February 19, 2019

February 18, 2019

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ESMA Consults on Guidelines on Anti-Procyclicality Margin Measures for CCPs

On January 8, the European Securities and Markets Authority (ESMA) published a consultation paper on draft guidelines on anti-procyclicality margin measures for central counterparties (CCPs).

The European Market Infrastructure Regulation (EMIR) recognizes that margin calls and haircuts on collateral by CCPs may have procyclical effects. EMIR therefore requires CCPs to regularly monitor and, if necessary, revise the level of margins to reflect current market conditions, taking into account any procyclical effects of such revisions. EMIR and its delegated regulations require CCPs to adopt at least one of three anti-procyclicality (APC) margin measures to address this issue.

The aim of the guidelines is to clarify the application of EMIR in the context of the procyclicality of margins with the aim of ensuring common, uniform and consistent application of the requirements of EMIR. The guidelines cover the monitoring of margin procyclicality, the implementation of APC margin measures and disclosures intended to facilitate margin predictability.

ESMA notes in the consultation paper that it is important to recognize that it is not the intention of regulation to prevent a CCP from revising its margins to address changes in volatility. Instead, the regulations propagate the notion that CCPs should prevent big-stepped, unanticipated calls on clearing members during periods of extreme stress. The guidelines should therefore be read in this context.

The deadline for responses is February 28. ESMA expects to publish the final guidelines by the first half of 2018.

The consultation paper is available here.

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About this Author

Carolyn H. Jackson, International Attorney, Katten Muchin law firm

Carolyn Jackson is a partner in Katten Muchin Rosenman UK LLP and is a Registered Foreign Lawyer. She provides US financial regulatory legal advice to a broad range of market participants, including commercial banks, investment banks, investment managers, broker-dealers, electronic trading platforms, clearinghouses, trade associations and over-the-counter derivatives service providers.

Carolyn guides clients in the structuring and offering of complex securities, commodities and derivatives transactions and in complying with US securities and commodities laws...

+44 0 20 7776 7625
Nathaniel Lalone, Katten Muchin Law Firm, Financial Institutions Attorney
Senior Associate

Nathaniel Lalone, a partner at Katten Muchin Rosenman UK LLP, has a broad range of experience in the regulation of financial products and financial markets, and frequently provides regulatory and compliance advice to trading venues, clearing houses and buy-side firms active in the over-the-counter (OTC) derivatives, futures and securities markets. He is actively involved in advising clients on the implementation of MiFID 2 and MiFIR in the European Union as well as the international reach of US financial services regulation. He also has significant experience with structuring and documentation relating to OTC derivatives and structured products.

Prior to joining Katten, Nathaniel was a member of the US Regulatory and the Derivatives and Structured Finance practices at Allen & Overy LLP.

+44 0 20 7776 7629
Neil Robson, private equity fund managers counselor, Katten Law Firm, London

Neil Robson, a regulatory and compliance partner with Katten Muchin Rosenman LLP, focuses his practice on counseling hedge and private equity fund managers and other investment advisers on operational, regulatory and compliance issues. He regularly addresses Financial Conduct Authority (FCA) and EU authorization and compliance under both the EU Alternative Investment Fund Managers Directive (AIFM Directive) and MiFID, cross-border issues in the financial services sector, market abuse, anti-money laundering and regulatory capital requirements, formations and buyouts of...