On January 8, 2018, the European Securities and Markets Authority (“ESMA“) published a consultation paper containing draft guidelines on anti-procyclicality margin measures for central counterparties (“CCPs“) (ESMA70-151-1013).

Actions by CCPs such as margin calls and ‘haircutting’ collateral are known to have procyclical effects. Under Article 41 of the European Market Infrastructure Regulation (“EMIR“), CCPs are required to monitor and, where necessary, revise margin levels to reflect market conditions. Under Article 28 of Commission Delegated Regulation (EU) No 153/2013 (which itself contains various regulatory technical standards (“RTS“) on requirements for CCPs), CCPs must adopt (at least) one of three anti-procyclicality (“APC“) margin measures to address the above issues.

The draft guidelines seek to clarify how EMIR is applied within the context of the procyclicality of margins. They aim to achieve a consistent application of Article 41 EMIR and Article 28 of the RTS, and cover how margin procyclicality is monitored, how APC margin measures are implemented, and help govern disclosures that are intended to facilitate margin predictability.

The deadline for responses on the draft guidelines is February 28, 2018, and  ESMA expects to publish the final guidelines by the first half of 2018.

To view the draft guidelines, please click here.