On August 27, 2015, the European Securities and Markets Authority published a discussion paper on a review of the Regulatory Technical Standards for CCPs on the time horizons for the liquidation period for margin held by CCPs. The RTS currently specify a two-day time horizon as the liquidation period which should be sufficient for a CCP to transfer or liquidate the positions of a defaulting clearing member for exchange-traded derivatives. Margins are modeled to cover the exposures arising from this time horizon. The original RTS use this two-day liquidation period but based on net margin models, where offsetting positions of different customers cancel one another out. A key economic difference has been noted between the US and EU regimes for CCP margins, in that the US only requires a one day liquidation period but is calculated on a gross basis across all customer positions. A degree of harmonization of the two regimes is proposed to assist the EU in adopting a long-awaited equivalence decision for US CCPs under EMIR, with proposed adoption of a “one day gross” model for European CCP customer accounts. The two-day standard for clearing members' house accounts and the five-day liquidation period for OTC products would be retained. Responses to the discussion paper are due by September 30, 2015. On the basis of feedback, ESMA may prepare revised draft RTS for public consultation.
ESMA’s discussion paper and the response form are available at: http://www.esma.europa.eu/consultation/Consultation-ReviewEMIR-Article-26-RTS-1532013.