On April 20, ISDA submitted a response to the European Securities and Markets Authority (ESMA) consultation paper on a draft regulatory technical standard (RTS) for the post-trade risk reduction (PTRR) exemption from the derivatives clearing obligation under Article 4b of the European Market Infrastructure Regulation (EMIR).

In the response, ISDA provides drafting suggestions for the proposed RTS and makes the following comments:

• On the description of eligible PTRR services, ISDA emphasizes the importance of keeping principles-based definitions to allow for ongoing innovation;
• On safeguards to avoid circumvention of the clearing obligation, ISDA notes that existing requirements to benefit from the exemption, in terms of risk reduction, market risk neutrality and existing reporting under Article 9 of EMIR already act as de facto safeguards, so there is no need for any specific limitations to be added;
• On requirements for PTRR service providers, ISDA suggests that reporting and record-keeping requirements should avoid duplication and leverage the exercise performance report;
• On governance, conflicts of interest and compliance requirements, PTRR service providers are already subject to requirements on these matters as investment firms under the Markets in Financial Instruments Directive.