In May 2018, the Joint Committee of the European Supervisory Authorities (“ESAs“) launched two consultations (the “Consultations“) to amend EMIR concerning (i) the clearing obligation and (ii) certain risk mitigation techniques for non-cleared OTC derivatives in respect of securitisation issuers.
Prior to the Consultations, the Securitisation Regulation amended EMIR to ensure one goal: consistency of treatment between derivatives entered into by covered bonds issuers; and derivatives entered into by simple, transparent and standardised (“STS“) securitisation issuers. Please click here to read our full briefing.
EMIR is the centrepiece of the EU post financial crisis reform of derivatives markets and seeks to address perceived issues with counterparty credit risk and transparency. After a long and difficult consultation period, and some way behind other similar global initiatives, the next major piece of the EMIR framework will soon come into effect, which is the requirement for eligible counterparties to post margin on OTC derivative transactions.
On 1 September 2016, the first phase of mandatory clearing of over-the-counter (OTC) derivative transactions (Phase 1 Clearing) will be implemented. The first transactions to be potentially subject to mandatory clearing will be those entered into on or after 1 July 2017. Also on 1 September 2016, mandatory reporting of OTC derivative transactions will apply to central counterparties (CCPs) which are authorised to provide automated trading services (ATS) for clearing such transactions.
As part of the reform to regulate OTC derivative transactions in Hong Kong, the definition of ATS under the Securities and Futures Ordinance (SFO) will be expanded. As a result, CCPs which currently provide or market clearing services for OTC derivative transactions will need to be authorised as ATS providers under the SFO. The Guidelines for the Regulation of Automated Trading Services (ATS Guidelines) will be amended to reflect these changes. Given the inter-connection between the updated ATS framework and the CCPs' clearing obligations, the revised ATS Guidelines will take effect at the same time as Phase 1 Clearing, on 1 September 2016.
The Australian Government has made and registered a critical Regulation dealing with mandatory clearing of derivatives and an exemption allowing certain single-sided reporting. Continue reading
The Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have published consultation conclusions on the draft rules for mandatory reporting of over-the-counter (OTC) derivatives and related record keeping. The draft rules have been amended, taking into account the comments received and providing greater clarity to the proposed regulatory regime. Continue reading
The Hong Kong Monetary Authority and the Securities and Futures Commission have recently issued a joint consultation paper detailing their proposed requirements relating to the mandatory reporting and record keeping obligations for over-the-counter (OTC”) derivative transactions in Hong Kong. Continue reading
The US Commodity Futures Trading Commission (CFTC)’s 137 page concept release on risk controls and system safeguards for automated trading calls for the re-assessment of risk controls and safeguards in the light of the development of modern markets from human-centered trading venues to highly automated and interconnected trading environments. With operational centers of modern markets now residing in a combination of automated trading systems (“ATSs”) and electronic trading platforms, the CFTC is re-evaluating “traditional risk controls and safeguards that relied on human judgment and speeds, and which were appropriate to manual and/or floor-based trading environments”. Continue reading
The European Securities and Markets Authority (ESMA) has launched a Discussion Paper as a first step towards preparation for the regulatory technical standards (RTS) to implement provisions of the European Markets Infrastructure Regulation (EMIR) regarding the obligation to centrally clear OTC derivatives. The consultation will assist in developing ESMA’s approach to determining those classes of OTC derivatives that need to be centrally cleared and the phase-in periods for the counterparties concerned. Responses to the Discussion Paper are sought by 12 September 2013, and feedback received will be used to draft technical standards on the clearing obligation, on which there will be a further public consultation. Continue reading
The regulatory response to the credit crisis is having a profound effect on derivative markets. In our bulletin for corporate clients, we provide an update on three areas of change in the derivative markets primarily driven by regulatory reform – EMIR, the debate over credit valuation adjustment, and alternative mechanisms for transfer of collateral- which will have an increasing effect on the way corporate clients use derivatives.
The Financial Stability Board (FSB) has published its 5th six-monthly progress report on the implementation of over-the-counter (OTC) derivatives market reforms. Continue reading