ESMA Issues Discussion Paper on Clearing of OTC Derivatives

The European Securities and Markets Authority (ESMA) has launched a discussion paper to prepare  the regulatory technical standards (RTS) which will implement provisions of the European Markets Infrastructure Regulation (EMIR) regarding the obligation to centrally clear over-the-counter (OTC) derivatives.

The consultation aims to assist ESMA in developing its approach to determining which classes of OTC derivatives need to be centrally cleared and the phase-in periods for the counterparties concerned.

EMIR introduced provisions to improve transparency, establish common rules for central counterparties (CCPs) and for trade repositories (TRs) and to reduce the risks associated with the OTC derivatives market. It provides for the obligation to centrally clear OTC derivative contracts or to apply risk mitigation techniques such as the exchange of collateral.

“Our consultation is a first important step in shaping the details of how central clearing of OTC derivatives will work in the European Union [EU],” said Steven Maijoor, ESMA chair. “Having these trades centrally cleared and ultimately making post-trade data available to investors will increase the robustness, transparency and stability of the financial system.”

The discussion paper is open for feedback until 12 September 2013. ESMA will use the feedback received to draft its technical standards on the clearing obligation, which will be presented in future public consultations.

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