We, at Point Nine, examined the latest updates by ESMA (25.08.2021) regarding “All Notifications” and outlined everything you should know about them below.
Variation margin exchange under the EMIR RTS on OTC derivatives
The ESAs published (8 March 2016) the Regulatory Technical Standards (RTS) on risk mitigation techniques for OTC derivatives not cleared by a central counterparty (CCP). This RTS draft was developed to establish provisions aiming to increase the safety and transparency of the over-the-counter (OTC) derivatives markets in the EU.
In accordance with the published statement difficulties that, in particular smaller counterparties are facing, the European Supervisory Authorities (ESAs) expect competent authorities (CAs) to generally apply their risk-based supervisory powers in their day-to-day enforcement of applicable legislation. This approach entails that Competent Authorities can take into account the size of the exposure to the counterparty plus its default risk, and that participants must document the steps taken toward full compliance and put in place alternative arrangements to ensure that the risk of noncompliance is contained, such as using existing Credit Support Annexes to exchange variation margins. This approach does not entail a general forbearance, but a case-by-case assessment from the CAs on the degree of compliance and progress. In any case, the ESAs and CAs expect that the difficulties will be solved in the coming few months and that transactions concluded on or after 1 March 2017 remain subject to the obligation to exchange variation margin.
ESMA’s Final Report regarding EMIR RTS on the novation of bilateral contracts not subject to bilateral Margins.
The ESAs’ proposal includes an amendment of the Commission Delegated Regulation on bilateral margining in order to facilitate certain novation’s of contracts to EU counterparties during a specific time-window.
This paper provides explanations on the draft RTS amending the current Commission Delegated Regulation on bilateral margining with respect to the treatment of novated contracts from a counterparty established in the United Kingdom to a counterparty which is established in another Member State. Section I explains the background to our proposals, Section II details the rationale for the RTS amendments and Section III outlines the ESAs’ proposal.
The Final Report is sent to the European Commission to submit the draft technical standards presented in Annex for endorsement in the form of a Commission Delegated Regulation, i.e. a legally binding instrument applicable in all Member States of the European Union. Following the endorsement, they are then subject to the review of the European Parliament and of the Council.
Final Report EMIR RTS on various amendments to the bilateral margin requirements in view of the international framework
This Report provides explanations on the draft RTS amending the current Commission Delegated Regulation on bilateral margining with respect to the treatment of physically settled FX forward and swap contracts, intragroup contracts, equity option contracts and the implementation of the initial margin requirements. Section I explains the background to our proposals, Section II details the rationales for the RTS amendments and Section III outlines the ESAs’ proposal.
This draft RTS need to go through before being finalized and entering into force, and in light of some of the relevant deadlines, with regards to the bilateral margin requirements and the treatment of physically settled FX forward and swap contracts, intragroup contracts, equity option contracts and the implementation of the last phase of the initial margin requirements as proposed in the draft RTS, the ESAs expect competent authorities to apply the EU framework in a risk-based and proportionate manner until the amended RTS enter into force.
