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ESMA proposal regarding clearing obligations for financial counterparties with a limited volume of activity welcomed

Insurance Europe has responded to a European Securities and Markets Authority (ESMA) consultation on the clearing obligation for financial counterparties with a limited volume of activity, where it welcomed the proposal for delaying by two years the implementation of clearing obligations for small market players and market players with limited activity.

In its response, Insurance Europe said that the European Market Infrastructure Regulation (EMIR) has introduced a number of requirements that in practice translate into obligations that are burdensome, both in terms of initial implementation and ongoing operation, especially for small and very small companies.

For example, a small company may decide to engage in hedging via derivatives, but only perform one transaction per quarter or per year. However, this single transaction would trigger significant EMIR obligations, including collateral management on a daily basis, which would be extremely burdensome.

Insurance Europe said that while many European insurance companies have already established clearing arrangements, a range of smaller counterparties and counterparties with limited derivatives activities have been facing challenges, and would therefore welcome a later implementation of the clearing requirements.

Published 5 September 2016
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