European FX firms likely to escape clearing obligation under ESMA


ESMA Chair Steven Maijoor has inferred that it is unlikely that FX trades will be subject to clearing requirement as EMIR and MiFID II draw closer.

The question as to whether Europe will impose institutional-style FX trade clearing and reporting measures on retail FX firms was indeed a matter for many FX firms to consider in the advent of MiFID II, which sought to emulate the North American Dodd-Frank Act in its trade reporting measures.

Whilst the European Securities and Markets Authority (ESMA) has proposed that when the European Market Infrastructure Regulation (EMIR) is fully implemented, all OTC derivatives transactions should be conducted via trade repositories and a central counterparty, there may be a possibility that firms in Europe could be spared the immense cost and re-organization required to accommodate such rulings.

This week, Steven Maijoor, ESMA’s Chair, stated that FX trades that are classified as being derivatives will have to be reported, but there will be no clearing requirement.

“Personally, I don’t expect there to be any clearing requirement for forex derivatives in the forseeable future,” Mr. Maijoor was quoted by Reuters on Wednesday.

“Reporting systems are already done and dusted and dealers could now have to include another category,” stated Etay Katz, a financial services attorney with Allen & Overy.

Whereas clearing procedures were implemented for all institutional FX firms in the United States as part of the Dodd-Frank Act, it is likely that all participants will avoid this measure in Europe.

For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.

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European FX firms likely to escape clearing obligation under ESMA

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