The European Securities and Markets Authority (ESMA) has published a final report concerning draft regulatory technical standards (RTS) on indirect clearing arrangements under EMIR and MiFIR. The draft RTS clarify provisions of indirect clearing arrangements for over-the-counter (OTC) and exchange-traded derivatives.

The draft RTS provide provisions on the following key points:

  • default management. In order to take into account that there can be a conflict of law between EU regulation and certain national insolvency regimes, the draft RTS propose an obligation of means, i.e. relying on having appropriate default procedures and committing to trigger them;
  • choice of account structures to be offered to indirect clients. The draft RTS provide a choice of possible account structures that reflect the current practice in the OTC derivative and the exchange traded derivative markets in terms of level of segregation. Also, the number of accounts required has been simplified to minimise the operational burden for market participants; and
  • long chains. The draft RTS, under certain conditions, allow indirect clearing chains that are longer than the standard chains of four entities.

ESMA’s final report has been submitted to the European Commission which has three months to decide whether to endorse the technical standards. This is followed by a non-objection period by the European Parliament and the Council of the EU.

View ESMA issues technical standards on indirect clients, 26 May 2016