ESMA has published its 2nd Annual Report on EMIR penalties and supervisory measures.
Report highlights the supervisory strengths as well as areas for improvement identified in 2018 based on a survey conducted with 31 EEA NCAs.
NCAs responses were based on the TR data as well as the data submitted by market participants directly to NCAs. Although no fines were administered in 2018, the report points to areas likely to be in focus in the future: examining trading patterns to identify potential market exploitation strategies. It highlights the need to pay closer attention to clearing obligation, NFC- and third country entities.
Report highlighted that NCAs that might benefit from coordinating activities – these areas were partially covered by the EMIR REFIT text under Articles 4a and 10 of EMIR
Some of the identified challenges are related to the supervision of NFCs clearing obligation ability to identify excessive reliance on the exception applied to hedging positions as well as identifying trading strategies designed to exploit regulatory arbitrage that can result in circumvention of clearing obligation requirement in relation to third country entities trading contracts with substantial effect in the Union and which would be subject to the clearing obligation if established in the EU. It’s worth noting that majority of countries only relied on the counterparties notification in regards to clearing obligation and only 22% performed proactive checks in 2018. This is likely to change in the future.