MFA Submits Response to ESMA on EMIR Clearing of Credit Default Swaps

The Managed Funds Association ("MFA") submitted to the European Securities and Markets Authority ("ESMA") a response to its "Consultation Paper on the Clearing Obligation under EMIR (No. 2)" concerning the clearing of credit default swaps ("CDS"). In the letter, MFA emphasized that it is important for the European Commission to recognize U.S. central counterparties as being subject to equivalent regulation prior to the European Capital Requirements Directive's December 15 deadline. MFA also urged ESMA not to subject any class of CDS to the clearing obligation until multiple clearing members offer client-clearing services for that class.

In addition, MFA requested that ESMA do the following:

1. shorten the phase-in periods in respect of the clearing obligation to three months for Category 1 entities (i.e., certain clearing members) and six months for Category 2 entities (i.e., investment funds and other clearing members);
2. eliminate application of the clearing obligation to existing contracts (i.e., frontloading) with respect to all derivative contracts and categories of market participant; and
3. harmonize the classes of CDS that it will subject to the clearing obligation with those classes subject to mandatory clearing under CFTC rules.

See: MFA Comment Letter.