ESMA Issues Feedback Statement on Central Clearing of Non-Deliverable Forwards
The European Securities and Markets Authority ("ESMA") published a statement regarding its consultation paper on the clearing obligation for non-deliverable foreign exchange forwards ("NDFs").
The European Markets Infrastructure Regulation requires ESMA to draft technical standards for the clearing obligations of different derivative classes. The statement summarizes the feedback received in response to the consultation paper.
Based on the feedback that it received, ESMA stated, it is not proposing a clearing obligation on the NDF classes at this stage. ESMA explained that more time is needed to address appropriately the main concerns raised during the consultation.
Related news: CFTC Global Markets Advisory Subcommittee on Foreign Exchange Markets Submits Report (with Patel Comment and Delta Strategy Group Summary) (December 22, 2014).
Commentary
The ESMA statement makes clear that there are many important questions to be answered before central clearing is further mandated in derivatives markets across the globe. (Note that recently in the United States, a CFTC subcommittee also expressed the need for caution before proceeding with mandating the central clearing of NDFs.)
The ESMA paper also makes clear that, should central clearing be mandated eventually for NDFs, the mandate will likely come through a process of forced standardization of product terms.