On April 9, ISDA, the Commodity Markets Council Europe (CMCE), Energy Traders Europe (ETE) and FIA jointly responded to Chapter 7 of the UK Financial Conduct Authority’s (FCA) Quarterly Consultation CP26/8 on increasing the clearing threshold for commodity derivatives under the UK European Market Infrastructure Regulation (EMIR).
The response supports the FCA’s intention to increase the clearing threshold for commodity derivatives from its current level of €3 billion, but argues that the proposed level of €5 billion is not sufficient, and that the threshold should instead be increased to €6 billion. Changes to market structure dynamics since this threshold was first set more than a decade ago, such as significantly increased commodity prices and market volatility, mean that the current threshold has shrunk considerably in real terms. A significant increase is necessary to avoid the threshold acting as a drag on UK commodity derivatives markets, and to enhance UK competitiveness.
The proposed increase is a temporary measure while the UK Treasury reviews Title II of UK EMIR, which is expected to include a comprehensive assessment of clearing thresholds and the methodology by which they are determined. It is essential that review continues to take account of the unique characteristics of commodity derivatives markets and does not result in a reduction below €6 billion.
Documents (1) for ISDA, CMCE, ETE, FIA Respond to FCA on Commodity Derivatives Clearing Threshold
Latest
Updated OTC Derivatives Compliance Calendar
ISDA has updated its global calendar of compliance deadlines and regulatory dates for the over-the-counter (OTC) derivatives space.
10 Years of the ISDA SIMM
As the derivatives industry prepared for the September 2016 implementation of initial margin requirements for non-cleared derivatives, one challenge stood out: counterparties needed to agree on the amount of initial margin to be exchanged. But if each firm developed its...
Expanding the Universe of Eligible VM
ISDA conducted a series of interviews with buy- and sell-side firms to understand the drivers of a growing use of non-cash assets as variation margin (VM) for non-cleared over-the-counter (OTC) derivatives and the barriers that remain to expanding the use...
ISDA Response on Hedge Accounting Guidance
On August 14, ISDA responded to an exposure draft from the Financial Accounting Standards Board (FASB). ISDA broadly supports the FASB’s proposed targeted improvements to hedge accounting, including allowing interest rate hedging of held-to-maturity (HTM) debt securities, recognizing all Secured...