Following its review of the European Markets Infrastructure Regulation (EMIR) the independent EU authority published four reports, which include proposals to rethink the entire “equivalence and recognition process” of recognizing third country central counterparties during derivative trades.
“There needs to be a better response to regulatory differences between third countries,” it said. “We propose that the jurisdiction decision be governed by Regulatory Technical Standards and that any recognition process should also include additional risk-based consideration allowing it to deny or suspend the recognition of a third country CCP.”
Introduced in August 2012, EMIR is a European Union regulation designed to increase the stability of over-the-counter derivative markets throughout the EU states.
In today’s report, ESMA also proposed “streamlining” the process for determining clearing obligations and introducing tools allowing the suspension of clearing obligations when certain market conditions arise.
Steven Maijoor, ESMA chair, said: “EMIR is a key component of the EU’s regulatory reform package in response to the financial crisis affecting many elements of over-the-counter derivatives markets.
“While its implementation is still underway we recommend a number of changes, based on our experiences, to improve and streamline the regulatory and supervisory framework and to ensure that the objectives of stability and investor protection are met.”
When it was introduced, EMIR brought in reporting obligations, clearing obligations, measures to reduce counter-party credit risk, common rules for central counterparties, and interoperability rules.
