ESAs Publish Second Consultation Paper on Margin Requirements for Non-Centrally Cleared Derivatives

The European Supervisory Authorities ("ESAs") published a second consultation paper on the draft Regulatory Technical Standards ("RTS"). The document outlines the framework for the margin requirement for non-centrally cleared derivatives under EMIR.

The second consultation paper builds on the proposed outlined in the ESAs' first Consultation Paper, published in April 2014. After reviewing the responses to the first consultation paper, the ESAs engaged in dialogue with other authorities to identify operational issues that may arise from the implementation of the EMIR framework.

The ESAs are specifically seeking feedback on a narrow set of topics in the second consultation paper. Specifically, respondents are invited to comment on:

• the treatment of non-financial counterparties domiciled outside the EU;
• the timing of calculation, call and delivery of initial and variation margin;
• whether the draft RTS might produce unintended consequences concerning the design or implementation of initial margin models;
• whether the requirements concerning the concentration limits address the concerns expressed on the previous proposal;
• any concerns on the requirements on trading relationship documentation;
• the requirements concerning the legal basis for the compliance;
• whether the approach addresses the concerns on the use of cash for initial margin; and
• the requirements concerning the treatment of FX mismatches between collateral and OTC derivatives.

Comments on the second consultation are due by July 10, 2015.

See: Second Consultation Paper.