On September 4, ISDA responded to the European Commission’s (EC) consultation on amendments to delegated regulation (EU) 2017.567. The key area of interest for ISDA was the proposed insertion of a new article 16a that establishes what constitutes a post-trade risk reduction service (PTRRS) for the purposes of article 31(1) of the Markets in Financial Instruments Regulation (MIFIR). This article of MIFIR exempts PTRRS from post-trade transparency, the derivatives trading obligation and best execution requirements. The previous version of MIFIR article 31 only exempted portfolio compressions from these obligations. As PTRRS are not defined in MIFIR, a legal gap exists that the amendments to the Commission Delegated Regulation (CDR) (EU) 2017/567 are intended to address.

ISDA’s response to the consultation supports the thrust of the proposed amendments – in particular, the expansion of PTRRS to include portfolio rebalancing and basis risk optimization exercises in addition to portfolio compressions. The response also suggests several amendments to the drafting of article 16a for greater clarity and the avoidance of unnecessary complexity.