EFAMA’s REPLY TO ESMA’s CONSULTATION PAPER ON POST TRADE RISK REDUCTION SERVICES WITH REGARDS TO THE CLEARING OBLIGATION (EMIR Article 85(3a

15 June 2020

General comments: Asset managers and funds are rarely benefiting from post trade risk reduction (“PTRR”) techniques:

General comments
- Asset managers and funds are rarely benefiting from post trade risk reduction (“PTRR”) techniques, as:
o Our volume of transaction by counterparty is below mandatory compression,
o Our transactions with each counterparty are directional (i.e. one strategy applies to the entire portfolio), or
o Some counterparties are imposing offsetting provisions directly in the master agreement, limiting the right to offset,
o Offsetting could cause solidarity between sub-funds, which is illegal under UCITS and AIFMD, even more for multilateral PTRR mechanisms.
- PTRR are risk mitigation tools. Therefore, they should be treated as technical movements in portfolio management and should be exempted from best execution requirements.

EFAMA paper

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