In November, ESMA published a Discussion Paper on the conditions of the Active Account Requirement (AAR) under EMIR 3. From DUFAS, we responded to this paper expressing support that compliance with the AAR should not create excessive additional costs. At the same time, we express some concerns.
From DUFAS, we support the principle that demonstrating compliance with the Active Account Requirement (AAR) should not impose undue additional costs on market participants. Nevertheless, we are concerned about the operational and financial burdens arising from the additional information requirements under EMIR 3.0 AAR, as well as the need for regulators to assess existing information in a different way. This could lead to increased costs for both the industry and regulators. We emphasize that standardization of reporting requirements, as proposed by ESMA, is a crucial prerequisite for the proposed obligations.
Key points:
- Additional information requirements: We are concerned about the amount of additional information participants must provide and the review of existing information by regulators, which increases operational pressures and costs.
- Derivatives classification: The current classification of derivatives into contract classes and subcategories does not match practice. We advocate fewer categories based on size, as its members mainly use derivatives with maturities of more than 15 years and volumes above €50 million.
- Uncertainties: There are ambiguities around the interpretation of "less than five sub-categories with non-zero transactions" and the exclusion of transactions at an EU CCP. We call on ESMA to provide clear numerical examples.
- Reference Period: We propose to extend the reference period for the AAR from six months to one year. This avoids the need for additional transactions to meet the requirements, especially since trading in large notional amounts does not always reflect regular activity.
We appreciate the opportunity to provide input and support the goal of transparency and consistency in derivatives reporting under EMIR 3.0. We remain open to working with ESMA and other stakeholders to refine the proposals and better align regulation with market practices.
