30 January 2015

ESMA published opinion on draft RTS on the clearing obligation for interest rate swaps

This is in response to the European Commission’s notification of 18 December 2014 of its intention to endorse, with amendments, the draft RTS submitted by EMSA on 1 October 2014.

ESMA agrees with the ultimate objectives of the modifications that the European Commission intends to introduce. However, ESMA considers that the tool proposed by the Commission for the matter related to the non-EU intra group transactions is not appropriate from a legal perspective and, in the case that the Commission intention is to define a later application date for those transactions, ESMA stands ready to explore, in coordination with the Commission, a different manner to incorporate that provision. ESMA backs the modifications on the frontloading section, though has a few observations and improvements with respect to several recitals. ESMA proposes to incorporate the suggestion of the Commission to deal with the application of the 8 billion threshold to investment funds for the definitions of types of counterparties as a specific provision in the text of the RTS.

In accordance with the ESMA Regulation, within a period of six weeks from this notification, ESMA may amend the draft RTS and resubmit it in the form of a formal opinion to the Commission. The opinion addresses a number of those changes introduced by the Commission. In particular, the opinion explains ESMA’s support of the Commission’s intention to extend the initial approach with the objective of postponing the start date of the frontloading obligation, as this should provide counterparties with sufficient time to determine whether their contracts are subject to the frontloading obligation.

However, the opinion also raises some concerns on the process envisaged to exempt non-EU intragroup transactions from the clearing obligation. ESMA is ready to provide technical advice on this particular issue, if requested, in order to find an alternative solution, both in the interest of an efficient implementation and to avoid any delays in the roll-out of the clearing obligation.

Full press release

Full Opinion

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