On 5 April 2022, the European Securities and Markets Authority (ESMA) announced that it had provided a high-level response to the European Commission’s consultation on a targeted review of the European Markets Infrastructure Regulation (EMIR) with respect to the EU’s central clearing framework.

In its response the ESMA begins by outlining certain key considerations regarding the scope and implementation of the clearing obligation which is intended to better incentivise clearing and to increase the attractiveness of EU cleared markets. The ESMA also identifies possible incentives for EU clearing participants to reduce their exposures to certain clearing services deemed of substantial systemic importance by the ESMA. This builds on the ESMA’s earlier public statement last December regarding the comprehensive assessment of substantially systemic third-country CCPs, where the ESMA had recommended that the relevant EU and Member State competent authorities consider a number of risk-reducing and risk-mitigating measures to address the current exposure levels. The ESMA sees merit in further considering these options.

The ESMA also makes a number of targeted proposals intended to streamline the functioning of the EU CCP supervisory system and address certain duplicative and inefficient supervisory processes, in order to ensure that the supervisory framework for EU CCPs remains agile and attractive for clearing participants. The recommendations include proposals to:

  • Increase the attractiveness of cleared EU markets, e.g. by expanding and facilitating entities clearing in the EU.
  • Improve the clearing obligation framework, e.g. by changing the reference from OTC to non-cleared derivatives in the clearing thresholds.
  • Incentivise EU clearing participants to reduce their exposures to UK CCPs.
  • Enhance the EU supervisory framework for CCPs.
  • Mitigate risks remaining at UK CCPs.

The ESMA also makes a number of proposals to enhance its powers particularly with regards to Tier 2 CCPs.

The Commission is expected to develop a legislative proposal amending the EU central clearing framework.