On 21 March 2018, the European Securities and Markets Authority (ESMA) published an opinion providing further guidance on the treatment of packages under the trading obligation for derivatives (TO) which MiFIR introduced on 3 January 2018.
ESMA notes that the TO as specified in Commission Delegated Regulation 2017/2417 is designed to apply at the level of a financial instrument and not at the level of the package. Therefore, only components of a package are subject to the TO, but not the package as such.
ESMA suggests a tailored approach ensuring that, only where it is feasible to trade components of a package that are subject to the TO on a trading venue without creating undue operational or execution risk, those components need to be concluded on a trading venue. This approach applies to the following categories of packages:
- all components of the package are subject to the TO;
- at least one component is subject to the TO and all other components are subject to the clearing obligation for derivatives;
- at least one component is an interest rate swap subject to the TO and all other components are government bonds denominated in the same currency (spread overs).