ESMA sets final rules for post-trade risk reduction services exempt from EU clearing

The European Securities and Markets Authority (ESMA) published on 20 October its final draft rules on the conditions that post-trade risk reduction (PTRR) services must meet for the OTC derivative trades they produce to be exempt from the EU clearing obligation.

What PTRR services are

PTRR services, such as portfolio compression, portfolio rebalancing and basis risk optimisation, reduce risk in derivatives portfolios through transactions that are not price-forming and do not change the portfolios’ market risk profile. EMIR 3, the latest revision of the EU’s derivatives and clearing rules, created a conditional exemption from mandatory clearing for trades that result from these services. The exemption has applied since 24 December 2024, without detailed rules until now.

What the rules set out

According to the final report, the draft regulatory technical standards cover:

• which PTRR services and resulting trades are eligible, including compression, rebalancing and basis risk optimisation;
• common conditions on market risk neutrality and risk reduction;
• the obligations of service providers, including the information they give participants, how exercises are run, their algorithms, controls and record-keeping;
• how use of the exemption will be monitored, so that it is not used to get around the clearing obligation.

ESMA said the rules build on existing market practice and avoid new requirements where current ones already do the job. PTRR service providers must already be authorised under MiFID, so the draft standards rely on existing MiFID rules, for example on conflicts of interest, instead of adding new ones. ESMA consulted in February 2026 and received four responses, which it described as broadly supportive, so the final text largely follows the consultation draft.

What it means for the market

For firms that trade OTC derivatives in the EU, the standards set out the conditions that trades from compression, rebalancing and similar exercises must meet to be exempt from mandatory clearing. ESMA said the aim is to make these services easier to use while preventing misuse of the exemption. Our guide to how futures contracts work explains how central clearing works for exchange-traded contracts.

What happens next

ESMA sent the final report to the European Commission on 9 October 2026. The Commission has three months to decide whether to endorse the draft standards.