On February 4, the European Securities and Markets Authority (ESMA) published a feedback statement declaring its current intentions not to propose a clearing obligation for non-deliverable forwards (NDFs) under the European Market Infrastructure Regulation for foreign exchange NDFs. The statement is in response to ESMA’s October 1, 2014, consultation paper, which proposed draft technical regulatory standards for a mandatory clearing obligation on NDFs.

ESMA determined not to impose a clearing obligation on NDFs at this time in order to take more time to address the concerns raised by the responses to its consultation paper. Industry stakeholders identified two primary areas of concern: 1) the marketplace has minimal experience with the clearing of NDFs; and 2) international consistency of implementation, including timing. The industry also noted that currently only one European central counterparty (CCP) is authorized by ESMA to clear NDFs; the third-country CCPs that can clear NDFs are not yet recognized by ESMA.

ESMA has not ruled out the possibility of later imposing a clearing obligation on NDFs in response to further market developments.

A copy of the ESMA statement can be found here.