MFA Letter on Amended EMIR Margin RTS

October 24, 2019

From: MFA

To:

European Securities and Markets Authority, European Commission - DG FISMA
European Banking Authority
European Insurance and Occupational Pensions Authority

MFA submitted a comment letter on October 24 to the European Supervisory Authorities (ESAs) on two issues related to the ESA’s impending issuance of amended margin regulatory technical standards for non-cleared derivatives under EMIR (EMIR Margin RTS).  In the letter, MFA raises the following issues:

  • Equity Options Derogation Extension – In the EMIR Level 1 text, a delay was granted as to when market participants would have to comply with the EMIR Margin RTS with respect to their equity options.  The purpose of this derogation to prevent market fragmentation and regulatory arbitrage single neither single-stock or index equity options are subject to U.S. margin rules.  The current derogation is set to expire on January 4, 2020.  While the ESAs may propose to extent the derogation in their proposed amendments, that regulatory process will not have completed itself before the expiration of the current derogation.  Therefore, we are asking the ESAs to extent the derogation separately from the process related to the amended RTS.
  • Expansion of Money Market Funds as Eligible Collateral – In both the U.S. and EU, market participants are allowed to post money market funds (MMFs) as eligible collateral.  However, EU rules only allow use of MMFs that are UCITs and U.S. rules allow only U.S. MMFs (i.e., not UCITs).  As a result, when U.S. and EU counterparties enter into trade with each other, there are unable to post any MMFs because none satisfy both sets of rules.  Therefore, we are asking the ESAs to amend the EMIR Margin TRS to expand the scope of MMFs permitted to include issuing entities that have similar MMF regulatory oversight within their applicable regime.  This issue is an issue that MFA has written letters in support of in the U.S.

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