Under European Market Infrastructure Regulation (EMIR), certain OTC financial derivative transactions became subject to clearing with a central counterparty with an aim of reducing the counterparty risk of the parties to the said transactions.
The question arises as to how the limits on counterparty risk in OTC financial derivative transactions that are centrally cleared should be calculated by UCITS and whether UCITS should apply the same rules to both OTC financial derivative transactions that are centrally cleared and exchange-trade derivatives (ETDs). Indeed it is argued that the UCITS Directive should no longer distinguish between OTC financial derivative transactions and ETDs but between cleared and non-cleared OTC financial derivative transactions.
With this in mind, on the 22nd May, 2015 the European Securities and Markets Authority (ESMA) published an opinion wherein it calls for a modification of the UCITS Directive to take into account the clearing obligations for certain types of OTC financial derivative transactions under EMIR.
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