On 2 April 2020, the European Securities and Markets Authority (ESMA) issued a consultation paper covering a range of issues regarding potential central clearing solutions for pension scheme arrangements (PSAs) under the European Market Infrastructure Regulation (EMIR). The consultation paper is based on ESMA’s first report to the European Commission documenting the progress made to date towards potential clearing solutions for PSAs.
The consultation paper, after providing information on the regulatory context, presents the issue of why pension funds use derivatives and the issues caused by central counterparties’ requirement to have variation of margin calls fulfilled exclusively in cash and its quantitative impact. The consultation paper also discusses the ongoing exemption of clearing for PSAs to centrally clear their over-the-counter trades. The annexes to the consultation paper provide the relevant EMIR Refit articles to central clearing obligations for PSAs as well as a questionnaire for public consultation.
The deadline for comments on the consultation paper is 15 June 2020. ESMA expects to publish a second report and submit it to the European Commission by the end of the year.