ESMA has correctly summarised the key difficulties in relation to the clearing obligation. The position stated in paragraphs 11 to 15 exactly reflects the experience of our medium sized and
smaller members. But we also draw ESMA’s attention to wider problems affecting small FCs. Our small members are beginning to report difficulty in finding swap providers prepared to deal
with them (whether on cleared or uncleared basis), or being quoted two prices, a favourable one based on CCP clearing, and an adverse one based on traditional bilateral settlement. We
suspect that the clearing obligation is, in isolation, only one – though probably the most important – part of a series of measures which are together having the unintended
consequence of reducing small FCs’ access to derivatives altogether. ESMA’s current proposal, though welcome, cannot deal with the wider problem. We would encourage ESMA to carry out
a wider study into this area.

Read the full response here.