Regulation BCL 2012/No. 11 of 10 July 2012 on the supervision of central counterparties and trade repositories in Luxembourg, amending Regulation BCL 2010/No. 6

BANQUE CENTRALE DU LUXEMBOURG
Regulation of the Banque centrale du Luxembourg 2012/No. 11 of 10 July 2012 on the supervision of central counterparties and trade repositories in Luxembourg, amending the amended Regulation of the Banque centrale du Luxembourg 2010/No. 6 of 8 September 2010 on the supervision of payment systems, securities settlement systems and payment instruments in Luxembourg

The Directorate of the Banque centrale du Luxembourg,

Having regard to the Treaty on the Functioning of the European Union, and in particular Articles 127(2) and (5) thereof;

Having regard to Articles 3.1 and 22 of the Statutes of the European System of Central Banks and of the European Central Bank;

Having regard to Article 108bis of the Constitution;

Having regard to the Law of 23 December 1998 (hereinafter the "Law") on the monetary status and the Banque centrale du Luxembourg (hereinafter the "Central Bank"), as amended, in particular Articles 2(5), 27-3 and 34(1);

Considering that, pursuant to Article 2(5) of the Law, "In view of its mission regarding the promotion of the proper functioning of payment systems, the Central Bank ensures the efficiency and safety of payment systems and securities settlement systems, as well as the safety of payment instruments. The modalities of coordination and cooperation for the exercise of this mission are the subject of agreements between the Central Bank and the Commission de Surveillance du Secteur Financier, in respect of the legal competences of the parties";

Considering Article 27-3 of the Law providing that "For the purpose of carrying out the mission defined in Article 2(5), the Central Bank may request information from payment systems and securities settlement systems regarding the operation of these systems which it needs to assess their efficiency and safety, and it may request information from issuers of payment instruments regarding the payment instruments which it needs to assess their safety. The Central Bank is empowered to carry out on-site visits to collect the information referred to in paragraph 1. To this end, it coordinates with the Commission de Surveillance du Secteur Financier.";

Considering Article 34(1) of the Law providing that "Within the limits of its competences and missions, the Central Bank has the power to issue regulations. The regulations of the Central Bank are published in the Mémorial.";

Having regard to the Law of 10 November 2009 on payment services, the electronic money institution activity and the finality of settlement in payment systems and securities settlement systems;

Considering the Regulation of the Banque centrale du Luxembourg 2010/No. 6 of 8 September 2010 on the supervision of payment systems, securities settlement systems and payment instruments in Luxembourg, as amended following Regulation of the Banque centrale du Luxembourg 2011/No. 10 of 14 July 2011 (the "2010 Regulation");

Considering, pursuant to the Opinion of the European Central Bank of 13 January 2011 (CON/2011/1) (2011/C 57/01), that the central banks of the Eurosystem have the mission to maintain financial stability as well as the safety and efficiency of financial infrastructures, "this role is undertaken both by the central banks responsible for the supervision of central counterparties and trade repositories and by the central banks issuing the currencies used for transactions cleared by central counterparties or recorded by trade repositories".

Art. 1. Definitions

"Technical agent": a service provider with which a central counterparty or a trade repository has placed or centralized a significant part of its operational and/or technical infrastructure.

"Central counterparty": a legal entity that interposes itself between the counterparties to financial transactions on one or more markets, thereby becoming the buyer to every seller and the seller to every buyer.

"Trade repository": an electronic register centralizing the collection, retention and dissemination of information relating to transactions in derivative products.

Art. 2. Supervision of central counterparties and trade repositories

1. Within the framework of the 2010 Regulation, the Central Bank shall also exercise supervision over central counterparties and trade repositories established in Luxembourg.

2. To exercise supervision over central counterparties and trade repositories, the Central Bank applies in particular the decisions adopted by the Governing Council of the European Central Bank relating to recommendations, principles and standards, including evaluation methodologies. The Central Bank ensures in particular the application of the recommendations set out in the annex to this Regulation.

3. The supervision by the Central Bank covers the safety and efficiency of central counterparties and trade repositories.

4. The Central Bank exercises its supervision over central counterparties and entities operating trade repositories, as well as over operating rules and contracts. Its supervision also extends to services (in particular operational and IT services) provided by technical agents or third-party entities.

5. The above paragraphs shall have the consequences described in Articles 3 to 11 below in the text of the 2010 Regulation.

Art. 3. Amendment of the title and preamble of the 2010 Regulation

1. Following Article 2 above of this Regulation, the title of the 2010 Regulation is completed by ", central counterparties and trade repositories" and shall henceforth read as follows:

"Regulation of the Banque centrale du Luxembourg 2010/No. 6 of 8 September 2010 on the supervision of payment systems, securities settlement systems, payment instruments, central counterparties and trade repositories in Luxembourg"

2. Following the third paragraph of the preamble of this Regulation, the third paragraph of the preamble of the 2010 Regulation is replaced by the following text:

"Having regard to Articles 3.1 and 22 of the Statutes of the European System of Central Banks and of the European Central Bank;"

3. Following the last paragraph of the preamble of this Regulation, a paragraph with the following content is added to the preamble, at the end:

"Considering, pursuant to the Opinion of the European Central Bank of 13 January 2011 (CON/2011/1) (2011/C 57/01), that the central banks of the Eurosystem have the mission to maintain financial stability as well as the safety and efficiency of financial infrastructures, 'this role is undertaken both by the central banks responsible for the supervision of central counterparties and trade repositories and by the central banks issuing the currencies used for transactions cleared by central counterparties or recorded by trade repositories'."

Art. 4. Amendment of the "Definitions" article of the 2010 Regulation

1. Following Article 1 above of this Regulation, Article 1 (Definitions) of the 2010 Regulation is completed, at the end, by the following definitions:

"Central counterparty": a legal entity that interposes itself between the counterparties to financial transactions on one or more markets, thereby becoming the buyer to every seller and the seller to every buyer.

"Trade repository": an electronic register centralizing the collection, retention and dissemination of information relating to transactions in derivative products.

2. Following Article 1 above of this Regulation, the definition of "Technical agent" in Article 1 of the 2010 Regulation is replaced by the following text:

"'Technical agent': a service provider with which a system operator, an issuer of payment instruments, a governance authority, a central counterparty or a trade repository has placed or centralized a significant part of its operational and/or technical infrastructure."

Art. 5. Amendment of the "Scope" article of the 2010 Regulation

Following paragraph 1 of Article 2 above of this Regulation, Article 2 of the 2010 Regulation (Scope) is completed by a third paragraph with the following content:

"3. The Central Bank exercises supervision over trade repositories established in Luxembourg."

Art. 6. Amendment of the "General framework for the supervision of systems and payment instruments" article of the 2010 Regulation

1. Following paragraphs 2 and 3 of Article 2 above of this Regulation, Article 3 of the 2010 Regulation (General framework for the supervision of systems and payment instruments) is completed, at the end, by a paragraph 5 and is completed by references to central counterparties and trade repositories.

2. In addition, the general framework for the supervision of system participants described in paragraph 3 of Article 3 of the 2010 Regulation is more strictly limited, following the addition of the phrase: ", and participants according to the risk situation resulting from their participation in the system".

3. Following paragraphs 1 and 2 above, the title and text of Article 3 of the 2010 Regulation are replaced by the following text:

"Art. 3. General framework for supervision

1. To exercise its supervision, the Central Bank applies in particular the decisions adopted by the Governing Council of the European Central Bank relating to recommendations, principles and standards, including evaluation methodologies. The Central Bank ensures in particular the application of the recommendations set out in the annex to this Regulation.

2. The supervision by the Central Bank covers the safety and efficiency of systems, central counterparties and trade repositories; it also covers the safety of payment instruments.

3. The Central Bank exercises its supervision over the operating rules and contracts of the system. Its supervision also extends to the system itself, including operators, services (in particular operational and IT services) provided by technical agents or third-party entities, and participants according to the risk situation resulting from their participation in the system.

4. The Central Bank's supervision regarding payment instruments applies in particular to issuers and governance authorities, services (in particular operational and IT services) provided by technical agents or third-party entities, operating rules and contracts.

5. The Central Bank exercises its supervision over entities operating central counterparties and trade repositories, as well as over operating rules and contracts. Its supervision also extends to services (in particular operational and IT services) provided by technical agents or third-party entities."

Art. 7. Amendments to the "Implementation modalities" article of the 2010 Regulation

Following Article 2 above of this Regulation, Article 4 of the 2010 Regulation (Implementation modalities) is completed by references to central counterparties and trade repositories; the text of said Article 4 of the 2010 Regulation is thus replaced by the following text:

"Art. 4. Implementation modalities

1. The Central Bank supervises systems, payment instruments, central counterparties and trade repositories by collecting all useful information available to it under its various missions and in cooperation with other central banks and prudential supervisory authorities. The Central Bank indicates in particular the qualitative and quantitative information that must be provided to it by the entities concerned, as well as the periodicity of this information. The Central Bank determines the modalities of communication and transmission for the purposes of this Regulation.

2. The Central Bank may require system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories concerned to carry out regular self-assessments of their level of compliance with the applicable recommendations, principles and standards referred to in Article 3.

3. The Central Bank carries out the checks it deems appropriate. It is in particular empowered to carry out on-site checks with system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories concerned.

4. The Central Bank may, within the framework of its supervision, address specific recommendations or instructions to system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories concerned."

Art. 8. Amendment of the "Obligations of system operators, issuers of payment instruments and governance authorities" article of the 2010 Regulation

Following Article 2 above of this Regulation, Article 5 of the 2010 Regulation (Obligations of system operators, issuers of payment instruments and governance authorities) is completed by references to central counterparties and trade repositories. The title and text of said Article 5 of the 2010 Regulation are thus replaced by the following text:

"Art. 5. Obligations of system operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories

1. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories shall put in place a risk management framework for the system, payment instrument, central counterparty and/or trade repository adapted to the volume and complexity of their activity. The framework is based on an organization, procedures and internal rules enabling effective governance, monitoring and control of the safety and/or efficiency of the system, payment instrument, central counterparty and/or trade repository, associated risks, and applicable legal and operational environments. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories shall follow the recommendations, principles and supervisory standards referred to in Article 3.1.

2. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories are required to provide the Central Bank with all information it deems useful for the accomplishment of its supervisory mission.
   These information include among others:

• general information relating to systems, instruments, central counterparties or trade repositories,
• data relating to activity, incidents, fraud,
• financial data,
• information relating to the risks to which systems, instruments, central counterparties or trade repositories are exposed, as well as to internal risk mitigation tools,
• information relating to changes affecting systems, instruments, central counterparties or trade repositories,
• information relating to governance and internal rules and procedures.

3. System operators, issuers of payment instruments, governance authorities, central counterparties and trade repositories shall designate one or more duly mandated contact persons to deal with the Central Bank within the framework of its supervisory mission."

Art. 9. Amendment of the "Publication" article of the 2010 Regulation

Following Article 2 above of this Regulation, paragraph 2 of Article 7 of the 2010 Regulation (Publication) is completed by a reference to central counterparties and trade repositories; the text of said paragraph 2 of Article 7 of the 2010 Regulation is thus replaced by the following text:

"The Central Bank also makes available to the public the official list of systems, central counterparties and trade repositories that it supervises via its website (www.bcl.lu)."

Art. 10. Amendment of the "Miscellaneous provisions" article of the 2010 Regulation

Following Article 2 above of this Regulation, paragraph 1 of Article 9 of the 2010 Regulation (Miscellaneous provisions) is completed by a reference to central counterparties and trade repositories; the text of said paragraph 1 of Article 9 of the 2010 Regulation is thus replaced by the following text:

"1. The Central Bank adapts its supervision of systems, payment instruments, central counterparties and trade repositories in application of the principle of proportionality."

Art. 11. Amendment of the annexes of the 2010 Regulation

Following Article 2 above of this Regulation, the annexes of the Regulation of the Banque centrale du Luxembourg 2010/No. 6 of 8 September 2010 on the supervision of payment systems, securities settlement systems and payment instruments in Luxembourg are completed by the following annex:

"11. CPSS-IOSCO Principles for Financial Market Infrastructures, Bank for International Settlements (April 2012, www.bcl.lu)"

Art. 12. Entry into force

This Regulation shall enter into force on the day of its publication.

Art. 13. Publication

This Regulation shall be published in the Mémorial and on the website of the Banque centrale du Luxembourg (www.bcl.lu).

BANQUE CENTRALE DU LUXEMBOURG
The Directorate

Annexes:

1. Eurosystem oversight policy framework, July 2011, www.bcl.lu
2. CPSS-IOSCO Principles for Financial Market Infrastructures, Bank for International Settlements (April 2012, www.bcl.lu)