On June 15, ISDA and the Futures Industry Association (FIA) submitted a joint response to ESMA’s consultation on central clearing solutions for pension scheme arrangement (PSA).
ISDA and the FIA express their view that market-based liquidity transformation like the repo market will be able to support PSAs in normal times, but PSAs might struggle to obtain cash for variation margin (VM) calls at a CCP in extreme stressed markets. While changes to bank capital rules, leverage ratio and the GSIB framework will increase the capacity of banks to provide PSAs with access to repos, ISDA and the FIA believe that only a central bank-backed collateral transformation facility would be a credible solution for the cash VM problem as described in ESMA’s report to provide additional security.
ISDA and the FIA also asked ESMA to review the exemption from the clearing mandate for UK PSAs to avoid an unlevel playing field.
Not being exempt from the clearing obligation under EU rules could have the two negative consequences:
- UK PSAs may prefer to contract with UK dealers over EU dealers post-Brexit to benefit from the clearing exemption.
- EU fund vehicles set up for EU28 PSAs that include UK PSAs as investors will no longer benefit from any exemption post-Brexit, making Europe a less desirable jurisdiction for those vehicles.
Documents (1) for ISDA and FIA Respond to ESMA Consultation on Clearing Solutions for PSAs
Latest
ISDA In Review – June 2025
A compendium of links to new documents, research papers, press releases and comment letters published by ISDA in June 2025.
ISDA Presents Lock-Up Agreement Proposal
ISDA is pleased to present the proposed Lock-Up Agreements and CDS – Proposed Auction Solution. “Lock-Up Agreements” are market-wide arrangements, broadly standardized and predominantly integrated with court sanctioned restructuring or bankruptcy processes. Numerous end users will sign material Lock-Up Agreements...
Key Trends in OTC Derivatives Market H2 2024
The latest data from the Bank for International Settlements (BIS) over-the-counter (OTC) derivatives statistics shows a modest increase in notional outstanding during the second half of 2024 compared to the same period in 2023. Notional outstanding for interest rate, foreign...
Request to Extend Relief on No-Action Letter 22-18
On July 3, ISDA requested to extend the relief under the Commodity Futures Trading Commission's (CFTC) no-action letter No. 22-18. ISDA requests that the relief is extended until further action by the CFTC resolves the overlapping and contradictory reporting obligations...