ESMA proposes OTC clearing delay for smaller players

ESMA has recommended a delay from the clearing obligation for firms with "limited" derivatives volumes.

Europe’s regulatory watchdog is proposing a longer phase-in period for central clearing of OTC derivatives for participants less active in trading the products.

The phase-in period would apply to interest rate swaps clearing for financial counterparties with a “limited volume” of derivatives activity under EMIR regulations.

The European Securities and Markets Authority (ESMA) has proposed to amend EMIR’s regulations to prolong the phase-in period by two years for category three firms – those which are not part of the group above the €8 billion threshold.

In the consultation paper, ESMA states that certain financial counterparties with a limited volume of activity are facing difficulties in accessing CCP clearing.

Category 3 firms, which include non-financial counterparties such as small pension funds and insurance companies, are provisionally scheduled to begin clearing on 21 June 2017. 

The latest consultation follows the decision by ESMA last year to grant a temporary two year exemption for pension funds from central clearing. The exemption is set to expire on 18 August 2017.