05 November 2010

Comment paper on EC proposal for Regulation on OTC derivatives, CCPs and trade repositories

ISDA (the International Swaps and Derivatives Association), AFME (the Association for Financial Markets in Europe), the Nordic Securities Association (NSA) and Assosim (the Italian Association of Financial Intermediaries) support the legislative proposal on OTC derivatives, CCPs and trade repositories (EMIR). In particular, they welcome the European Commission’s recognition

• that central counterparties should be used where they reduce risk in the financial system;
• that though many contracts will be suitable for clearing, some will not (on a prudent basis)and some may cease to be eligible;
• of the role of bilateral risk management as an alternative to central clearing, where central
• clearing will not reduce risk (and the role of bilateral counterparty risk mitigation tools);
• of the importance of regulatory reporting via trade repositories, as a systemic risk tool;
• that some participants in derivatives business should benefit from an exemption from clearing requirements, when considering the risk associated with these activities and the negative (overall) risk and liquidity impacts a requirement to clear/collateralise derivative positions could imply.

The comments focus on

• preserving the ability of firms and other derivatives users wishing to manage underlying risks to do so on an safe and cost‐effective basis (thereby encouraging them to invest in their activities, with all of the wider economic benefits resulting from that);
• maintaining the world‐leading position of Europe’s derivatives business and financial market infrastructure business.

© AFME