On 4 October 2019, the European Securities and Markets Authority (“ESMA”) launched a consultation paper on possible amendments to the trading obligation under the Markets in Financial Instruments Regulation (“MiFIR”), following the introduction of the EMIR Refit Regulation (“EMIR Refit”).

The recent changes introduced by EMIR Refit modify the scope of counterparties subject to the clearing obligation. EMIR Refit introduced an exemption from the clearing obligation for small financial counterparties (“SFC”) and modified the mechanism to determine the obligations of non-financial counterparties above the clearing threshold (“NFC+”).

EMIR Refit was not accompanied by direct amendments to MiFIR, which currently leads to a misalignment between the scope of counterparties subject to the clearing obligation under EMIR and the derivatives trading obligation under MiFIR. In this regard, EMIR Refit mandated ESMA to assess whether the derivative trading obligation under MiFIR should be aligned with changes to the clearing obligation introduced by EMIR Refit, and to submit its findings in a report to the European Commission.

As a first step, the ESMA consultation paper is seeking views on the necessity and appropriateness of aligning the derivatives trading obligation under MiFIR with changes made under EMIR Refit to the clearing obligation. ESMA’s initial proposal in the consultation paper would be to formulate a recommendation to the European Commission to align the scope of counterparties subject to the clearing and the trading obligation.

The deadline for comments on the consultation is 22 November 2019. ESMA intends to submit a final report to the European Commission by 18 May 2020. On the basis of ESMA report, the European Commission will prepare a report that would be submitted to the European Parliament and to the Council by 18 December 2020.

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