ESMA published final draft technical standards on 20 October for post-trade risk-reduction services, spelling out how providers and users should support clearing-exempt derivatives transactions. The package addresses information supplied to participants, exercise management, provider controls and regulatory monitoring.[1]
The underlying EMIR 3 exemption has applied since 24 December 2024. These detailed standards remain subject to Commission endorsement. The report records submission on 9 October and a three-month Commission decision period, distinguishing that procedural milestone from the public release.[2]
A portfolio can become safer while its notional grows
The draft covers compression, rebalancing and basis-risk optimisation. Compression terminates or replaces trades to reduce notional amounts. Rebalancing and basis-risk optimisation can instead add non-price-forming transactions while reducing risk. Their notional totals can therefore rise; the tests concern market-risk neutrality and risk reduction.[2]
Providers would retain exercise records for at least ten years and confirm compliance annually to their national authority. Reporting would distinguish all changes to the provider’s rules from material changes to its methods and algorithms, avoiding a requirement to report every technical adjustment as material.[2]
For a derivatives desk, that distinction makes the evidence behind an optimisation exercise commercially important. A smaller headline portfolio is an incomplete measure of the result. Service selection and internal approval need to consider what risk the exercise removes and how the outcome can be demonstrated.[2]
ESMA says its approach builds on established market practices and existing rules where they already meet the objective. For brokers and dealers arranging these services, the practical work is to connect the provider’s disclosures, execution process and control evidence to their own use of the exemption. That gives operational teams a defined framework around an existing risk-management activity.[1]
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 20 Oct 2026
- Final Report: Regulatory Standards on the requirements for Post-Trade Risk Reduction services for the purpose of the clearing obligation exemption under EMIR European Securities and Markets Authority · 20 Oct 2026 · Accessed 20 Oct 2026