3 February 2016
On 29 January, FIA submitted its response to the European Commission Consultation - Call for Evidence: EU Regulatory Framework for Financial Services. FIA's response covers key recommendations from members on, among other areas: the leverage ratio; indirect clearing; equivalence determinations; commodities firms - including capital issues as well as position reporting; trading and e-trading; reporting; definitions; and global solutions. With regard to concerns about the leverage ratio, FIA members recommend that the Basel Committee and European Commission should amend the leverage ratio in the area of exposure value calculation for client-cleared derivatives to recognise the exposure-reducing effect of segregated margin. The response calls for an amendment to the leverage ratio methodology to move from CEM to SA-CCR (without modifications) so that it is not punitive to client clearing of derivatives and end retail investors (e.g. through pension funds) or market participants with off-setting positions, including amending weightings and other add-ons.
On the topic of indrect clearing, the FIA response calls for ESMA to publish final Regulatory Technical Standards (RTS) that enable a scalable model for indirect clearing of OTC and exchange-traded derivatives which addresses insolvency and property law issues contained in earlier RTS proposals under EMIR and MiFIR. It also suggests a limit in the scope of requirements to EU CCPs, to EU indirect clients' and to the first four parties in a clearing chain. Clearing members should also have discretion over to whom they offer indirect clearing.
Additionally, FIA suggests that there should be greater collaboration and coordination among legislators and regulators across the globe with regard to consistency in global timelines for implementation of high-level political commitments. For example, the European Commission should wait for the completion of the CPMI-IOSCO paper on CCP recovery and the FSB paper on resolution prior to formulating its own CCP Recovery and Resolution implementation work.
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