The European Markets Infrastructure Regulation (EMIR) introduced provisions to improve transparency and reduce the risks associated with the over-the-counter (OTC) derivatives market and established common rules for central counterparties (CCPs) and for trade repositories. In particular, Title IV of EMIR introduced common requirements for CCPs and mandated the European Securities and Markets Authority (ESMA) to develop draft Regulatory Technical Standards (RTS) on a number of areas, while delegating powers to the European Commission to adopt the RTS.
Commission Delegated Regulation No 153/2013 adopted the RTS on requirements for CCPs as developed by ESMA. Article 26 of RTS No 153/2013 established a RTS for the definition of the time horizons for the liquidation period. The rationale for defining precisely time horizons for the liquidation is that within the liquidation period the CCP should be able to either transfer or liquidate the position of the defaulting clearing member and have sufficient margins to cover the exposures arising from the transfer or liquidation of the relevant positions. In developing its proposal for Regulation No 153/2013, ESMA took a view that a two-day liquidation period was a prudent minimum for products other than OTC derivatives.
ESMA has a general mandate to review the technical standards it has issued to ensure their purpose is appropriately fulfilled. ESMA has now issued a Discussion Paper which reviews whether it would be appropriate to revise the current regulatory standard in Article 26 with respect to client accounts in order to allow CCPs authorised under EMIR to apply a one-day liquidation period for financial instruments other than OTC derivatives, only where margins on client accounts are calculated on a gross basis. ESMA compares certain margin calculation methods and raises questions seeking views on whether and, if so, how Article 26 of RTS No 153/2013 ought to be revised.
The deadline for comments on the Discussion Paper is 30 September 2015.