MFA Submits Letter to ESMA on Draft Technical Standards on OTC Derivatives

August 05, 2012

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Topics: European Securities and Markets Authority ESMA, over-the-counter derivatives, OTC derivatives, CCP, trade repositories, European Parliament, Council of the European Union, OTC derivatives transactions, central counterparty, EMIR, central clearing, systemic risk, transparency, collateral, segregation, regulatory technical standards, straight-through processing, OTC derivatives market, market participants, Dealer, portability, client protections, contractual relationship, clearing member, CPSS-IOSCO, CPSS-IOSCO standards, CCP governing bodies, margin valuation, margin, risk management, risk management framework, conflicts of interest, fiduciary duty, International Organization of Securities Commissions, IOSCO, proprietary trading tools, risk committee, derivatives contracts, derivatives, risk profile, interlocking governance arrangements, trading venues, Commodity Futures Trading Commission, CFTC, Securities and Exchange Commission, SEC, internal controls, over-collateralization, in-the-money swap, "delta" hedge, swaps, credit default swap, CDS, negative correlation, capital, trading costs, credit risk, indirect clearing, non-linear products, Europe, European Union, EU, administrator, omnibus account, default, principal basis, agency basis, gross basis, net basis, LCH Clearnet, indirect client, direct client, close-out, extraterritorial application of EMIR, extraterritoriality, risk mitigation, Dodd-Frank Wall Street Reform and Consumer Protection Act, Asia, regulatory arbitrage, Regulators, counterparty risk, duplicative regulation, mutual recognition, third country regime, interpretive guidance, Cross-Border, index, foreign exchange, Euro, currency, interest rate derivatives, EU Member State, non-cleared OTC derivatives, compliance, default fund, portfolio reconciliation, portfolio compression, self-regulatory organization, SRO, swap dealers, major swap participants, Derivative Contracts, bilateral non-cleared OTC derivatives transactions, execution, hedging, upfront payment, floating rate payment, coupon, maturity, bespoke non-cleared trades, security-based swaps, debt-security based swaps, total return swaps, settlement prices, Proprietary Trading Strategy, public disclosure, confidence interval, margin requirements, financial instrument, posted collateral, interest rate swaps, Stan Ivanov, Lee Underwood, variation margin, initial margin, Basel Committee on Banking Supervision, Basel III, liquidation horizons, bilateral counterparty credit risk, netting, transaction fees, liquidity fragmentation, affiliated market participants, money market instruments, credit institutions, stress testing, back testing,
From: MFA, Stuart Kaswell

To:

ESMA

MFA submitted a comment letter to the European Securities and Markets Authority (“ESMA”) in response to its Consultation Paper on “Draft Technical Standards for the Regulation of OTC Derivatives, CCPs and Trade Repositories.” This letter was submitted in connection with an accompanying letter on straight-through processing. In our letter, among other things, MFA requested that ESMA:

(i) adopt various anti-circumvension mechanisms to enhance protections related to client representation on central counterparty (“CCP”) governing bodies;

(ii) ensure greater CCP transparency by requiring public disclosure of its governing bodies’ meeting minutes and the identities of CCP governing body members;

(iii) provide greater clarity about the legal, operational and collateral posting aspects of the “omnibus” and “individual client” segregation models; and

(iv) allow greater flexibility with respect to portfolio margining, portfolio compression and timing of confirmation of trades.

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