ESMA Pulls Back from Mandatory Clearing for FX NDFs
The European Securities and Markets Authority announced on Feb. 4 that it has decided against moving forward with a proposal to mandate central clearing for non-deliverable currency forwards.
ESMA said it may propose clearing requirements for NDFs at a future date, but explained that more time is needed to address certain issues identified by market participants in their feedback on the proposal. These issues included concerns about the number of clearinghouses with the ability to clear NDFs and the lack of experience of NDF clearing.
The announcement marked an important change in ESMA policy on this issue. The European regulator issued a consultation paper in October that proposed a detailed set of regulatory technical standards for clearing NDFs and an implementation schedule starting in the fourth quarter of 2015.
In its February statement, ESMA also noted the importance of “international consistency” in the implementation of such a clearing obligation. The Commodity Futures Trading Commission is also considering whether to mandate clearing for NDFs but has not yet issued a proposal or determined when such a mandate should be implemented.