What Changed
- The ESAs published a Final Report proposing draft RTS to amend Commission Delegated Regulation (EU) 2016/2251.
- The amendments eliminate initial margin exchange obligations for counterparties below the €8 billion threshold across both new and existing contracts.
- The draft RTS was submitted to the European Commission for endorsement, pending scrutiny by the European Parliament and the Council.
Market participants engaged in over-the-counter (OTC) derivatives trading within the European Union face potential regulatory relief under proposed changes to bilateral margin rules. The European Supervisory Authorities (EBA, EIOPA, and ESMA – the ESAs) have published a Final Report containing draft Regulatory Technical Standards (RTS) that aim to simplify the bilateral margin framework under the European Market Infrastructure Regulation (EMIR).
The proposed RTS seek to amend Commission Delegated Regulation (EU) 2016/2251. The primary focus of these amendments is counterparties subject to initial margin requirements whose trading activity falls below the €8 billion aggregate threshold established by EMIR for exchanging initial margin. Under the current regulatory framework, counterparties operating below this threshold are exempt from exchanging initial margin on new uncleared OTC derivative contracts, but they remain obligated to exchange initial margin for pre-existing contracts.
If adopted, the proposed amendments will eliminate the requirement to exchange initial margin for both new and existing contracts for counterparties below the €8 billion threshold. This change is designed to facilitate the phase-out of initial margin requirements for qualifying market entities, addressing requests raised by market participants and supporting broader EU regulatory objectives of simplification and administrative burden reduction. Furthermore, the ESAs noted that the adjustment intends to foster greater consistency with the regulatory treatment applied to similar counterparties in other global jurisdictions.
Regarding procedural status, the ESAs have formally submitted the Final Report and draft RTS to the European Commission for endorsement. Following the Commission's formal review and adoption process, the draft RTS will be subject to a period of scrutiny by the European Parliament and the Council of the European Union. The regulatory changes will take effect following successful completion of these legislative stages and subsequent publication in the Official Journal of the European Union.
Specific dates for publication, entry into force, and application are not provided in the source material. Counterparties operating in the EU OTC derivatives market should monitor the European Commission's endorsement process and subsequent legislative scrutiny for further updates regarding final implementation timelines.
Who May Be Affected
Counterparties to uncleared OTC derivative contracts subject to EMIR initial margin requirements that fall below the €8 billion threshold.
Cross-Border Context
The proposal supports consistency between EU bilateral margin rules and regulatory frameworks in other non-EU jurisdictions for counterparties below the €8 billion initial margin threshold.
What to check next
- European Commission review and adoption of the draft RTS
- Scrutiny period by the European Parliament and the Council of the European Union
- Publication of the final text in the Official Journal of the European Union
This article provides general information and does not constitute legal advice. Consult the official text and obtain advice appropriate to your circumstances where needed.