ESMA sends draft PTRR rules to Brussels, setting terms for the EMIR 3 clearing exemption

On 20 October the European Securities and Markets Authority (ESMA) published its final report on draft regulatory technical standards (RTS) for post-trade risk reduction (PTRR) services. The RTS set the conditions under which OTC derivatives resulting from those services are exempt from the EMIR clearing obligation.

The report says ESMA submitted the draft RTS to the European Commission on 9 October. The Commission has three months to decide whether to endorse them. Until it does, the standards are not law.

Background

EMIR 3 entered into force in December 2024. Its Article 4b introduced a conditional clearing-obligation exemption for transactions resulting from PTRR services, which it describes as non-price-forming trades that reduce risk “without altering the market risk profile of the portfolios concerned”. The main examples are:

• portfolio compression
• portfolio rebalancing
• basis-risk optimisation

The exemption has applied since 24 December 2024. ESMA describes the period since then as an interim one in which the exemption is in force without detailed rules. It keeps a public register of PTRR service providers.

ESMA consulted in February 2026. Feedback was “broadly supportive”, so the final text “corresponds largely to the proposal presented in the CP”.

What the draft RTS require

According to the final report, the RTS cover:

• Scope: the PTRR services and resulting transactions that qualify for the exemption.
• Risk conditions: common conditions on market-risk neutrality and risk reduction.
• Provider obligations: covering transparency to participants, algorithms, execution, controls and record-keeping.
• Monitoring: a process for monitoring use of the exemption, including how national authorities notify the names of authorised providers.

On market-risk neutrality, ESMA’s consultation found that firms already treat small changes in risk “within small tolerances” as neutral, but that “there is no hard threshold”. The final draft does not add one. Instead:

• providers must design their methodologies and algorithms so that exercises achieve neutrality
• tolerances become mandatory for all PTRR service types, as they already are for compression
• providers must reject excessive tolerances set by users
• providers must give authorities information showing that an exercise was market-risk neutral

Respondents told ESMA that participants typically set minimal tolerances before each run. Examples are delta-risk tolerances for compression and counterparty credit-exposure tolerances for rebalancing.

ESMA stresses that the RTS build on existing practice. Because EMIR requires providers to be MiFID-authorised firms, the RTS rely on existing MiFID rules on matters such as conflicts of interest. A separate section of the report covers transactions to be recorded for the parallel MiFIR exemption from transparency, the derivatives trading obligation and best execution.

Why it matters

Compression and rebalancing are central to how dealers manage uncleared and cleared books. If the exemption were applied loosely, it could let firms keep trades out of clearing. That is why ESMA says the rules are designed so the exemption “does not lead to the misuse of the clearing obligation”.

For providers, the main effect is documentation. They will need to evidence neutrality for each exercise and be able to show supervisors why a user’s tolerance was accepted or rejected.

For dealers, little should change in practice if their current runs already use tight tolerances. Compliance teams should still map their existing PTRR activity against the draft text before the Commission decides.

Sources

• ESMA press release, 20 October 2026 — https://www.esma.europa.eu/press-news/esma-news/esma-specifies-requirements-facilitate-safe-use-post-trade-risk-reduction
• ESMA final report, ESMA74-1049116226-981 — https://www.esma.europa.eu/sites/default/files/2026-10/ESMA74-1049116226-981_Final_Report_on_post_trade_risk_reduction_services_RTS_Exemption_CO.pdf