ESMA reviews the scope of clearing and derivatives trading obligations

The European Securities and Markets Authority, ESMA, has published its final report on the clearing (CO) and derivative trading (DTO) obligations to accompany the benchmark transition.
For over-the-counter (OTC) interest rate derivatives (IRD) denominated in EUR, GBP, JPY, and USD, the report proposes revised Regulatory Technical Standards (RTS) that that would modify the scope of the CO and DTO and that have been already submitted to the European Commission for endorsement. The report is a component of the shift away from EONIA and LIBOR and toward substitute benchmarks, particularly risk-free rates like €STR, SOFR, SONIA, and TONA.
In accordance with the G20 goals, ESMA’s proposed changes seek to guarantee a smooth benchmark transition while retaining an effective scope for these duties.
The proposals include:
+ for the CO – introduce the TONA OIS (with maturities up to 30 years) class and extend the SOFR OIS class (up to 50 years); and
+ for the DTO – introduce certain €STR OIS classes.
In order to encourage worldwide convergence as far as feasible, ESMA worked together with authorities from third country jurisdictions who are currently rewriting their respective CO and DTO.
In November 2021, ESMA had already presented a first batch of draft RTS to the European Commission (eventid=13635) that would change the scope of the CO and the DTO. These RTS have already come into effect (eventid=15598), (eventid=15661).