The Financial Services Authority (OJK) has officially signed a MoU with the European Securities and Markets Authority (ESMA), leading to the acknowledgment of PT Kliring Penjaminan Efek Indonesia (KPEI) as a Third Country Central Counterparty (TC-CCP) in the European market.Â
ESMA, located in France, is the regulatory and supervisory authority for financial markets in the European Union (EU), collaborating with non-EU authorities through direct involvement with regulators.
Presently, KPEI stands as the third Central Counterparty (CCP) in the Association of Southeast Asian Nations (ASEAN), the sixth in Asia, and the 38th globally to receive recognition from ESMA. The signing of the MoU took place on September 30, 2023, with ESMA’s acknowledgment granted on October 19, 2023.
Central Counterparty (CCP) is a financial institution that acts as an intermediary in financial markets, particularly in the trading of derivatives and securities. Its primary function is to reduce counterparty risk by serving as the buyer to every seller and the seller to every buyer. In doing so, it becomes the counterparty to both sides of a transaction, ensuring that the trade is completed even if one of the parties defaults.
Inarno Djajadi, Executive Head of Capital Market Supervision at OJK, highlighted that the signing of the MoU was part of OJK’s efforts to elevate the capacity of Clearing and Guarantee Institutions in Indonesia, particularly PT KPEI, to an international and global level.
The recognition by ESMA aligns with OJK’s commitment to promoting good corporate governance principles, emphasizing prudence, effective risk management, security, efficiency, and reliability in the capital market.
ESMA’s assessment places KPEI in the Tier 1 category of Third-Country CCP, indicating that it poses a low risk (non-systemically important) to financial stability in the EU or any of its member states.
With this recognition, KPEI can provide clearing services to clearing members and trading venues established in the European Union. The ESMA recognition of KPEI as a Third-Country CCP will be effective from December 31, 2023.
The acknowledgement process of KPEI as a Third-Country CCP was preceded by the issuance of an equivalence decision by the European Commission on June 8, 2023.
This decision concluded that the legal provisions and supervisory mechanisms in Indonesia ensure that CCPs established and supervised by OJK continuously comply with legally binding requirements equivalent to the European Market Infrastructure Regulation (EMIR) requirements.
Before receiving ESMA’s recognition, KPEI fulfilled four conditions outlined in Article 25 of EMIR. First, there is equivalence in legal regulations and supervision in Indonesia. Second, KPEI has been authorized as a CCP and is subject to effective supervision and enforcement of laws to ensure full compliance.
Third, regulatory cooperation has been established between ESMA and relevant competent authorities from the applicant country. Fourth, the jurisdiction in the CCP’s home country has a system equivalent to the EU for anti-money laundering and counter-terrorism financing.
