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ARTICLE · 29 JULY 2014

European Commission Responds To Frontloading Issue Raised By ESMA

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On July 17, 2014, ESMA published a letter from the European Commission in response to ESMA’s letter regarding the frontloading issue under the EMIR.

European UnionFinance and Banking
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On July 17, 2014, the European Securities and Markets Authority ("ESMA") published a letter from the European Commission (dated July 8, 2014) in response to ESMA's letter on May 8, 2014 regarding the frontloading issue under the European Market Infrastructure Regulation ("EMIR"). Frontloading is the requirement under EMIR for OTC derivatives to be cleared which are entered into after a central counterparty ("CCP") has been authorized/recognized under EMIR to clear certain classes of derivative but before the application of the clearing obligation. The European Commission acknowledges the issues that the frontloading obligation might present but points out that EMIR provides for the potential adjustment of the application of the frontloading obligation through the determination of minimum remaining maturities as adapted for each asset class. The Commission's view is that the frontloading obligation should not be applied before parties could reasonably foresee

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