March 2, 2021

Volume XI, Number 61

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March 02, 2021

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March 01, 2021

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ESMA Publishes Statement Clarifying Clearing and Trading Obligations Ahead of December Deadline

On October 31, the European Securities and Markets Authority (ESMA) published a statement clarifying firms’ clearing and trading obligations in light of current derogations and phase-in periods ending on December 21, allowing for regulatory forbearance.

ESMA explains that, under the European Market Infrastructure Regulation (EMIR), both the current derogation from the clearing obligation for certain intragroup transactions concluded with a third-country group entity and the phase-in for non-financial counterparties (NFCs) in Category 4 (“NFCs+), expire on December 21, for the interest rate derivative classes denominated in the G4 currencies subject to the clearing obligation.

In relation to the derogation, ESMA drafted amendments to Commission Delegated Regulations on the clearing obligation to extend the derogation expiration to December 21, 2020. Proposals to amend EMIR (EMIR Refit) envision that NFCs+ would only be subject to the clearing obligation in the asset class or asset classes where their level of activity is above the clearing threshold (for more information on the EMIR Refit, see here).

However, there is a risk that the above measures will not have gone into effect before December 21. This would mean that affected counterparties would need to have clearing arrangements in place and start clearing transactions, before they are once again no longer required to do so after the amendments enter into force.

ESMA also explains that because financial counterparties and NFCs that benefit from the derogation from the EMIR clearing obligation are also exempt from the trading obligation under the Markets in Financial Instruments Regulation, such counterparties would be subject to the trading obligation until the above measures enter into force.

Given such difficulties, ESMA expects competent authorities not to prioritize their supervisory actions towards affected entities and to apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation in a proportionate way.

The announcement is available here.

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©2020 Katten Muchin Rosenman LLPNational Law Review, Volume VIII, Number 306
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About this Author

John Ahern, Financial Attorney, London, Katten Law Firm
Partner

John Ahern, partner at Katten Muchin Rosenman UK LLP and head of the London Financial Services group, focuses his practice on banking, financial services, UK and European financial markets, and related regulations. His background in private practice and as in-house counsel at a global investment bank provides him with perspective on the unique regulatory issues facing the wholesale and private banking sectors. John advises multilateral trading facilities, broker-dealers and banks on trading, clearing and settlement as well as custody of securities—both physical and...

+44 (0) 20 7770 5253
Carolyn H. Jackson, International Attorney, Katten Muchin law firm
Partner

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...

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

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...

44-0-20-7776-7666
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