ISDA members welcome this consultation and ESMA’s analytical work on anti-procyclicality (APC) tools shared in the appendix. We are encouraged by ESMA’s focus and thought leadership on this important topic.

We appreciate that ESMA wants to await further international work and is therefore not providing rules on transparency and disclosure. Nevertheless, transparency, disclosure, and governance are critical components in making APC tools effective, and so we encourage ESMA to move forward on these components when the international work concludes.

As stated in ISDA’s response to BCBS/CPMI/IOSCO’s consultation on margin practices, we propose that the whole clearing market (CCPs, clients, clearing members) and regulators agree to a target level of procyclicality that balances the cost of clearing (margin levels) with stability (reduced procyclicality), acknowledging that margin calls during some tail situations may have to exceed this to ensure CCPs are not under-collateralized. A precondition of this approach is a standardized measure of procyclicality so that regulators and market participants have transparency about how well each CCP has implemented the agreed risk appetite for procyclicality.

Many of ESMA’s proposals are in line with recommendations we make in our response to BCBS/CPMI/IOSCO on margining practices. We also understand that ESMA wishes to update the APC tools in EMIR. In this light, we provide our thoughts to ESMA’s questions.

We also propose for ESMA to review APC tools in conjunction with regulations and practices in relation to CCP base margin.

This consultation response covers the positions of our members that are clearing members and their clients. The paper does not reflect the views of many CCPs, and many of the CCPs are in disagreement with the views expressed herein.