The European Markets Infrastructure Regulation introduced a clearing obligation for over-the-counter (“OTC”) derivatives in 2012, but pension scheme arrangements (“PSAs”) were granted a temporary exemption from the obligation. The reason of granting the exemption was to allow time for PSAs to find viable technical solutions to clear their OTC derivatives, as they would face difficulties in sourcing cash to meet the variation margin requirements. This exemption has been renewed several times since 2012 and is currently due to expire in June 2022.
On 25 January 2022, the European Securities and Markets Association (“ESMA”) sent a letter to the European Commission recommending the end of the current exemption from the clearing obligation with a one-year implementation period. In its letter, ESMA stated that the technical solutions are available and PSAs are ready to clear their OTC derivatives, but they should be given sufficient time before the obligation takes effect. Therefore, in its letter ESMA recommended starting to apply the clearing obligation to PSAs from 19 June 2023. The final decision will be made by the European Commission.