ESAs letter to the European Commission on EMIR bilateral margining framework and equity options

The ESAs have written a letter to Mairead McGuinness, Irene Tinagli, and Elisabeth Svantesson, who hold important positions in the EC, EP, and Council of the EU, respectively. The letter addresses the issue of the Bilateral Margin RTS under EMIR. The RTS were initially developed and subsequently amended by the ESAs to align with international standards set by the BCBS and the IOSCO.
The Bilateral Margin RTS include a deferred date of application for non-centrally cleared OTC derivative contracts, specifically equity options. This deferred date was extended in the past to accommodate exemptions granted by other jurisdictions. However, the current exemption, along with the exemption for intragroup derivative contracts, is set to expire on 4 January 2024.
As the deadline approaches and the situation in other jurisdictions stabilizes, the ESAs seek clarity from the EC and co-legislators on the permanent treatment of equity options concerning bilateral margining. The ESAs acknowledge that different views exist on whether an exemption for equity options is necessary, as there are arguments both for and against it. On one hand, there may be no prudential grounds for the exemption, but on the other hand, it would align with approaches taken by other jurisdictions and maintain the competitiveness of EU counterparties.
The ESAs request that the ongoing EMIR review addresses this issue and welcomes clarifications from the EC and co-legislators on the applicable regime for equity options from 4 January 2024, onwards. They offer their technical input and support while awaiting guidance from the EC and co-legislators.