MFA Submits Response to ESMA on EMIR Clearing Obligation of Non-Deliverable Forwards

MFA submitted a response to ESMA's "Consultation Paper on the Clearing Obligation under EMIR (No. 3)," which relates to the clearing of foreign exchange non-deliverable forwards ("NDFs") under EMIR.

MFA expressed concern with the clearing of NDFs because (i) there is a lack of international convergence, (ii) not all market participants have access to the cleared NDF market and (iii) the costs of NDF clearing outweigh the systemic risk benefits.

MFA recommended that ESMA should not commence the clearing of NDFs at this time. When NDFs are ready, MFA urged ESMA to phase in NDF clearing by:

• not applying its proposed threshold-based approach, and instead including all alternative investment funds ("AIFs") in the same category for purposes of the clearing phase-in and frontloading obligations;
• providing a 12-month phase-in period for the combined category of AIFs; and
• eliminating the frontloading obligation for all entities in that combined category.

See: MFA's Response to ESMA.