ESMA questioned over asset-class specifics in new regulation

The lack of clear asset-class-specific rules and implementation timelines for the European Market Infrastructure Regulation (EMIR) remains a major concern for market participants, despite a public hearing on draft technical standards.

The hearing was hosted in Paris on 6 March by the European Securities and Markets Authority (ESMA), which is responsible for drafting and implementing technical standards under EMIR. As part of that responsibility, ESMA will need to opine on which classes of derivatives should be subject to mandatory clearing, and whether Europe should follow the lead of the US Treasury in exempting foreign exchange swaps and forwards.

“Regulations are issued to change market practices, and this is what we are looking to do in the derivatives space. We think the measures currently drafted will push the market in that direction,” said Thierry Francq, secretary-general of France’s Autorité des Marchés Financiers (AMF).

Some participants in the 100-strong audience expressed concern about the lack of asset-class-specific standards in the initial discussion paper. James Kemp, managing director of the global foreign exchange division of the Global Financial Markets Association (GFMA), made reference to the collaboration with the US Commodity Futures Trading Commission to work through the specific aspects of different asset classes.

“[The regulation] could add systemic risk to the system if you start to introduce new workflows to foreign exchange, which is a global payment system. I would encourage that time is allowed for this industry outreach to work through the trade repositories before rules and guidelines are set in stone. It is not a paper exercise, but a whiteboard process to understand the flows,” said Kemp.

Fabrizio Planta, senior officer for post-trade at ESMA, said he welcomed further input from the foreign exchange market. “We appreciate if there is need for further meetings and we are open to getting new input. Any details will be considered,” he said.

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