In 2017, the EU derivative market increased further in size and now amounts to €660 trillion. The data shows that mandatory clearing obligations of EMIR have significantly increased the volume cleared by a Central Counterparty (CCP). As such, the effectiveness of EMIR clearing and reporting obligation has been demonstrated.
On 18 October 2018, ESMA published the first Annual Statistical Report on the EU’s derivative market. The objective of the report is to facilitate entity oversight by national and EU supervisory authorities and highlight potential risks. This consolidated market view was made possible by the reporting obligations under EMIR for exchange-traded derivatives (ETD) and over-the-counter (OTC) derivatives.
Findings
The key findings of the report, which are based on the data by the trade repositories (TR), shows the following:
- the EU derivatives market grew from €605tn to €660tn in gross notional amount outstanding by the end of 2017;
- 74mn open transactions were reported at the end of 2017.
- OTC derivatives make up the majority with 86% of the total derivatives traded in the EU, the total amount of ETDs has increased from 13% of the market share to 17%.
Broken down into asset classes:
- interest rate derivatives (IRDs) dominate the market share with 69% of the total amount outstanding;
- currency derivatives (CD) make up 12% of the market share;
- other asset classes, such as equity, credit, and commodity derivatives thus each account for less than 5% of the total amount outstanding; however, concentration and interconnectedness levels disproportionately increased for commodity derivatives.
Clearing Effectiveness
- Clearing is of significance in the CD and IRD market, but hardly takes place across other asset classes.
- Thus, only where EMIR has mandated a clearing obligation, is clearing of significance.
- The EU market clears the majority of its contracts in EU CCPs, which will be of additional significance surrounding the expected EMIR changes regarding Brexit.
Next Steps
In light of the findings of the statistical report, ESMA plans to continue to enhance investor protection by:
- Continuing to assess risks to investors, markets, and financial stability;
- Complete the single rulebook for EU financial markets;
- Promote supervisory convergence; and
- The direct supervision of specific financial entities.
Let us assist you to ensure your EMIR frameworks are aligned and prepare you today for the EMIR REFIT obligations through a high-level impact assessment, a gap assessment, and the implementation support.
