ESMA report on fees charged by trade repositories

On 11 Jan 2018 the European Securities and Markets Authority (ESMA) has published a Thematic Report on fees charged by Credit Rating Agencies (CRAs) and Trade Repositories (TRs).

The Thematic Report provides ESMA’s views on the application of the requirements that fees charged by CRAs should be non-discriminatory and cost-based, and TRs provide non-discriminatory access and charge publicly disclosed and cost-related fees. It equally identifies the areas for improvement regarding transparency and disclosure, the fee-setting process and the interaction with entities related to CRAs and TRs. Going forward, these areas will form the core of ESMA’s supervisory focus.

ESMA has raised the following concerns regarding fees charged by trade repositories (TRs):

  • Transparency and disclosure – TRs can achieve more transparency through reducing complexity and increasing comparability of fee schedules, as well as disclosing sufficient information to enable clients to estimate any additional reporting costs. For example, clarity can be achieved by adding illustrative examples for the most popular reporting scenarios. ESMA identifies as good practice the use of on-line calculators to enhance comparability between TRs for clients. Transparency around potential connectivity costs would help clients in evaluating the total cost of using a particular TR;
  • Fee-setting process – TRs need to ensure that cost is a key pricing factor and sufficient controls are in place to demonstrate that the regulatory objectives regarding pricing are met. For example, if a TR decides to charge differently ETD and OTC derivative reporting, Commodity or Credit derivative swap, ESMA would expect that the reason of the difference is primarily based on costs. The different fee cap and/or volume tier in place raises concerns on whether the revenues, which could have been received from the clients who reached the fee cap, may in fact have been charged to other clients. The fee caps in certain cases are applied to clients that belong to the same group as the TR itself. Only 43 clients in total across all TRs were subject to a fee cap in 2016. Those clients are reporting on behalf of other counterparties.

ESMA also provides a factsheet on Trade Repository Fees.

Next Steps

ESMA will continue to engage with both supervised entities and their clients to ensure effective application of the fee provisions, e.g. on costs, price deviations and controls in place.

ESMA may also decide to provide further supervisory guidance to ensure compliance with the relevant requirements.

Our Opinion 

Our view is that ESMA’s Thematic Report will influence the fee schedule of the trade repositories in the following way:

  • The TRs will provide more details about all possible costs/fees charged as well as examples of the most common reporting scenarios, maybe on-line calculators of the fees;
  • The TRs will review and most probably significantly increase or remove the fee caps.

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