KPEI Gets Recognition From ESMA As Third-Country Central Counterparty

Photo: (Aris Nurjani/VOI)

JAKARTA - PT Kliring Penjaminan Efek Indonesia (KPEI) has obtained a recognition from the European Securities and Markets Authority (ESMA) as the Third-Country Central Counterparty (CCP).

For information, ESMA is a regulator and supervisor of the European Union's financial markets located in Paris, France.

The ESMA mission is to increase investor protection, encourage financial market order and maintain financial stability in the European Union. One of them is to maintain the health and resilience of the Central Counterparty (CCP).

KPEI as the Third-Country Central Counterparty (CCP) is based on article 25 of the European Market Infrastructure Regulation (EMIR) and the recognition is based on the Decree of the Board of Supervisors ESMA dated October 19, 2023.

As part of the requirements for KPEI's recognition as the Third-Country CCP by ESMA, on September 30, 2023, the Financial Services Authority (OJK) and ESMA have signed a memorandum of understanding on ESMA monitoring of compliance with the continuous recognition requirements by CCP established in Indonesia and supervised by the OJK.

President Director of Kliring Securities Indonesia Iding Pardi said that in order to get TC CCP ESMA recognition, KPEI has gone through various processes since 2022.

"So this effort is not simple and not for a long time the process from 2022 for the equality of CCP TC regulations can also be recognized," he said at a press conference at the OJK Building, Monday, November 13.

Iding conveyed that the cooperation carried out with ESMA was in the form of a memorandum of understanding in the form of regulatory equality and hoped that this MoU could have a positive impact.

"So this MoU is more about equal regulation of domestic infrastructure that is monitored by what is monitored outside," he explained.

Iding said that with the equalization of regulations between OJK and ESMA, foreign investors can use KPEI services so that domestic and foreign investors can better believe in infrastructure in Indonesia.

"So, foreign investors can trust the infrastructure in Indonesia more and currently there are no companies with foreign universities that deal with KPEI," he explained.

Iding conveyed that this recognition is one of Indonesia's implementations as one of the G20 countries related to CCP with the implementation of mandatory clearing which is expected to increase transactions.

However, Iding explained, if there are parties who want to make derivative transactions and do not carry out clearing, they will be subject to a higher capital charge.

"For capital charges in the clearing, not with quality, the margin is approximately 1,250 percent of the transaction value. With a qualified CCP institution of approximately only 3 percent," he explained.

Chief Executive of the Capital Market Supervisory, Derivative Finance and OJK Carbon Exchange, Inarno Djajadi, said that the KPEI's recognition as TCCP by ESMA was a follow-up to OJK's efforts to encourage Kliring and Guarantee Institutions in Indonesia, in this case KPEI, to increase its service capacity at a higher level, namely the international and global levels.

With the ESMA recognition, KPEI can provide clearing services to clearing members and exchanges (trading venues) established in the European Union.

ESMA's confession of KPEI as the Third-Country CCP is valid from December 31, 2023.

Based on the ESMA assessment, KPEI is included in the Tier 1 Third-Country CCP category which means that KPEI has a small (non-systemically imported) risk of financial stability in the European Union or in one or more member states of the European Union.

"KPEI is included in the Tier 1 Third-Country CCP category. This means that KPEI has a small or non-financial risk in the European Union," he said.

In addition, in this collaboration, the process of recognizing KPEI as the Third-Country CCP was preceded by the issuance of an equality decision from the European Commission on June 8, 2023.

As well as legal provisions and the OJK monitoring mechanism regarding CCP established in Indonesia, it is equivalent to the requirements by the European Market Infrastructure Regulation (EMIR).