Trade Associations Submit Letters to ESAs on EMIR Risk Mitigation Regulatory Technical Standards

The Managed Funds Association ("MFA"), SIFMA and ISDA sent separate comment letters to the European Supervisory Authorities ("ESAs") on their joint consultation paper, titled "Draft Regulatory Technical Standards on Risk-Mitigation Techniques for OTC-Derivative Contracts Not Cleared by a CCP" ("Consultation Paper"), regarding EMIR ("European Market Infrastructure Regulation").

The MFA's letter voiced support for the ESAs' efforts to reduce counterparty credit risk and mitigate the potential for systemic risk resulting from uncleared OTC derivative markets. The MFA emphasized the need to ensure that the final regulatory technical standards ("RTS") outlined in the Consultation Paper are consistent with mandatory margin requirements in other jurisdictions.

Additionally, SIFMA and ISDA submitted a joint comment letter regarding the Consultation Paper. The letter identifies areas of the draft RTS where additional rulemaking and clarification is needed, focusing on subjects including:

• that the mandatory capture of main nonlinear dependencies and certain other model requirements are overly rigid and prescriptive;
• the restrictive nature of the proposed concentration limits;
• that an 8% FX haircut on mismatched collateral would create operational, credit and settlement risk;
• a two-year implementation window to comply with margin requirements; and
• consistent margin rules across major financial jurisdictions.

See: MFA Comment Letter; SIFMA-ISDA Comment Letter.Related news: ESMA Publishes Two Consultation Papers Regarding Clearing under EMIR (with Zwirb Comment) (July 11, 2014).