The European Securities and Markets Authority (ESMA) has published the responses received to its discussion paper aimed at developing regulatory technical standards relating to the obligation to centrally clear over-the-counter (OTC) derivatives under the
European Markets Infrastructure Regulation (EMIR).
41 responses are published including 9 from asset management firms, 13 from banking organisations, 8 from insurance, pension and asset managers, 3 from investment services firms, 2 from legal and accountancy firms, 5 from regulated markets, exchanges and
trading systems and 12 from others.
A joint ISDA and BBA response stresses that the readiness of CCPs and of market participants to clear derivatives in a way that does not generate unnecessary systemic risk is the most important issue when considering the implementation of the clearing obligation.
EMSA’s initial focus should be on the application of
mandatory clearing for credit and interest rate derivatives asset classes. They consider, amongst other things, that the:
- frontloading obligation could generate the potential for market dislocation;
- imposition of the clearing obligation should only occur when there is certainty as to the capacity and capability of CCPs to effectively manage default and
- clearing obligation must be applied with sufficient granularity to give certainty to the market regarding the application of the clearing obligation to each individual transaction; and
- phasing in of the clearing obligation should be considered based on counterparty classification.
BBA & ISDA