The European Securities and Markets Authority has issued proposed final rules – so-called “regulatory technical standards – permitting European-regulated clearinghouses (CCPs) to calculate margin requirements for clients of their members utilizing a potential liquidation horizon of one business day, subject to various circumstances. These conditions include that the CCP knows the identity of all ultimate clients and maintains separate records of the positions of each clients as of at least the end of each day, does not include proprietary positions among client accounts and calculates margin requirements “on a near to real-time basis at least every hour during the day;” and ordinarily calls for new margin within one hour on existing positions where margin requirements are higher than 110 percent of existing collateral. If a CCP does not satisfy the enumerated conditions to calculate margin requirements based on a one-day liquidation horizon, it must utilize a two business day horizon, as is currently required. This new approach was adopted following the European Commission’s recent issuance of a formal determination that the Commodity Futures Trading Commission has equivalent requirements as the European Union in overseeing clearinghouses. In approving this new approach ESMA recognized that “clearing members might lose incentives to offer client clearing services if they lose the benefit of netting efficiency that result from opposite positions of different clients.” However, ESMA considered, among other things, that not adopting this approach might make EU qualified CCPs less competitive with non-EU clearinghouses. (Click here for further details on the EC’s recent equivalency determination in the article, ”CFTC Approves Substituted Compliance Framework for EU Based DCOs; EC Formally Recognizes US CCPs as Subject to Equivalent Regulation” in the March 20, 2016 edition of Bridging the Week.)