Comment paper on EC proposal for Regulation on OTC derivatives, CCPs and trade repositories
05 November 2010
The main focus of the comments is to make CCPs sufficiently resilient. The proposal is ambitious, but leading market participants who offer liquidity in this business (without which hedgers could not hedge) support CCP use for eligible contracts on prudential and economic grounds.
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.
Full
Comment Paper
© AFME
