knowledge 20 December 2023 |

Better Late Than Never! ESAs Issue EMIR “No-Action” Confirmation

The European Supervisory Authorities1 (the “ESAs”) on 20 December 2023 published joint draft regulatory technical standards (the “Draft RTS”) proposing a two-year extension, to 4 January 2026, to the current time-limited exemption from the EMIR margin requirement for non-centrally cleared OTC single-stock equity options and index options (the “Relevant Equity Options”)2.

Given that the current exemption is due to expire on 4 January 2024, the Draft RTS are accompanied by a “no action letter” 3 providing that:

“From 4 January 2024 until the entry into force or rejection of the proposed amendment to the Commission Delegated Regulation 2016/2251 or the adoption of any long-term solution in the context of the EMIR revision, whichever occurs first, the competent authorities should not prioritise any supervisory or enforcement action in relation to the requirements set out in Article 11 of Regulation 648/2012 as specified in Articles 9 to 18, points (c), (d) and (f) of Article 19(1), Article 19(3) and Article 23 of Regulation 2016/2251 in respect equity options.”

This is a very welcome development as the derivatives industry has been pressing for some time for a legislative resolution of this issue and, pending that resolution, issue of no-action relief; most recently in this 10 November 2023 letter from various industry associations to the ESAs.

The ESAs have noted that this interim solution is proposed in the context of the ongoing EMIR Review negotiations, which they anticipate should provide a decision regarding the treatment of Relevant Equity Options with respect to the EMIR margin requirement4.

  1. The European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority.
  2. See Commission Delegated Regulation (EU) 2016/2251 of 4 October 2016 supplementing Regulation (EU) No 648/2012 of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories with regard to regulatory technical standards for risk-mitigation techniques for OTC derivative contracts not cleared by a central counterparty (the “Margin RTS”), here, at Regulation 38(1)).
  3. As regards such “no-action” letters more generally, see here.
  4. In their 13 June 2023 letter sent to the European Commission, European Parliament and the Council of the European Union (see here), the ESAs highlighted the need to have a clear decision on this issue as part of the ongoing EMIR Review. In proposing this interim solution, the ESAs have noted amendments to EMIR agreed by the European Parliament's Committee on Economic and Monetary Affairs on 28 November 2023 and the Committee of Permanent Representatives in the European Union on 6 December 2023, which introduce specific provisions on Relevant Equity Options including a permanent exemption from the EMIR margin requirement.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.