European Supervisory Authorities Opine on Final Draft Technical Standards on Uncleared Derivatives

The Joint Committee of the European Supervisory Authorities published an Opinion on the European Commission's proposed amendments to the final draft Regulatory Technical Standards on risk mitigation techniques for uncleared OTC derivatives under the European Markets Infrastructure Regulation. The Joint Committee is made up of the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority. The Opinion includes a revised version of the final draft RTS.

On July 28, 2016, the European Commission requested the ESAs to amend the final draft RTS and submit a modified version for approval. The ESAs have rejected certain amendments relating to concentration limits on initial margin for pensions scheme arrangements. The Commission also proposed amendments to the calculation of the threshold against non-netting jurisdictions, but the ESAs have concluded that no change should be made as no new supporting evidence has been presented to warrant the change. The ESAs also noted that the treatment of covered bonds in the final draft RTS was designed pursuant to EMIR and they have maintained that no substantive changes as per the Commission’s proposals should be made.  The ESAs have also rejected amendments regarding the treatment of bilateral derivative contracts where a counterparty is a CCP, transactions with third country counterparties and the process for regulators on the exemption of intragroup derivative contracts. The ESAs are also proposing some non-substantive amendments, including the introduction of a recital containing the reasoning for a delayed phase-in of the requirements for equity options and clarification on the process around the intragroup exemption.

As the ESAs have submitted the draft RTS with amendments inconsistent with those proposed by the Commission, the Commission may now adopt RTS with the proposed amendments it considers relevant, or reject any amendments accordingly. The European Parliament and the Council of the European Union will have three months to object to the RTS from the date the Commission adopts it. 

View the Opinion.