January 18, 2021

Volume XI, Number 18


January 15, 2021

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European Securities and Markets Authority (ESMA) Weekly Update, December 4, 2020

ESMA Publishes Statement Regarding Post-Brexit Impact on MiFIR Derivatives Trading Obligation

On November 25, the European Securities and Markets Authority (ESMA) published a statement regarding the impact on the derivatives trading obligation (DTO) under Article 28 of the Markets in Financial Instruments Regulation (600/2014) (MiFIR) following the United Kingdom’s withdrawal from the European Union on December 31 (the Statement).

In the Statement, ESMA determines that the application of DTO will continue to apply without changes in the event of a no-deal Brexit or the absence of an equivalence decision issued by the European Commission following the end of the transition period. However, ESMA commits to monitoring the situation closely.

ESMA confirms that most UK trading venues that offer trading in derivatives subject to the DTO have established new trading venues in the European Union. Although trading activity on these venues is currently limited, the venues have on-boarded participants and members which should facilitate EU investment firms’ compliance with the DTO after the end of the transition period.

ESMA recognizes that in the absence of an equivalence decision, this system may create challenges for EU counterparties who have UK branches of EU investment firms. These EU counterparties are likely to be subject to the DTO in both the United Kingdom and the European Union and may require changes to their current business practices to ensure compliance with both.

The Statement is available here.

ESMA Publishes Final Report on EMIR RTS Clearing Obligation Regarding Intragroup Transactions and Novations From UK to EU Counterparties

On November 23, the European Securities and Markets Authority (ESMA) published a final report on regulatory technical standards (RTS) on the risk mitigation techniques for OTC derivative contracts not cleared by central counterparties detailing bilateral margin requirements under the European Market Infrastructure Regulation (EMIR) (the Report).

The key amendments considered by ESMA in the Report include:

  • extending the deferred application date of clearing obligation for 18 months for intragroup transactions;

  • extending the temporary exemption for single-stock equity or index options in respect of bilateral margin requirements for three years;

  • preserving the characteristics of contracts from UK counterparties novated to EU counterparties without triggering bilateral margin or clearing obligation requirements under certain conditions. This limits situations where the original UK counterparty is no longer able to provide certain services within the European Union after the end of the transition period; and

  • altering the Clearing Delegated Regulations for Brexit-related novations of OTC derivative contracts to EU counterparties within a 12-month timeframe and updating the Regulations to harmonize with the changes introduced by EMIR Refit Regulation.

ESMA submitted the Report to the European Commission for endorsement.

ESMA expects national competent authorities to apply the EU framework regarding clearing obligations, intragroup OTC derivative contracts and OTC derivative contract novated from the United Kingdom to the European Union in a proportionate manner before the enactment of the RTS.

The Report is available here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume X, Number 339



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...

+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...