EFAMA response to ESMA's consultation paper on draft technical standards for the Regulation on OTC derivatives, CCPs and trade repositories

05 August 2012

EFAMA appreciates the wide and profound scope of the proposed draft technical standards. In addition, it welcomes the flexible and more pragmatic overall approach in the draft Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS).

The draft RTS and ITS seem to balance relatively well between stakeholders.

EFAMA supports the detailed requirements for central counterparties. On the other side, there are different aspects where EFAMA would like some further clarifications:

• Considering the non-competitive nature of central clearing in many regulated markets, the draft RTS and ITS provide the CCPs with quite far-reaching rights concerning their standards. This applies especially to margin and collateral requirements. EFAMA would like ESMA to either a) consider further the need for such rights against the non-competitive background or b) at least balance these rights with as wide disclosure obligations as possible.
• EFAMA members are of the opinion that the information provided by the competent authority to ESMA when it authorises a CCP to clear a class of derivative has to include a description about the capability of a central counterparty to provide a detailed level of segregation on assets and positions for the indirect clearing members (e.g. investment fund management companies).
• In terms of the formats for trade repository reporting, further clarification would be welcomed, especially in terms of portfolio reporting and hybrids.
• Market participants welcome the reiterated approach by ESMA to avoid duplicate reporting according to EMIR and MiFID requirements in the future.
• EFAMA disagrees with the proposal made by ESMA that all not-centrally cleared OTC derivative contracts with a financial counterparty or a non-financial counterparty should be confirmed at the latest by the end of the same business day.
• EFAMA disagrees with the proposal made by ESMA with the scope of assets to be accepted as highly liquid collateral by a CCP. The scope of highly liquid financial instruments as collateral has to include besides cash and bonds other types of assets to support liquidity in the Market, as well as main market index equities.

Additionally, whilst EFAMA is fully supporting the core principals of legislation and is broadly in line with a majority of ESMA’s draft proposals, it strongly believe that ESMA should carefully consider the implementation phase-in requirements, and should introduce for this purpose specific counterparty categories which are more granular than the current distinction between Financial and Non-Financial Counterparties.

Each such counterparty category should benefit from a reasonable and status adapted time window for implementation of different EMIR requirements. US regulators have integrated such an approach for implementation of the Dodd-Frank Act, and EFAMA is of the opinion that applying similar mechanics under EMIR is a reasonable feature to allow for a well adjusted implementation process.

Full consultation paper

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