ESMA consults on post-trade risk reduction services under EMIR 3

ESMA has launched a public consultation on proposed technical standards for post-trade risk reduction (PTRR) services under the revised EMIR framework (EMIR 3). This initiative, developed within the context of the Digital Operational Resilience Act (DORA), aims to establish a clear regulatory regime for these portfolio compression and similar services. The consultation paper details draft rules covering authorization, operational requirements, and conduct standards for PTRR service providers.

The changes primarily affect entities providing PTRR services, who will require authorization as a new type of EU financial market infrastructure. Users of these services, including banks, investment firms, and central counterparties, are also impacted as they must ensure their service providers are compliant. The rules are designed to enhance the safety, transparency, and resilience of these critical risk mitigation tools.

Compliance teams at both potential PTRR providers and their client firms should immediately review the consultation paper to assess its implications. The next step is to prepare a formal response to ESMA during the consultation period, which closes on 24 September 2024. Firms should also begin gap analyses against the draft requirements to prepare for future authorization or due diligence processes.