Lynn Strongin Dodds looks at the recommendations made in response to ESMA’s consultation on margin transparency.
The responses are rolling in to the European Securities and Markets Authority’ (ESMA) consultation launched in June on draft regulatory technical standards (RTS) under Article 38 of the European Market Infrastructure Regulation (EMIR 3.0). While they are broadly supportive, industry groups such as the Futures Industry Association (FIA), International Swaps and Derivatives Association (ISDA) and the European Association of CCP Clearing Houses (EACH) are suggesting a few changes to ensure the rules are not excessively rigid.
Article 30 sets out transparency obligations for central counterparties (CCPs) and clearing service providers (CSPs). Based on the responses received, ESMA will prepare the final reports and submit the final draft to the European Commission by 25 December 2025.
ESMA was canvassing views on the type of information to be disclosed by clearing CSPs to their clients, in relation to costs and fees for the provision of clearing services. It was also looking for comment on the requirements regarding the CCPs’ margin simulation tool and CSPs’ margin simulations as well as the type of data CCPs and CSPs need to provide for their margin models.
The FIA has urged ESMA not to mandate overly prescriptive requirements for clearing member firms, particularly those that do not apply their own margin models but pass through clearinghouses’ margin requirements to clients.
FIA Chief Operating Officer and SVP of Global Policy, Jacqueline Mesa, said, “We strongly support the EU’s overarching policy objectives to enhance transparency and enable clearing members, clients and end-users to be better prepared for margin calls and associated liquidity needs, particularly under stressed market conditions. However, we urge ESMA to ensure that these RTS remain firmly aligned with the Level 1 mandate, both in scope and proportionality.”
According to FIA, Article 38(7) and (8) of EMIR places the primary transparency obligation on CCPs. CSPs, by contrast, should focus on forwarding CCP disclosures and providing additional information only where they impose their own margin add-ons.
A recent FIA survey of clearing members reveals that 86.5% of clients are charged CCP margin only, 10.5% face CCP margin plus CSP add-ons – usually multipliers – and just 3% are subject to proprietary CSP models. This means that CCP disclosures are the dominant factor shaping client exposures, while CSP transparency needs are limited. This is why the FIA is warning against placing heavier-than-necessary obligations on CSPs.
The FiA also expressed its concerns over a proposal requiring CSPs to provide “two scenarios related to the individual risk of the client”. It argues this would go beyond CCP obligations and would be operationally unfeasible for CSPs with large client bases.
The FIA believes that detailed scenario testing for each client would add cost and complexity without delivering proportionate benefits. “Overly burdensome or non-risk-aligned requirements on EU-based CSPs, particularly where similar expectations are not imposed globally or not in line with international standards, may inadvertently weaken the relative attractiveness and scalability of clearing services in Europe, “Moss added.”
Separately, FIA has called for a proportionate compliance timeline that reflects the operational and technological complexity of the rules. In particular, FIA recommends a staggered implementation — with CCPs required to comply first, followed later by CSPs once CCP frameworks are in place. Without such staging, FIA warns, CSPs could face regulatory breaches if they are unable to access CCP disclosures in time.
ISDA is also calling for a timely implementation period which it believes should be around 18 months.
As to the actual RTS, it notes that there is room for achieving transparency more efficiently and recommends a more direct approach whereby CCPs make model documentation and simulators directly available to clients. On cost of clearing, ISDA highlights that CSPs should be able to meet the new requirements by referring to existing disclosures under the Markets in Financial Instruments Directive (MiFIR).
Meanwhile, EACH proposes that the size of a CCP should be taken into account during implementation given the scope of the requisite changes to IT systems. It believes that adopting a suitable phase-in approach could spread the integration of new features, such as incorporating initial margin add-ons over a longer period, rather than requiring full implementation in one step.
Overall, it advocates a more balanced approach, with CCPs disclosing information only when it is not already available through other means or that are, in fact, used by market participants.” Disclosing detailed information could expose proprietary algorithms and intellectual property that CCPs have developed, “it added.
Also, EACH noted that” focusing on the usability of information should help market participants distil the benefits of aggregate information on key model characteristics rather than excessive technical details that may confuse clearing members and their clients.”
The trade group said this could be achieved by excluding proposals that are not required by EMIR Level 1 such as sensitivity testing or already provided by other means such as the back testing obligation within the CPMI-IOSCO quarterly report.
EACH also noted the ESMA proposals should not go beyond Basel Committee on Banking Supervision (BCBS), the BIS Committee on Payments and Market Infrastructures (CPMI) and the International Organisation of Securities Commissions (IOSCO0 guidelines on margin transparency which only require main/material and not all add-ons to be included in the simulators.
