The European Securities and Markets Authority (ESMA) proposed measures on Friday 14 October to alleviate the liquidity pressure on non-financial counterparties (NFCs) active on gas and electricity regulated markets cleared in EU-based CCPs.
In its final report, ESMA provides draft regulatory technical standards that temporarily extend, for a period of 12 months, the pool of CCP eligible collateral to uncollateralised bank guarantees for NFCs acting as clearing members and to public guarantees for all types of counterparties.
In response to the European Commission regarding the current level of margins and excessive volatility in energy derivatives markets, ESMA had already proposed, on Thursday 22 September, concrete solutions to facilitate the functioning of European financial and energy markets (see EUROPE 13030/17). On Tuesday, it will present new proposals to deal with the volatility of energy markets.
Recent political and market developments have led to significant price and volatility increases on energy markets, which have triggered substantial margin increases by CCPs to cover the related exposures. These margin increases have created liquidity strains on non-financial counterparties (NFCs), which typically have fewer and less liquid assets. This forces them to either reduce their positions or leaves them unproperly hedged and exposed to further price variations.
The final report was sent to the European Commission. It will then be subject to a scrutiny procedure by the European Parliament and the EU Council with a view to a proposal for a delegated act.
To read the ESMA report: https://aeur.eu/f/3nd (Original version in French by Anne Damiani)