ESMA has written to the European Commission in relation to the frontloading requirement under EMIR. The frontloading requirement is the obligation to clear OTC derivative contracts entered into after a central counterparty (CCP) has been authorised under EMIR and before the date of application of the clearing obligation. The frontloading requirement implies that contracts concluded on a bilateral basis following the authorisation of a CCP might become subject to the clearing obligation before their expiration date.

ESMA states that their analysis, conducted for the purpose of determining the future clearing obligations, has identified that this requirement may introduce significant uncertainties in the market with the consequences mainly borne by derivatives end-users. Those consequences are legal, operational and financial.

ESMA is seeking the European Commission Services’ views on the approach to frontloading.