On Jan. 8, the European Securities and Markets Authority opened a public consultation on draft guidelines that aim to clarify the implementation of anti-procyclicality provisions for central counterparties under the European Market Infrastructure Regulation. EMIR requires CCPs to monitor and account for the procyclical effects of margin calls and collateral haircuts and implement certain types of anti-procyclicality measures. The purpose is to reduce the risk that a spike in margin requirements might amplify shocks to market conditions during a period of instability and harm a clearing member's ability to manage its liquidity.
ESMA said the guidelines seek to promote “common, uniform and consistent” application of the anti-procyclicality provisions at the 16 clearinghouses authorized under EMIR. The guidelines cover three areas:
- the monitoring of margin procyclicality
- the implementation of anti-procyclicality measures
- the disclosures to facilitate margin predictability