EMIR: ESMA issues opinion on portfolio margining requirements

The European Securities and Markets Authority (ESMA) has issued an opinion on portfolio margining requirements under Article 27 of Commission Delegated Regulation (EU) 153/2013 with regard to RTS on requirements for central counterparties (CCPs).

Paragraph 1 of Article 27 of the RTS allows for a CCP to offset or reduce the required margin across the financial instruments that it clears if the price risk of one financial instrument or a set of financial instruments is significantly and reliably correlated with the price risk of other financial instruments, and specifies the conditions on how much offsets can be allowed, allowing a CCP to apply a reduction of up to 100% of the difference between the sum of the margins for each product calculated on an individual basis and the margin calculated based on a combined estimation of the exposure for the combined portfolio where a CCP is not exposed to any potential risk from the margin reduction.

Under the European Market Infrastructure Regulation (EMIR) and its implementing measures, there is no specific definition of what constitutes the same instrument or product.

ESMA's opinion aims to clarify:

• the cases where margin reductions can be up to 100%; and
• when two contracts can or cannot be considered as the same instrument for the purpose of portfolio margining.