The European Securities and Markets Authority (ESMA) has published final draft regulatory technical standards (RTS) specifying the trading obligation for derivatives for classes of interest rate swaps (IRS) and credit default swaps (CDS) as foreseen in Articles 28 and 32 of the European Market Infrastructure Regulation (EMIR).

Article 28 of MiFIR introduces the trading obligation for derivatives, established in accordance with the procedure set out in Article 32 of MiFIR and further specified in Commission Delegated Regulation (EU) 2016/2020 of 26 May 2016 (RTS 4). Derivatives that are subject to the trading obligation may only be traded on a regulated market, multilateral trading facility, organised trading facility or a third country trading venue deemed to be equivalent by the European Commission. Article 32(1) of MiFIR mandates ESMA to develop RTS specifying the derivatives that should be subject to the trading obligation.

The final report presents ESMA’s approach for determining which derivatives should be subject to the trading obligation taking into account comments received from stakeholders responding to its earlier consultation published on 19 June 2017. After a review of the responses received to the consultation, the draft RTS have been amended and are set out in Annex II of the final report.

ESMA has decided to make the following fixed-to-float IRS and CDS indices subject to on-venue trading:

  • fixed-to-float IRS denominated in EUR;
  • fixed-to-float IRS denominated in USD;
  • fixed-to-float IRS denominated in GBP; and
  • index CDS – iTraxx Europe Main and iTraxx Europe Crossover.

ESMA submitted the final report to the Commission on 28 September 2017. The Commission has three months to decide whether to endorse the draft RTS. The Commission has expressed to ESMA its strong commitment to apply the trading obligation from the start date of the MiFID II framework. ESMA has therefore maintained 3 January 2018 as the envisaged date of application.

View ESMA finalises MiFID II’s derivatives trading obligation, 29 September 2017