The European Securities and Markets Authority (ESMA) has published an opinion on portfolio margining requirements under Article 27 of Commission Delegated Regulation (EU) 153/2013 (Delegated Regulation) that contains regulatory technical standards supplementing the European Market Infrastructure Regulation (EMIR). Article 27 of the Delegated Regulation provides that a central counterparty may allow offsets or reductions in the required margin across the financial instruments that it clears if the price risk of one financial instrument or a set of financial instruments is significantly and reliably correlated, or based on equivalent statistical parameters of dependence, with the price risk of other financial instruments.

EMIR uses part of this definition in order to define a “derivative” or “derivative contract”. Further, Article 2(7) of EMIR defines the “class of derivatives” as “a subset of derivatives sharing common and essential characteristics including at least the relationship with the underlying asset, the type of underlying asset, and the currency of national amount”. However, there is no further clarification as to which instrument/product can be considered the same. The opinion aims at providing such clarification for the purposes of application of Article 27 of the Delegated Regulation. In particular, the opinion aims at clarifying:

  • how to identify the same financial instruments or products; and
  • the cases where margin reductions can be up to 100%.

View ESMA opinion on portfolio margining for CCPs under EMIR, 10 April 2017