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ESMA consults on Post-Trade Risk Reduction Services under EMIR REFIT

26 March 2020

The European Securities and Markets Authority (ESMA), the EU's securities markets regulator, has launched a public consultation on Post Trade Risk Reduction Services (PTRR) under the European Market Infrastructure Regulation (EMIR).

Portfolio compression is an existing requirement in the current framework for OTC derivative contracts and EMIR REFIT mandates ESMA, in cooperation with the ESRB, to investigate whether any trades that directly result from PTRR services, including portfolio compression, should be exempted from the clearing obligation.

The aim of the consultation paper

The consultation paper considers the different types of PTRR services offered, including what they are, how they function, the risks they aim to reduce and asks for data on the current use of such services.

ESMA seeks detailed feedback on how the clearing obligation affects these PTRR services and whether there should be an exemption to the clearing obligation for trades directly resulting from PTRR services. ESMA also seeks feedback on the scope of a possible exemption to the clearing obligation and if an exemption should be subject to conditions or restrictions.

All interested stakeholders are invited to respond to this consultation paper. In particular, responses are sought from financial and non-financial counterparties of OTC derivatives transactions, entities providing post trade risk reduction services as well as from central counterparties (CCPs).

Next steps

Following the public consultation ESMA will consider all comments received by 15 June 2020 and expects to publish a final report and to submit it to the European Commission.