The European Securities and Markets Authority (ESMA) has provided further clarity regarding the operation of the clearing obligations under the European Market Infrastructure Regulation (EMIR), in terms of their applicability to pension schemes, and as regards to their operation in practice in relation to swaptions and frontloading.   

List of pension scheme arrangements exempt from certain clearing requirements published

ESMA has publicly released a list of pensions scheme arrangements exempted from certain clearing obligations under the EMIR transitional provisions, pursuant to EMIR Article 89(2). View the list of pension scheme arrangements exempted from the clearing obligation. The effect of an arrangement being included in this list is that it benefits from a temporary exemption from the clearing obligation in so far as this relates to over-the-counter (OTC) derivative contracts objectively measurable as reducing investment risks directly related to the pension scheme’s financial solvency. Now that the list has been published, ESMA is obligated to conduct an annual peer review of those arrangements included on the list, with the aim of further strengthening consistency in supervisory outcomes.

EMIR Question and Answers (Q&As): updated advice on swaptions and frontloading

ESMA has updated its Q&As regarding the implementation of EMIR, particularly as regards questions 17 and 20. See the updated list of Q&As. These have been updated to provide further clarity on how the clearing obligation should apply to swaps resulting in the exercise of a swaption, including during the frontloading period, as well as the approach on frontloading that was adopted in the ESMA’s first regulatory technical standards (RTS) on the clearing obligation. This RTS on the clearing obligation entered into force on 21 December 2015.