Central Counterparty – CCP

Clearing System

A Central Counterparty (CCP) is a legal entity that acts as a counterparty to both sides of a financial instrument transaction. It becomes the buyer to every seller and the seller to every buyer, thereby managing counterparty risk and enhancing market transparency. CCPs are essential for clearing a wide range of financial instruments, ensuring that the necessary financial instruments, cash, or both are available to secure the exposures arising from those positions. CCPs are highly regulated institutions that specialize in managing counterparty credit risk.

A clearing system is a system that:

1. is operated or managed by a central counterparty that, in accordance with the provisions of Regulation (EU) 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (hereinafter: EMIR, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02012R0648-20250117), is authorised to operate by Hanfa or the relevant competent authority of another Member State or is recognised by ESMA or
2. is operated or managed by another legal person authorised to do so by Hanfa, which does not provide CCP services within the meaning of EMIR (so-called clearing system operator).

Clearing is the process of comparing data on concluded legal transactions with dematerialized securities, determining the deadlines for clearing of these legal transactions, and calculating settlement obligations, which is carried out with or without the mediation of a central counterparty.

Clearing with the mediation of a central counterparty in accordance with the provisions of EMIR is the process of establishing positions, including the calculation of net obligations and the process of ensuring the availability of financial instruments, cash or both to cover the exposures arising from those positions.

In the Republic of Croatia, the company SKDD-CCP Smart Clear d.d. from Zagreb (hereinafter: SKDD-CCP or the Company) operates as a central counterparty in accordance with the Hanfa decision of 29 October 2021. in relation to the clearing of transactions in transferable securities referred to in point 87, subpoints a) and b) of Article 3 of the Croatian Capital Market Act (hereinafter: CMA), which includes shares and other equivalent securities that represent a share in the capital or membership rights in the company as well as bonds and other forms of securitized debt, and which transactions are executed on the regulated market and multilateral trading facility managed by the Zagrebačka burza d.d., Zagreb (hereinafter: ZSE).

The Company started with the operational work on 3 January 2022. After the Company was initially issued a license to provide central counterparty services under EMIR, by Hanfa Decision of 21 December 2023, the Company was granted an extended authorisation for the provision of central counterparty services, in relation to the clearing of the following transactions: (i) funds traded on the stock exchange or ETFs from point 25 of Article 3 of the CMA, (ii) treasury bills as money market instruments from point 31 of Article 3 of the CMA, which transactions are executed on the regulated market and multilateral trading facility managed by ZSE. 

The provisions of EMIR, the provisions of regulatory technical standards and implementing technical standards, as well as ESMA guidelines define:

• the procedure for obtaining an authorization to perform CCP activities, the authorities that participate in the procedure for granting authorization to operate and the procedure for extension or revoking of authorization to a CCP at the level of the Republic of Croatia and the European Union
• requirements (organizational, capital, risk management, etc.), rights, obligations and responsibilities of CCPs when providing CCP services
• conditions under which the fulfillment of the requirements by the CCP is continuously reviewed and assessed in order to preserve the financial stability of the market
• outsourcing of operational functions, services or activities to third parties
• interoperability arrangements with another CCP.

A legal entity that intends to provide CCP services in accordance with EMIR shall apply for authorisation to the competent authority of the Member State in which it is established. Once granted, authorisation shall produce legal effects throughout the European Union. The authorisation shall specify the services/activities that the CCP may provide, as well as the types of financial instruments covered by that authorisation. Apart from the moment of authorisation, the CCP shall comply with the EMIR compliance requirements on an ongoing basis.

Pursuant to Article 18(1) of EMIR, Hanfa, as the competent authority of the SKDD-CCP in accordance with Article 22 of EMIR, is required to establish the College of Regulators of the SKDD-CCP and to manage and chair it to facilitate the performance of the tasks referred to in Articles 15, 17, 17a, 20, 21, 30, 31, 32, 35, 37, 41, 49, 51 and 54 of EMIR. That college shall be co-chaired and managed by Hanfa as the competent authority, and Chair or one of the independent members of the CCP Supervisory Committee referred to in Article 24a(2), point (b) (the ‘co-chairs’). The College of Regulators of the SKDD-CCP (hereinafter: the College) was established by the Agreement on the Establishment and Functioning of the College of Regulators of the SKDD-CCP on 16 August 2021.

Pursuant to Article 18(2) of EMIR, Hanfa shall publish on its website the list of members of the College and notify the list to ESMA. The list shall be updated by the CCP's competent authority without undue delay after any change to the composition of the College. In case of no changes to the composition of the College, no new publishing requirements will arise.

Composition of the  College:

Due to the specific role of the CCP in the financial market, it is necessary to continuously review/assess whether the CCP meets all the requirements prescribed by EMIR (capital requirements, organizational requirements, prudential requirements, etc.). The review and assessment of the fulfillment of the conditions of the SKDD-CCP is carried out by Hanfa as the national competent authority which regularly, and at least once a year, informs the College about the results of the review and assessment and about any corrective measures taken.

EMIR provisions prescribe the conditions for managing the CCP's exposure to clearing members, the conditions for margin and default fund payments by clearing members, as well as the amount of dedicated own resources to cover potential losses that exceed the losses to be covered by margin requirements. EMIR, in Article 45, establishes a default waterfall that is activated in the event that one of the clearing members ceases to meet its obligations.