MFA Submits Letter to ESMA on Straight-Through-Processing

August 05, 2012

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From: MFA, Stuart Kaswell

To:

ESMA

On August 5, MFA submitted a comment letter to the European Securities and Markets Authority (ESMA) to advocate for the benefits of, and legal justification for, including a requirement for straight-through-processing in ESMA’s regulatory technical standards under EMIR Level II (EMIR RTS).  In the letter, MFA explained that straight-through-processing of derivatives transactions ensures that parties to a derivative transaction are informed in real-time (or as close to real-time as possible) whether the transaction has been accepted for clearing.  Once the transaction is accepted for clearing, the parties’ counterparty risk exposure is to the central counterparty (CCP) rather than the other market participant.  MFA also noted that Article 11 of EMIR sets forth requirements related to mitigating risks of each non-cleared transaction.  Consistent with the risk mitigation elements of EMIR, MFA recommended that the EMIR RTS should mandate the compression or effective elimination of the time between execution and confirmation of clearing acceptance, as is the norm in other cleared derivatives markets.

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