In his July 4 address
before the Europlace Financial Forum, European Securities and Markets Authority (ESMA) chair, Steven Maijoor, announced that ESMA would be proposing standards implementing regulation of OTC derivatives, central counterparties and trade repositories (EMIR) by September 30. Maijoor said that these implementation standards will include an end-user exemption similar to the one expected to be in place under the Dodd-Frank Act.
The EMIR framework establishes certain exemptions from the clearing obligation and risk mitigation techniques for bilateral trades, in particular those relating to non-financial counterparties and intragroup exemptions. The actual boundaries of these exemptions were left to ESMA to clarify and define in its implementation standards, however. According to Mr. Maijoor, ESMA will propose a broad definition of hedging to ensure that end users employing OTC derivatives to hedge risks related to their commercial business are exempted. In addition, despite complicated differences between EMIR and Dodd-Frank, ESMA intends to propose globally consistent clearing threshholds.
I should say that we are proposing a broad definition of hedging to ensure that end-users who use OTC derivatives to hedge risks related to their commercial business are exempted. In addition, this definition is very similar to the definition of our US counterparts. For the clearing thresholds I should say that we are fairly consistent with our international counterparts, although this is, for example, complicated by substantial differences on this issue between EMIR and Dodd-Frank.
Fully appreciating the importance of firm's ability to to hedge, Mr. Maijoor assured that, "all these reforms aim at ensuring that derivatives markets continue to serve their purposes of allowing for a proper hedging of risks."