ESMA published its final report on post-trade risk-reduction services on 20 October. The underlying report says the draft regulatory technical standards were transmitted to the European Commission on 9 October. They specify conditions for qualifying OTC derivative transactions under the EMIR 3 clearing exemption.[1][2]
The baseline matters: the report states that the Level 1 exemption entered into force on 24 December 2024. The current initiative develops the detailed standards for that existing exemption; it does not create a general release from mandatory clearing.[2]
Three services covered by the draft
| Service | Proposed qualifying mechanism |
|---|---|
| Portfolio compression | Terminate or reduce existing derivatives and replace them with lower combined notionalSource 2 |
| Portfolio rebalancing | Add non-price-forming trades to reduce counterparty risk; notional can increaseSource 2 |
| Basis-risk optimisation | Add non-price-forming trades to reduce basis risk in an existing hedged portfolioSource 2 |
Operational safeguards in the draft RTS
| Requirement | Proposed control |
|---|---|
| Risk reduction | Reduce overall risk in each submitted portfolio; specific risk increases must remain within participant tolerancesSource 2 |
| Uncleared risk | No increase in aggregate net uncleared risk in any submitted portfolioSource 2 |
| Market-risk neutrality | Market exposure unchanged or within minimal participant tolerancesSource 2 |
| Algorithm controls | Test before deployment or substantial updates and guard against external manipulationSource 2 |
| Acceptance | Accept the exercise in full rather than select individual trades; participants may decline an outcome outside their tolerancesSource 2 |
| Records | Retain transaction/exercise records for at least ten years after the exerciseSource 2 |
| Supervisory reporting | Annual compliance confirmation, plus prompt notice of material changes or non-complianceSource 2 |
The report gives the Commission a three-month endorsement decision period under the ESMA Regulation. Its draft also provides for entry into force on the twentieth day after publication in the EU Official Journal. Those procedural stages remain separate from ESMA’s publication and from the already-operating Level 1 exemption.[2]
Sources & further reading
- ESMA specifies requirements to facilitate safe use of post-trade risk reduction services European Securities and Markets Authority · 20 Oct 2026 · Accessed 26 Oct 2026
- Final report on PTRR services: ESMA74-1049116226-981 ESMA · 20 Oct 2026 · Accessed 26 Oct 2026