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NASDAQ OMX having become a CCP in Europe has prompted swift action by ESMA in setting forth OTC derivatives clearing guidelines
Following the authorization of NASDAQ OMX as the first EU-based central counterparty (CCP) on March 18, 2014, the European Securities and Markets Authority (ESMA) has today published information about NASDAQ OMX and the contracts it is authorized to clear. In accordance with the procedure laid out under Article 5(1) of EMIR, on March 18, 2014 ESMA was notified of NASDAQ OMX’s authorisation including the classes of OTC derivatives cleared by them.
ESMA will propose draft regulatory technical standards (RTS) on the clearing obligation if the classes of OTC derivatives notified to ESMA meet the criteria defined in EMIR. The clearing obligation procedure defined in Article 5(2) of EMIR is triggered every time a new CCP clearing OTC derivatives is authorised. For the clearing obligation, ESMA will only assess the suitability of those classes notified to ESMA.
This means that if CCPs are authorised on different dates, several clearing obligation procedures may run in parallel. For each of these procedures, ESMA has up to six months from the time of the notifications to draft the respective RTS, consult and submit them for endorsement to the European Commission. After the Commission’s endorsement, the RTS are subject to a non-objection period by both the European Council and Parliament, after which the clearing obligation will be phased-in per type of counterparties.
Additionally, ESMA has produced a full report on post-trade reporting today including important questions and answers, as Europe’s authorities follow in the footsteps of the US in heading toward a global standard of OTC derivative regulation.
With NASDAQ OMX having attracted the attention of the Europe-wide financial market regulatory authorities, does this move by ESMA represent simply a mirror of the Dodd-Frank trade reporting rulings, or is it a further step toward on-exchange FX becoming commonplace in the future?