The European Securities and Markets Authority (ESMA) has stated it is “aware of challenges that certain small financial counterparties would face to prepare for the 21 June 2019 deadline to start central counterparties (CCP) clearing and trading venues on some of their over-the-counter (OTC) derivative contracts”.
ESMA published the statement in reference to the European Market Infrastructure Regulation (EMIR) Refit implementation.
The public statement addresses issues around the clearing and trading obligations for small financial counterparties and the backloading requirement for reporting entities, ahead of upcoming deadlines.
ESMA stated: “Given that the EMIR Refit negotiations have not been finalised, it is yet not known when the resulting text is expected to start applying, potentially after the phase-in for category three counterparties expires.”
It added: “Therefore, there could be a timing gap during which small financial counterparties, whose derivative positions are below the clearing thresholds, would need to have clearing arrangements in place and start clearing their derivative contracts before they are once again no longer required to do so once Refit comes into force.”
ESMA also indicated that it expects National Competent Authorities (NCAs) not to prioritise their supervisory actions towards financial counterparties whose positions are expected to be below the clearing thresholds when Refit enters into force, and to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in this area in a proportionate manner.
ESMA further affirmed in its statement that it “expects NCAs to apply their risk-based supervisory powers in their day-to-day enforcement of EMIR in a proportionate manner”.
It said: “This may include not prioritising counterparties’ reporting of backloaded transactions in their day-to-day supervision and enforcement of EMIR.”
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