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The overarching objective of EMIR is to increase transparency and reduce risk in the over-the-counter (OTC) derivatives markets. ISDA fully supports a resilient and efficient market and regulatory infrastructure that achieves these objectives. ISDA continues to support a prudently-managed transition to robust central counterparties (CCPs) and EMIR supports this goal. The eligibility determination process ensures that the products that are cleared are vetted by regulators at national and European level, and that industry has the opportunity to raise any concerns in the consultation process.
ISDA supports the authority delegated to ESMA with respect to the identification of contracts subject to the clearing obligation and the roll-out of clearing to various categories of counterparty. ISDA believes this will allow CCPs to manage operational risk better and will also allow smaller counterparties to prepare operationally and financially.
ISDA does, however, highlight the challenges ahead with respect to sequencing of implementation of G20 commitments on clearing, and stresses the importance of international workstreams to support convergence around these implementation timelines.
As also highlighted in a letter to Commissioner Barnier, Danish Finance Minister Corydon and ECON Committee Chairman Bowles, ISDA remains concerned at the cumulative workload confronting the European Supervisory Authorities (ESAs). It is essential that, as they approach critical rule-making mandates over the coming months and years, the ESAs are provided with the time and opportunity to succeed. This is important for the quality of regulation and for the international credibility of the ESAs themselves. The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) have been given a further three months (relative to recent texts) to adopt draft technical standards; however the ESAs are still faced with an immense workload in a limited timeframe.
ISDA recognises the importance of robustly regulated clearinghouses, given the level of risk concentration apparent at CCPs, and is hopeful that last night’s agreement can facilitate resilience of these structures through responsible behaviour from CCPs and market participants alike.