On 21 August 2014, the European Systemic Risk Board (ESRB) published its response to the European Securities and Markets Authority's (ESMA) first consultation paper on draft regulatory technical standards (RTS) under the Regulation on OTC derivative transactions, central counterparties and trade repositories (EMIR). The paper consults on the clearing obligation (CO) for OTC interest rate derivatives (IRD).
The response summarises the ESRB's opinion on ESMA's proposals in this area. The ESRB expresses its general support for subjecting the classes of OTC derivatives proposed by ESMA to the clearing obligation.
However, the ESRB notes that:
- Additional metrics could be considered in order to assess the suitability of classes of OTC IRD instruments for the clearing obligation.
- Mandatory clearing of these OTC IRD could have certain macro-prudential implications, in terms of market structure and concentration, which regulators may wish to monitor going forward.
- The final draft of the RTS to the European Commission should be underpinned by a more comprehensive analysis with respect to OTC IRD denominated in currencies other than USD, EUR, GBP and JPY, including all of the criteria enumerated in Article 7(2) of Regulation (EU) No 149/2013 in order to determine the classes of OTC derivatives which ought to be subject to the CO.
- In terms of dates of application of the CO, the ESRB is not completely convinced by the argument that extensive delays are necessary for category 2 (non-clearing members) and category 3 (non-financial counterparties above the clearing threshold) counterparties. The ESRB proposes to set the date of application for category 2 at 12 months and for category 3 at 18 months after the entry into force of the RTS.