Joint Trade Association Letter on EMIR Equity Options Derogation
April 30, 2020
On April 30, MFA and six other trade associations submitted a joint letter to the European Commission and the European Supervisory Authorities (ESAs) related to the derogation for equity options under the European Markets Infrastructure Regulation (EMIR) margin rules for non-cleared derivatives (Margin RTS). The EMIR Level 1 text provided a three-year delay to January 4, 2020 for when market participants would have to comply with the EMIR Margin RTS with respect to their equity options. This derogation was recently extended one year to January 4, 2021. The purpose of the derogation was to prevent market fragmentation and regulatory arbitrage since neither single-stock or index equity options are subject to U.S. margin rules. In the letter, the associations note that the reasons for deferring application of the EMIR Margin RTS have not changed, and thus, urge the European Commission and the ESAs to consider amending the EMIR Margin RTS to permanently exempt these transactions, or else to significantly extend the derogation to allow further observation of developments in other jurisdictions and to avoid an unlevel playing field for EU market participants engaged in global derivatives markets.