ESMA Guidelines and Recommendations

ESMA issues technical standards on indirect clients

ESMA Guidelines and Recommendations

Date: 06 February 2016

On 26 May 2016, the European Securities and Markets Authority (ESMA) issued two final draft regulatory technical standards (RTS) on indirect clearing under the Markets in Financial Instruments Regulation (MiFIR) and the European Market Infrastructure Regulation (EMIR) respectively. The draft RTS clarify provisions of indirect clearing arrangements for OTC and exchange-traded derivatives and help to ensure consistency and that an appropriate level of protection for indirect clients exists.

The draft RTS provide provisions on the following key points:  

  • Default management: in order to take into account that there can be a conflict of law between EU regulation and certain national insolvency regimes, the draft RTS propose an obligation of means, i.e. relying on having appropriate default procedures and committing to trigger them;
  • Choice of account structures to be offered to indirect clients: the draft RTS provide a choice of possible account structures that reflect the current practice in the OTC derivative and the exchange traded derivative markets in terms of level of segregation. Furthermore, the number of accounts required has been simplified to minimise the operational burden for market participants; and
  • Long chains: the draft RTS, under certain conditions, allow indirect clearing chains that are longer than the standard chains of four entities.

ESMA has sent its draft RTS on indirect clients for endorsement to the European Commission which has three months to accept or reject them. This is followed by a non-objection period by the European Parliament and Council. 


The publication of today’s final draft RTS follows a public consultation conducted end-2015. In general, EMIR introduced a clearing obligation for certain OTC derivative contracts.  MiFIR extended the scope of the clearing obligation to all derivative transactions concluded on a regulated market.  This means that the vast majority of derivative transactions will be cleared. Counterparties will clear their transactions by becoming a clearing member itself, by becoming a client of a clearing member or by establishing an indirect clearing arrangement with a clearing member.

Please see here for a copy of the Final Report.

For more information on MiFID Firms click here.