The European Securities and Markets Authority (ESMA) has published a final report proposing revisions to the Regulatory Technical Standards (RTS) on anti-procyclicality (APC) margin measures. According to a press release, the revision aims to “further harmonise CCP policies and procedures for selecting, assessing, and reviewing APC margin measures”, “provide more granularity on design and use of specific APC tools”, and ensure “sufficient flexibility for the CCPs to adapt to given market situations”.

In its report, ESMA states that the review was motivated by the market turmoil that occurred following Covid-19. The authority’s analysis at the time revealed “a lack of convergence regarding the implementation of the APC tools across EU CCPs”. The first draft of the review was published on 27 January 2022. Additional proposals have since been added after further research and adjustment for market developments following the Ukraine war.

It’s all about the buffers

The European Market Infrastructure Regulation (EMIR) requires CCPs to “regularly monitor and, if necessary, revise the level of margins to reflect current market conditions”. Some proposals in the revised RTS are stated below.


• When assessing the effectiveness of their APC measures, CCPs should take into account the effects of those measures across different price and yields levels.
• The current RTS requires CCPs to apply a margin buffer of at least 25 percent. The revised proposal acknowledges that there are cases where price or margin changes can be more than the size of the buffer. The buffer could then be eroded early and not help mitigate any further increases. In these cases, the CCP should consider a higher buffer.
• CCPs should develop and maintain policies around the arrangements used to limit the procyclicality of margin requirements. The selection of the APC tool should take into account the CCP’s risk management practices, the characteristics of the product offering, and its membership structure.