The European Securities and Markets Authority (ESMA) has published a consultation on draft regulatory technical standards it has to develop under the European Markets Infrastructure Regulation (EMIR) for the clearing of foreign exchange non-deliverable forwards.
This paper follows the July 2013 publication of a discussion paper on the clearing obligation under EMIR, the publication of the first consultation papers on the clearing obligation on interest rate classes and credit classes, and the publication of the final report on the clearing obligation on interest rate classes.
ESMA has stated that the forthcoming input from stakeholders in response to the paper will help it in “finalising the relevant technical standards to be drafted and submitted to the European Commission for endorsement in the form of Commission Regulations, ie, a legally binding instrument directly applicable in all member states of the [EU]”.
Commenting on the consultation draft, Rob Gray, head of sales at Dion said: “It is clear that financial institutions cannot afford to kick the challenge of complying with [foreign exchange] derivatives regulation into the long grass.”
“It is important that regulators, market participants and service providers work closely to come up with a solution that works for all.”
“Moving forward, previously manual underlying processes will have to be automated. This means there will be much more emphasis on fully automating platforms, which will drive further changes in the [foreign exchange] derivatives market.”
The consultation paper will seek stakeholders’ views on the regulatory technical standards that ESMA is required to draft under Article 5(2) “Clearing Obligation Procedure” of regulation number 648/2012 of the European Parliament and Council on over-the-counter derivatives, central counterparties and trade repositories (EMIR).
