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The Consultation Paper clarifies the conditions where EMIR’s provisions regarding central clearing or risk mitigation techniques would apply to OTC derivatives by two non-EU counterparties which have a direct, substantial and foreseeable effect in the EU. The proposed RTS would only apply when two counterparties to the same transaction are established outside the EU, their jurisdictions’ rules are not considered equivalent to EMIR, and where one of the following conditions are met:
Steven Maijoor, ESMA Chair, said: “Today’s proposals aim at ensuring that non-EU counterparties whose derivatives deals have a direct and substantial impact on EU financial markets are subject to EMIR’s clearing obligation or risk mitigation requirements. This is key in ensuring that any risk posed to the EU’s financial markets by non-EU counterparties’ transactions is adequately managed, thereby reducing any potential financial stability risks.”
The provisions in the draft RTS included in the consultation paper also aim at preventing the evasion of the regulatory requirements, such as would be the case if derivatives contracts between non-EU counterparties were being concluded without any business substance or economic justification, and in a way to evade the clearing obligation and risk mitigation provisions.
The closing date for stakeholders’ feedback on the draft RTS is 16 September, 2013.