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9 August 2012
In response to ESMA's (European Securities and Markets Authority) consultation paper on 'Draft Technical Standards for the Regulation on OTC Derivatives, Central Counterparties and Trade Repositories' – otherwise known as EMIR Level 2 – the Investment Management Association (IMA) welcomes the guidelines developed by ESMA, comments on key areas of concern for investors such as margin, collateral, FX, timetable, and recommends an alternative clearing approach to protect investors' assets.
The EMIR Regulation is intended to reduce the risk associated with the OTC derivatives market and establish common rules for central counterparties and trade repositories.
Jane Lowe, IMA's Director of Markets, said:
“This is a good first set of Technical Standards for EMIR bringing clarity and order to a complex area of work.
“However we would favour a clearing approach where the clearing house can at all times identify the true owner of positions and assets so that porting of these can occur with certainty in the event of a clearing member default. This provides critical added protection for the investor. Currently the structure obscures the identity of the client which makes it much more difficult for assets to be returned to the rightful owner in a default situation.”
The IMA also challenges the view that investors are not ready for central clearing explaining the reasons they have not yet engaged are because contractual terms are not attractive and the development of legally secure arrangements by the CCPs for individual client segregated accounts are not yet adequate.