MiFIR - Exemption from the trading obligation

As part of the review of the Markets in Financial Instruments Regulation (MIFIR), due to come into force at the end of first-quarter 2024, the European Commission would be entitled to grant a trading obligation exemption for certain derivatives (including the most liquid swaps and credit default swaps) on multilateral trading facilities in the European Union or equivalent facilities in third countries. Exemptions would be granted in certain circumstances, based on information sent by institutions to their competent authorities.

AMAFI reached an agreement with the Commission that exemption applications could be reviewed before MIFIR comes into force, so that exemptions could be effective from that date. AMAFI is therefore working with the French securities regulator, AMF, and the European Commission to establish the content of the applications that will enable institutions to be covered by the exemption.

This is a key issue for the competitive performance of institutions in France and the rest of the EU in these products. The exemption will shape their ability to propose cost-effective solutions to customers outside the EU, insofar as the trading obligation created an unfair playing field that severely eroded their market shares.

EMIR 3.0

It is not known at this stage when EMIR 3.0, Europe's new derivatives regulation, will come into effect. However, AMAFI and other Paris-based associations believe that national and European supervisory authorities should be asked to extend the current exemption for equity options clearing to that date. Currently, under EMIR regulatory technical standards, European market participants are covered by a temporary exemption, set to expire on 4 January 2024, from the requirement to post bilateral margin (variable and initial) for equity options.

In early November, AMAFI, the FBF, the AFG and Paris Europlace wrote to the AMF and the ACPR asking them to make a request to the European authorities to extend the exemption. That outcome is likely under EMIR 3.0: the co-legislators are agreed on extending the derogation for an unspecified duration, while non-EU jurisdictions – including the United States and the United Kingdom – do not apply such a requirement.