ESMA Consults on Non-EU Counterparties OTC Derivative Transactions

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On July 17, the European Securities and Markets Authority (ESMA) launched a consultation on draft regulatory technical standards (RTS). The consultation is aimed at implementing the provisions of the European Markets Infrastructure Regulation (EMIR) related to OTC derivative transactions by non-EU counterparties and at preventing attempts by non-EU counterparties to evade EMIR’s provisions.

The consultation paper clarifies conditions where EMIR’s provisions regarding central clearing or risk mitigation techniques applies to OTC derivatives by two non-EU counterparties which have a direct, substantial and foreseeable effect in the EU. The RTS would only apply when (i) two counterparties to the same transaction are established outside the EU; (ii) their jurisdictions’ rules are not considered equivalent to EMIR; and (iii) where either a) one of the two non-EU counterparties is guaranteed by an EU financial counterparty for at least €8 billion of OTC derivatives entered into and for an amount of at least 5% of the OTC derivatives exposures of the EU financial counterparty, or b) the two non-EU counterparties execute transactions via their EU branches. Consultation.

 

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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