The European Securities and Markets Authority (ESMA) has issued a consultation paper with a view to seek input from the FX industry with regard to clearing obligations under the European Market Infrastructure Regulation (EMIR).
With responses from industry participants invited by ESMA before November 6, 2014, the Europe-wide financial markets regulator aims to ascertain the method by which it should define rulings relating to clearing of non-deliverable forward derivative classes.
Industry participants are invited to consider whether the proposed structure for the FX NDF classes enables counterparties to identify which contracts are subject to the clearing obligation, as well as other important factors including whether determination of the classes of OTC derivatives should be subject to the clearing obligations.
For the currency pairs proposed for the clearing obligation on the NDF class, ESMA seeks to ascertain whether there are risks in including longer maturities, for example up to the 2 year tenor.
In a similar vein to the approach taken during 2013 by authorities in the United States when defining the full rulings for the FX clearing and central counterparty obligations under the Dodd-Frank Act, European authorities are taking an approach based on input from companies, which is relatively uncommon on the Eastern side of the Atlantic.
Often European rulings are set forth as a result of government-level decisions without input from corporations, unlike the Senate advisory panels last year which included many senior industry officials. The form which this has taken is a break from tradition, thus alluding to commitment from European law makers to cooperate with US authorities in the quest for a truly standardized global regulatory structure for online trading.
To download the response form from ESMA’s website, click here.