. But it has shelved plans to include non-core services in the calculation of turnover for annual supervisory fees in response to industry concerns that repositories would end up paying fees to both domestic and European regulators.
However, ESMA signalled its reluctance to dispense with service-based fees altogether. It claimed a repository offering value-added ancillary services "may potentially build a strong business model and obtain important total turnover".
DTCC Deriv/Serv CEO Stewart Macbeth said he was broadly happy with the advice. "As long as the regulator can recover its costs, that's what matters. You can't tell looking at the range what your fee levels will be – but the indicative numbers don't look too onerous," he said.
"The fee levels aren't going to change the overall economics of services. They're part of the expense base – and not the largest part for anyone."
ESMA also announced that it had excluded derivatives venues from the calculation of fees to be paid by repositories under a mixed structure that combines an annual fee with fees for specific supervisory actions – although OTC derivatives appear as one factor in the highest fee band.
Calculations of repositories' turnover will be made more difficult by the absence of existing data. ESMA pointed out in its report that uncertain demand for a new service delivered by emerging suppliers could generate "over-conservative or over-ambitious" financial forecasts.
"In theory anyone could have from 0% to 100% market share," said Macbeth. "That's why it's better to keep it simple to start with."
The EMIR rules are expected to come into force mid-way through next year and will push swaps trades on exchange-like platforms known as swap execution facilities and require trades to be centrally cleared and reported to trade repositories in accordance with a global, post-crisis initiative backed by G-20 countries.