Markets View - March 2026

LME Outage

Earlier this week, on 16 March 2026, the London Metal Exchange (LME) experienced a material electronic trading disruption. The LMEselect electronic trading platform entered a technical halt at approximately 14:43 GMT due to a failure in the primary electronic matching engine. The outage affected all core base metals (copper, aluminium, zinc, lead, nickel and tin), with prices ceasing to update on major market data platforms affecting all core base metals contracts. While trading has since resumed, the incident has important implications for price formation, hedging, documentation and operational risk, particularly given the timing of the outage during the Closing Price window and the LME’s declaration of a Disruption Event, and the proposed market reforms to increase increased reliance on electronic liquidity and on screen price formation.

At The Threshold: EMIR Clearing Threshold Changes

Both UK and EU regulators have been active on EMIR clearing thresholds this month. Here's what you need to know.

UK EMIR

The FCA is consulting on increases to UK EMIR clearing thresholds in CP26/8 (Chapter 7), published on 06 March 2026 and closing on 13 April 2026 (as we flagged in a recent Insights article). The key proposal is to increase the clearing threshold for commodity derivatives from €3bn to €5bn measured on a 12-month rolling average basis – a temporary relief to reflect rising commodity prices (and likely also with one eye on the EU EMIR threshold – see below). This is a transitional measure pending consideration of broader changes to the clearing regime under UK EMIR.

EU EMIR

The new clearing thresholds under EU EMIR

ESMA published a final report with draft RTS on 25 February 2026, following a consultation in April 2025. The new regime (under EMIR 3) introduces a distinction between uncleared positions and aggregate positions, with the latter applying only to FCs and only for asset classes subject to the clearing obligation (IRD and credit), to “better recognise the benefits of clearing”.

The RTS could be published in the OJ as soon as summer 2026 and come into force 20 days later, although it is difficult to be certain on the timing, and implementation may well be later than this.

The mooted "sixth bucket" for other derivatives has been shelved. Importantly, the calculation for NFCs will now be at entity level rather than group level (the calculation for FCs continues to be at group level unless the provision permitting certain UCITS and AIFs to calculate at the level of the fund applies).

ESMA has confirmed that counterparties are only required to perform their annual recalculation against clearing thresholds at their usual time of year (typically June) after the RTS enters into force, unless they wish to recalculate earlier to benefit from the changes. See our Insights publication for more detail.

Diverging UK/EU regimes

Going forward, those directly in scope for both UK EMIR and EU EMIR – or indirectly impacted through trading with UK and EU dealers – will need to run multiple sets of calculations. This could result in certain counterparties being FC+ or NFC+ under one regime and FC- or NFC- under the other, with significant practical consequences for clearing, margining (including UMR), and reconciliation requirements. We would be happy to assist as always with any specific queries you may have.

AAR you Ready? EU EMIR Active Account RTS

The regulatory technical standards specifying the operational conditions, representativeness obligation and reporting requirements for the EMIR 3 Active Account Requirement (AAR) were published in the Official Journal of the EU on 06 February 2026 (Commission Delegated Regulation (EU) 2026/305). The AAR RTS entered into force on 26 February 2026, 20 days after publication. For further detail, see our recent Insight publication on the topic.

As we said in our August 2025 edition, the AAR aims to incentivise the clearing of certain Euro (EUR) and Polish Zloty (PLN) derivatives within the EU and to reduce excessive reliance on clearing services provided by systemic third-country central counterparties (CCPs). The AAR contains two core obligations on in-scope counterparties:

• The ‘Operational Obligation’: to open and maintain an active account at an EU CCP for the AAR in-scope transactions; and
• The ‘Representativeness Obligation’: for larger portfolios, to clear a "representative number" of those transactions in the active account, along with associated reporting obligations (more on this below).

Which counterparties are in scope? Financial counterparties (FCs) and non-financial counterparties above the EMIR clearing threshold (NFC+s), who exceed the clearing threshold (individually or in aggregate) in any of the categories of transactions relevant for the AAR.

What transactions are in scope? For now, at least, interest rate derivatives (IRDs) denominated in EUR and PLN, and short-term interest rate derivatives (STIRs) denominated in EUR.

Representativeness: who, what and how? The representativeness obligation applies only to a subset of in-scope FCs and NFC+s – specifically those with a notional clearing volume outstanding of EUR 6 billion or more in derivative contracts in AAR categories. For groups subject to consolidated supervision in the EU, this threshold should also be assessed at group level.

On 20 February 2026, ESMA published a supervisory briefing on the representativeness obligation (see our further Insights publication on this topic). While primarily directed to national competent authorities (NCAs), the briefing is essential reading for counterparties subject to the representativeness obligation. Key areas addressed include:

• how to identify the most relevant subcategories for the purpose of the representativeness obligation;
• how to report trades under Article 9 and Annex III of Commission Delegated Regulation (EU) 2026/305; and
• a worked example of compliance with reporting requirements.

What's next? All FCs and NFCs directly subject to EU EMIR should have processes in place to determine, on a continuous basis, whether they are subject to the AAR and, if so, whether this includes the representativeness obligation.

ESMA expects the first reporting submissions by July 2026, including backlog data demonstrating compliance from 25 June 2025. Given the complexity of the representativeness obligation in particular, we recommend reviewing the supervisory briefing carefully and updating EU EMIR processes and procedures as needed.

Guaranteed Delivery? Consultation on EU EMIR CCP Collateral Rules

On 23 February 2026, ESMA published a consultation paper proposing amendments to EMIR RTS 153/2013 to permanently broaden the types of guarantees that CCPs can accept as collateral, following the changes introduced by EMIR 3. The proposals build on temporary emergency measures first introduced during the 2022 energy crisis, which expanded eligible collateral to help NFCs (particularly energy firms) manage margin requirements during periods of heightened volatility.

Key changes that the consultation paper is proposing include:

• Wider access: The ability to rely on guarantees as collateral will be expanded so all non-financial counterparties (NFCs) not just those that happen to be clearing members, can post public guarantees, public bank guarantees, or commercial bank guarantees to cover initial and ongoing exposures.
• Broader collateral eligibility: CCPs will be able to accept public guarantees, public bank guarantees and commercial bank guarantees as collateral, provided they meet strict requirements, including:
  • appropriate concentration limits (e.g., no more than 10% of a CCP’s collateral may be guaranteed by a single credit institution or group, unless bank guarantees exceed 50% of total collateral, in which case the limit may be raised to 25%);
  • credit quality requirements, including the need for reliable financial data and, for public guarantees, a credit rating; and
  • stringent wrong-way risk controls, especially for public and commercial bank guarantees.
• Operational requirements: Guarantees posted by clients will have to be individually segregated and cannot be issued by related group entities (including the clearing member). Public guarantees must be supported by an independent legal opinion confirming the capacity and authority of the guarantor, the legal validity of the guarantee, and the CCP's ability to enforce its rights without restrictions.
• Investment Policy Updates: ESMA also proposes targeted updates to CCP investment policy, including expanding eligible highly liquid instruments to those issued or guaranteed by the EU, BIS, and IMF.

What's next? The consultation is open until 30 April 2026. ESMA will consider feedback and expects to publish a final report and submit the final draft RTS to the European Commission in Q4 2026.

Reducing Risk (and Red Tape) – Consultation on EU EMIR PTRR Services

On 26 February 2026, ESMA published a consultation paper on draft regulatory technical standards (RTS) specifying the requirements for post-trade risk reduction (PTRR) services for the purpose of the clearing obligation exemption under EMIR.

A refresher on PTRR services: PTRR services aim to reduce counterparty, operational and basis risk in existing derivatives portfolios without altering overall market risk exposure. These services include:

• Portfolio compression: reduces the number of transactions by replacing or terminating partially or fully offsetting transactions to lower operational risk;
• Portfolio rebalancing: introduces additional offsetting transactions among participants to reduce counterparty risk; and
• Basis risk optimisation: introduces new transactions to simplify the portfolio structure and reduce basis risk.

These transactions are non-price forming – participants cannot post bids or offers, and no negotiations take place on price.

Why does this matter? EMIR Article 4b (inserted under EMIR 3) exempts from the clearing obligation transactions resulting from PTRR services, subject to requirements to be set out in the new RTS. Back in 2020, ESMA recommended the adoption of an exemption regime from the clearing obligation, to permit the use of more standardised products in PTRR services and, ultimately, extend their use to a larger group of market participants. ESMA had noted that existing PTRR services often used complex products that are not subject to the clearing obligation – to avoid the clearing funding costs, as well as the operational and legal burdens connected to clearing.

What does the consultation cover? Key areas addressed include:

• transparency towards participants;
• algorithm safeguards;
• execution of PTRR exercises;
• controls to be performed;
• record keeping; and
• monitoring of the application of the exemption.

What's next? Responses to the consultation are due by 20 April 2026. ESMA expects to publish a final report and submit the draft RTS to the Commission in Q4 2026.

Record Breaker: ESMA Issues Largest TR Fine to Date

ESMA has imposed a record fine of EUR 1,374,000 on REGIS-TR S.A., alongside a public notice, for seven breaches under EMIR and SFTR. The decision, adopted by ESMA's Board of Supervisors on 17 February 2026, marks the first enforcement action under SFTR and the highest fine ESMA has levied against a trade repository to date.

What were the breaches? ESMA’s investigation identified long-standing and systemic failings at REGIS-TR, including:

• Policies and procedures: unclear, inconsistent and incomplete policies and procedures under both EMIR and SFTR, leading to a lack of clarity regarding the roles and responsibilities of governing bodies;
• Organisational structure: shortcomings in REGIS-TR's organisational structure which did not ensure continuity and orderly functioning;
• Operational risk management: failure to identify and mitigate risks, particularly in relation to confidentiality breaches following Brexit; and
• Confidentiality and misuse of information: failure to ensure the confidentiality of information and to prevent misuse, after UK-based TRs retained access to the EU inter-TR SFTP folder for over six months following Brexit.

What happened with Brexit? Following the end of the Brexit transition period on 31 December 2020, ESMA deregistered UK-based TRs. However, REGIS-TR failed to disable access to its inter-TR SFTP folder for two UK TRs, meaning they could still access data from 1 January 2021 until the issue was discovered on 7 July 2021. One UK TR downloaded data daily throughout this period.

What did ESMA conclude? ESMA found that REGIS-TR acted negligently and did not meet the standard of care expected of a professional firm in the financial services sector. In addition to the fine, REGIS-TR has been required to address the identified shortcomings and bring three ongoing infringements to an end (relating to policies and procedures under EMIR and SFTR, and organisational structure under SFTR).

What does this mean for TRs? This case sets a clear benchmark for regulatory expectations around trade repository governance, operational resilience, and data protection. With ESMA confirming it will "continue to foster a strong compliance culture, including by taking enforcement action when appropriate", TRs should take note.

EU MiFID – All Go on Algos

On 26 February 2026, ESMA published a supervisory briefing to guide investment firms and national competent authorities (NCAs) on the supervision of algorithmic trading under MiFID2. The briefing aims to promote convergence in supervisory practices across the EU and considers requirements under Article 17 of RTS 6 (which specifies organisational requirements for investment firms engaged in algorithmic trading).

While the briefing is non-binding and not subject to a ‘comply or explain’ mechanism, it is still important reading for firms engaged in this activity. Key elements include:

• Definitions: ESMA clarifies what constitutes an "algorithm" and "algorithmic trading" to ensure consistent interpretation and reporting. Notably, even where human intervention occurs (e.g., a trader authorising orders), if a computer algorithm determines any individual parameter of the order, this still constitutes algorithmic trading.
• Governance, testing and outsourcing: The guidance addresses governance structures, testing of algorithms (including stress testing and material changes), and outsourcing arrangements. Firms remain fully responsible for compliance with RTS 6 even when using third-party algorithms or outsourcing trading functions.
• AI Act interaction: The briefing addresses the interaction with the EU AI Act. While AI-based algorithmic trading is currently excluded from the scope of a "high-risk" use case, the scope is subject to annual review. AI used in algorithmic trading may still constitute a "limited risk" use case depending on whether it is intended to interact directly with natural persons – in which case transparency requirements under the AI Act would apply.
• Pre-Trade Controls (PTCs): ESMA provides targeted guidance on PTCs, reflecting lessons learned from the 2024 Common Supervisory Action (CSA) following the 2022 Nordic flash crash. Key points include:
  • firms must implement "hard blocks" (mandatory) and are strongly encouraged to implement "soft blocks";
  • PTCs should be set in collaboration between trading, risk management and compliance functions;
  • firms must have two lines of defence for real-time monitoring; and
  • PTCs must apply to all orders, including quotes generated for market making purposes.

What should firms do? NCAs are encouraged to incorporate this guidance into their supervisory activities, including authorisation processes, thematic reviews, and on-site inspections. Investment firms would be advised to use the briefing to verify their compliance with algorithmic trading requirements and review their current arrangements against the clarified expectations, particularly around the definition of algorithmic trading (which may be broader than some firms assume), material change testing triggers, and AI governance.

Reaching the Limit – The Latest on UK Commodity Derivatives Reforms

As noted in last month's edition of Markets View, the FCA's new commodity derivatives regulatory framework under PS25/1 is set to come into force on 06 July 2026, with trading venues playing a central role in shaping and supervising the new regime. Both ICE Futures Europe (IFEU) and the LME have now published detailed materials setting out how they intend to implement the reforms. Members should be preparing now.

What’s new? IFEU has published a Position Limits and Accountability Levels Policy and an accompanying FAQ. Meanwhile, the LME has published a consultation paper, with responses due by 28 March 2026.

The approach, driven by the underlying revised framework, is broadly consistent between the two, but there are nuances:

• Position limits: Both venues will set position limits for "critical contracts" (IFEU: UK Brent Crude, UK Low Sulphur Gasoil, UK Rotterdam Coal, UK TTF Gas; LME: Aluminium, Copper, Lead, Nickel, Tin, Zinc) and "related" contracts. On the IFEU side, these limits apply in the spot month (or other delivery period) only, whereas the LME proposes to set limits for both spot month contracts and other months' contracts.
• Accountability levels: For contracts that are not critical, both venues will set "accountability levels" rather than hard limits. Breaching an accountability level does not automatically trigger a breach, but may prompt the venue operator to request information or take position management action.
• Exemptions: As a reminder, existing MiFID2 exemptions will not be grandfathered, so members currently relying on MiFID2 exemptions must apply for fresh exemptions using the forms published by the venues. IFEU will accept applications from 1 April 2026, while LME submissions may be made “from April”. Ideally members should do so as soon as possible, to allow plenty of time before the new regime comes into force in July.

What should members do?

• Review current exemptions: Members should identify all positions currently held under MiFID2 exemptions and assess whether they will qualify under the new IFEU/LME frameworks.
• Prepare exemption applications: Given the lead time required (IFEU indicates up to 30 business days for straightforward cases), members should prepare application materials now.
• Respond to the LME consultation: Members with views on the LME's proposals should respond by 28 March 2026.
• Update policies and systems: Members should review internal position monitoring and reporting systems to ensure they can comply with the new reporting requirements and accountability level frameworks.

The next few months will be critical as both venues finalise their rules and begin processing exemption requests. We will continue to monitor developments and report in future editions of Markets View.

MIP Ahoy! EU Unveils Sweeping Market Integration Package

We wanted to wrap up this edition with a look at the bigger picture: on 04 December 2025, the Commission published the Market Integration Package (MIP) – a comprehensive legislative initiative comprising three interconnected proposals intended to fundamentally reshape the EU's capital markets regulatory and supervisory landscape.

The Commission perceives that divergent national regulations, supervisory practices and infrastructure continue to hamper cross-border investment, raise compliance costs and limit scale and liquidity. The MIP is intended to address these issues.

What's in the MIP? The MIP consists of:

• A Master Regulation amending 14 regulations, including EMIR, MiFIR, CSDR, SFTR and others;
• A Master Directive amending MiFID2, as well as the UCITS Directive and AIFMD; and
• A Settlement Finality Regulation converting the Settlement Finality Directive into a directly applicable regulation and amending the Financial Collateral Directive.

Please refer to our recent Insights article for more details.

While we must emphasise that these proposals are still at a very early phase, we have set out below a number that we think are likely to be of interest to readers:

• PEMOs: The MIP introduces the concept of a “Pan-European Market Operator” status, whereby a single legal entity can operate multiple trading venues across Member States on one licence (thereby streamlining corporate structures and supervisory relationships for groups operating multiple venues). The proposals clarify and expand cross-border rights for venues, to address a current regulatory asymmetry where investment firms operating MTFs/OTFs have clearer passporting frameworks than regulated markets.
• Post-trade: CSDR would be modernised with a "hub and spoke" CSD connectivity model, mandatory T2S connections for EU CSDs, and DLT-ready definitions. The Settlement Finality Directive would be converted into a directly applicable regulation.
• Supervision: Perhaps the most controversial element is the proposed transfer of direct supervisory competences to ESMA, which would assume supervision over significant trading venues, all PEMOs, significant CCPs and CSDs, and all crypto-asset service providers (CASPs) under MiCAR. ESMA's convergence tools would also be expanded, including broader "no-action letter" powers and enhanced breach-of-Union-law procedures.
• EMIR and SFTR: The Master Regulation includes targeted amendments to EMIR and SFTR aimed at reducing overlap, removing burdens and aligning with the ESMA supervisory framework, including clarifying that intra-group resource allocation is not "outsourcing" and harmonising procedural provisions under ESMA's direct supervision.

What's next? The proposals now move into trilogue negotiations with the European Parliament and Council, with deliberations expected to take at least until the end of 2026. Given the breadth of the MIP and existing divergences among Member States negotiations – particularly concerning ESMA's new supervisory powers – are expected to be complex. Should the MIP be adopted, different elements would apply on a staggered basis, with market participants expecting implementation between 2027 and 2029.