On 13th September the European Commission DG FISMA sent this letter to ESMA, asking for a response to the following topics:
- Whether better use should be made of circuit breakers in Regulated Markets covering energy derivatives, in response to high volatility.
- How to address issues with high levels of collateral being required by commodities firms to meet margin calls(see here), possibly by accepting a wider range of collateral.
- Whether the EMIR clearing threshold should still be adjusted in the light of market conditions (see here).
On Thursday, ESMA sent this response. It includes:
- A proposal for a new type of “trading halt”to address the volatility issue.
- Some concerns on accepting too wide a range of collateral.
- A request to quickly implement the EMIR clearing threshold changes.
- A request for extra reporting on commodity derivatives positions, including those that benefit from the “REMIT Carve Out”.
- A suggestion to change the Ancillary Activity Exemption that more firms are required to obtain financial authorisation.
We can expect a great deal more discussion on these topics.
On Friday, ESMA issued several updated sets of Questions and Answers documents on MIFID II, including the one on Commodity Derivatives, which can be found here. This primarily addresses the changes that resulted from the “Quick fix”(see here).