On 20 November 2024, the European Securities and Markets Authority (ESMA) issued a consultation on the conditions of the Active Account Requirement (AAR) following the review of the European Market Infrastructure Regulation (EMIR 3).

Background

EMIR 3 addresses financial stability risks caused by EU clearing members and clients being exposed to systemically important third-country central counterparties (CCPs) (Tier 2 CCPs) by requiring some financial counterparties (FCs) and non-financial counterparties (NFCs) with exposures to clearing services of substantial systemic importance to hold an operational and representative active account at EU CCPs.

More specifically, Article 7a of EMIR (as revised by EMIR 3) requires certain FCs and NFCs to hold, for certain categories of derivative contracts, at least one active account at an EU CCP and for some of those FCs and NFCs to clear at least a representative number of trades in this account. The derivative contracts subject to the active account requirement are over-the-counter (OTC) interest rate derivatives denominated in euro, OTC interest rate derivatives denominated in Polish zloty and Short-Term Interest Rate Derivatives (STIR) denominated in euro, as outlined in Article 7a(6) of EMIR and further clarified in Recital 11 of EMIR 3.

Consultation

ESMA is mandated to further specify the conditions of the AAR in a Regulatory Technical Standard (RTS) within six months following the entry into force of EMIR 3.

The Consultation Paper seeks feedback from stakeholders on several key aspects of the AAR. It outlines the requirements proposed by ESMA to meet the operational conditions set out under points (a) to (c) of Article 7a(3), and their stress-testing. It also specifies the details of the representativeness obligation under condition (d) of Article 7a(3), including the relevant classes of derivatives, the different trade size and maturity ranges, the number of most relevant subcategories per class of derivatives, as well as the duration of reference periods. It also details the reporting requirements for counterparties subject to the AAR under Article 7b.

Next steps

ESMA has published the Consultation Paper shortly ahead of the publication of EMIR 3 in the EU Official Journal to balance the short deadline for ESMA to submit the draft RTS to the Commission.

ESMA will organise a public hearing on 20 January 2025.

The deadline for comments on the consultation is 27 January 2025.

ESMA will consider the feedback it receives to this consultation in Q1 2025.

ESMA aims to submit the final draft RTS to the Commission within 6 months following the entry into force of EMIR 3.