European Securities and Markets Authority Consults on Alignment of EU Trading and Clearing Obligations

The European Securities and Markets Authority has published a consultation paper on aligning the trading obligation under the Markets in Financial Instruments Regulation with the recent changes made to the clearing obligation under the European Markets Infrastructure Regulation by the EMIR Refit Regulation. Responses to the consultation should be submitted by November 22, 2019. ESMA intends to submit its final report to the European Commission in early 2020, with the Commission’s report to the European Parliament and Council expected by December 18, 2020.
 
The majority of the provisions under the EMIR Refit Regulation came into force on June 17, 2019, including an exemption from the obligation to centrally clear certain derivatives contracts for small Financial Counterparties by introducing a clearing threshold for FCs. Related amendments were not, however, made to institutions’ obligations to trade such derivatives contracts on exchanges or electronic trading platforms under MiFIR. As a result, small FCs are now exempt from the clearing obligation under EMIR, but continue to be subject to the derivatives trading obligation under MiFIR. The EMIR Refit also modifies the mechanism for determining the clearing obligations of Non-Financial Counterparties that cross the clearing threshold in a particular asset class, meaning such NFCs need only centrally clear contracts in the asset classes in which they exceed clearing thresholds (as opposed to being obliged to centrally clear all their derivatives contracts). The scope of the derivatives trading obligation under MiFIR refers to the provisions of EMIR which have now been amended, meaning there is misalignment between the two pieces of legislation.  
 
ESMA’s consultation paper states that the implementation challenges caused by the misalignment between the MiFIR trading obligations and the EMIR clearing obligations are expected to be analyzed fully in the Commission’s report. The consultation paper also refers to ESMA’s Statement published in July this year requesting national regulators to provide regulatory forbearance on an interim basis for entities that are affected by this misalignment until such time as clarification is provided on whether the MiFIR trading obligation will be formally aligned with the EMIR Refit clearing obligation. The paper goes on to seek input from stakeholders on ESMA’s proposals for addressing the issue on a long-term basis, including alignment of the scope of counterparties subject to the clearing and trading obligations.
 
View the consultation paper.
 
View details of EMIR Refit.
 
View details of ESMA's Statement on the misalignment of the MiFIR DTO and EMIR CO.
 
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