ESAs final draft RTS proposing amendments to bilateral margin requirements under EMIR

The European Supervisory Authorities (ESAs, comprising the European Banking Authority, the European Securities and Markets Authority and the European Insurance and Occupational Pensions Authority) have published a joint final report with draft regulatory technical standards (RTS) amending Commission Delegated Regulation (EU) 2016/2251. This Delegated Regulation sets out the margin requirements on risk mitigation techniques for uncleared over-the-counter (OTC) derivatives under the European Market Infrastructure Regulation (EMIR).

The proposed amendments would extend the existing exemption from initial margin requirements to existing uncleared OTC derivative contracts where one counterparty falls below the EUR 8 billion aggregate average notional amount (AANA) threshold. Under the current framework, counterparties below the threshold are exempt from exchanging initial margin only for new contracts, while existing contracts remain subject to the requirement. Under the proposed RTS, counterparties could cease exchanging initial margins for all uncleared OTC derivative contracts and release existing initial margin as early as 1 June of the relevant year in which the counterparty falls below the threshold.

The amending RTS also remove outdated transitional provisions relating to single-stock options and equity index options, reflecting the permanent exemption of those products from margin requirements introduced under EMIR 3. The final report has been submitted to the European Commission for endorsement and, if adopted, the amending RTS will be subject to scrutiny by the European Parliament and Council before publication in the Official Journal of the European Union.

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