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EMIR FX: ESMA pours murk into the fog

The long-running saga of FX derivatives’ status under EMIR was not made appreciably clearer by comments from ESMA Chairman Steven Maijoor last week. Speaking to Reuters on Wednesday, Maijoor opined that FX derivatives will have to be reported but not cleared, “Personally, I don’t expect there to be any clearing requirement for forex derivatives in the forseeable future”.

EMIR takes product definitions from Section C of Annex I to MiFiD; “FX Forwards” are listed in point 4, but without any definition of the term. Article 4(2) MiFiD empowers the Commission to issue clarification via a delegated act. The Commission and ESMA have so far been unable to publicly answer the fundamental question of when spot FX becomes Forward FX. From the high office he commands, it is likely that Mr Maijoor’s “foreseeable” represents a significant distance; however, this is not a question that benefits from casual guidance- the market requires clarification and fact rather than rumour. Neither is “foresight” a term that springs readily to mind in characterising EMIR’s implementation to date.

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