Trade bodies call for EMIR clearing exemption extension
12 June 2020 Paris
Image: liseykina/Shutterstock.com
Three trade bodies including the International Swaps and Derivatives Association (ISDA) have written to EU regulators to request that the temporary derogation from clearing requirements for intragroup transactions with non-EU affiliates, due to expire this year, be extended for a further three years for all jurisdictions.
The clearing requirements come as part of the European Market Infrastructure Regulation which governs over-the-counter (OTC) derivative trades and currently allows counterparts that belong to the same parent company to conduct these trades bilaterally.
However, this exception is due to expire in December.
Alongside ISDA, the European Banking Federation and the Futures Industry Association used the letter to endorse the steps take by the European Commission and the European Securities and Markets Authority to allow for the exception and emphasise the "continued importance of intragroup transactions both for the ability of EU financial groups to operate, compete (with other financial groups) and make capital available in non-EU jurisdictions and to manage risks on a centralised basis".
Intragroup transactions are also vital to enable non-EU financial groups to provide the capital needed to underpin investment within the EU-27 and to manage risk associated with this activity, the associations state.
As such, they are calling on the commission to make the necessary equivalence decisions be "as a matter of urgency" in relation to all jurisdictions that have implemented clearing rules in line with the G20 commitments.
Additionally, the regulatory technical standards should be amended to extend the current temporary derogation from clearing requirements for intragroup transactions with non-EU affiliates for a further three years for all other jurisdictions, the associations add.
These steps should be taken "as soon as possible during the first half of the year", the associations highlight, in order to prevent market participants from having to initiate and execute costly operational, legal and contractual compliance processes, while also dealing with the uncertainty.
Click here to read the full letter.
The clearing requirements come as part of the European Market Infrastructure Regulation which governs over-the-counter (OTC) derivative trades and currently allows counterparts that belong to the same parent company to conduct these trades bilaterally.
However, this exception is due to expire in December.
Alongside ISDA, the European Banking Federation and the Futures Industry Association used the letter to endorse the steps take by the European Commission and the European Securities and Markets Authority to allow for the exception and emphasise the "continued importance of intragroup transactions both for the ability of EU financial groups to operate, compete (with other financial groups) and make capital available in non-EU jurisdictions and to manage risks on a centralised basis".
Intragroup transactions are also vital to enable non-EU financial groups to provide the capital needed to underpin investment within the EU-27 and to manage risk associated with this activity, the associations state.
As such, they are calling on the commission to make the necessary equivalence decisions be "as a matter of urgency" in relation to all jurisdictions that have implemented clearing rules in line with the G20 commitments.
Additionally, the regulatory technical standards should be amended to extend the current temporary derogation from clearing requirements for intragroup transactions with non-EU affiliates for a further three years for all other jurisdictions, the associations add.
These steps should be taken "as soon as possible during the first half of the year", the associations highlight, in order to prevent market participants from having to initiate and execute costly operational, legal and contractual compliance processes, while also dealing with the uncertainty.
Click here to read the full letter.
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