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ESMA calls for UCITS amendments with launch of EMIR review 

May 26, 2015

Taha Lokhandwala, Investment & Pensions Europe

The European Securities and Markets Agency (ESMA) has called for a review of the UCITS Directive to account for the central clearing of derivatives required under the European Market Infrastructure Regulation (EMIR).

The agency, charged with financial market regulation, said, given the impact of the EMIR regulations, the UCITS Directive should be amended to apply the same rules to derivatives that are centrally cleared or exchanged traded.

The European Commission has at the same time launched its review of EMIR to produce a general report on the state of the regulation to the European Parliament and Council.

Currently, the UCITS Directive allows investments in both exchanged-traded derivatives (ETD) and over-the-counter (OTC) derivatives, but only the latter are subject to counterparty risk-exposure limits.

Under the new EMIR regime, certain OTC have to be centrally cleared, which ESMA said raised questions about how the limits to counterparty risk should be calculated for OTC transactions that are centrally cleared, and whether the same rules for OTC trades should also be applied to ETDs.

Read more: Investment & Pensions Europe

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