ESMA is consulting on amending regulatory technical standards (RTS) on indirect clearing arrangements for OTC derivatives under the European Market Infrastructure Regulation (EMIR) and on draft RTS for exchange-traded derivatives under the Markets in Financial Instruments Regulation (MiFIR). It covers only indirect clearing, and does not review other parts of the EMIR RTS. The consultation addresses:

  • accounts structure and segregation models: in line with comments ESMA received on the MiFIR consultation, it proposes to require firms to offer an omnibus indirect account (like in the current EMIR RTS) and a gross omnibus indirect account with margin at the level of the CCP;
  • default management requirements: the proposals reintroduce porting, but in a way that focuses on the obligation of means, via the procedures, and not on an obligation of results, guaranteeing porting, so the appropriate steps can be taken in the case of a default and in the case porting cannot be achieved. The leapfrog payment proposals are also based on the MiFID proposals and are centred on the procedure and its initiation;
  • longer chains involving more than one indirect client: the proposal is not to define different requirements depending on the number of intermediaries in the indirect clearing chain, but instead to consider that the indirect client at the end of the chain is the one that needs to be provided with an appropriate level of protection, which means that the requirements applicable to a direct client would need to be extended to all the intermediaries between the clearing member and the counterparty at the end of the chain;
  • a proposal to assign by default to an indirect client the choice of an omnibus indirect account following reasonable efforts to receive an instruction; and
  • to provide that collateral provided on top of the amount of margin the indirect client is called for is treated in accordance with the contractual arrangements.

This consultation has been anticipated since ESMA informed the Commission that the relevant RTS would be delayed pending consultation feedback (see FReD 9 October). ESMA explains why the two RTS must be consistent. The consultation closes on 17 December. (Source: ESMA Consults on Indirect Clearing Under EMIR and MiFIR)