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Clarity Needed on Clearing Rules for Non-EU Entities

By Hazel Sheffield
October 22, 2014 GlobalCapital

Market participants outside of the EU are grappling with European regulation that mandates clearing for non-EU derivatives contracts, resulting in a lot of interpretive differences according to lawyers.

On October 10, the European Market Infrastructure Regulation came into force for derivative contracts between two non-EU counterparties in jurisdictions not deemed equivalent to Europe, but where the contract could have a direct, substantial and foreseeable effect in the EU. From this date, certain non-EU counterparties, or third country entities as they are known, must comply with the clearing obligation and apply risk mitigating techniques for uncleared transactions.

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French Regulator Finds Market Manipulation Using EMIR Data

By Duncan Wood
October 14, 2014 Risk

Europe's derivatives reporting regime needs work, but the AMF has already used the data to identify market manipulation, which is now being investigated

The French markets regulator is using new derivatives trade reports to probe a case of market manipulation, according to one of its senior officials – despite data quality problems that have plagued the regime, part of the European Market Infrastructure Regulation (Emir), since its introduction in February.

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ICE Clear Europe Eyes OTC Rates Push

By Tim Cave
October 13, 2014 Financial News

IntercontinentalExchange is planning to introduce an over-the-counter interest rate swap clearing service to coincide with the introduction of European reforms next year, in a bid take on incumbent provider LCH.Clearnet.

ICE Clear Europe, the Atlanta-based group's London clearing house, aims to have an interest rate swaps clearing service in place during the second half of 2015, according to a person familiar with the situation.

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EuroCCP Rejects Derivatives Move, Citing Lack of Synergy

By John Bakie
October 13, 2014 The Trade

Poor synergy between cash equities and equity derivatives along with shifting goalposts for the implementation of derivatives clearing rules mean EuroCCP has ruled out entering the market.

The pan-European clearing house has seen most of its competitors enter the derivatives clearing space in recent years in preparation for the European market infrastructure regulation (EMIR).

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Out-of-step Regulators Are Walking Swaps Market Into Trouble

By Tim Cave
Published October 13, 2014 Financial News

The European swaps industry is facing up to what some market practitioners have called a “doomsday” moment later this year.

The cost of European banks’ exposures to swaps in foreign jurisdictions could soar in mid-December because of a failure by European and US regulators to formally recognise each other’s post-crisis rulebooks.

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Fed, CFTC Officials Back Standard Stress Tests for CCPs

By Kris Devasabai
Published October 11, 2014 Risk

CCPs should be subject to standardised stress testing to help determine loss absorbency provisions, regulators tell IIF conference

Two senior US regulators – one from the Federal Reserve Board and the other from the Commodity Futures Trading Commission (CFTC) – have called for central counterparties (CCPs) to  

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Banks Baffled by Looming EMIR Rules on Non-EU Trades

By Fiona Maxwell
Published October 6, 2014 Risk

Scope of Emir includes non-EU trades guaranteed by an EU bank, but thresholds apply – and a comment letter obtained by Risk reveals the industry does not know how to interpret those thresholds

Dealers are seeking urgent clarification from regulators about the European Market Infrastructure Regulation's (Emir) treatment of guaranteed entities in third countries ahead of an October 10 deadline. Under one reading of rules published in February, subsidiaries of European banks would be subject to EU clearing and margining rules – meaning their local customers would have to comply as well.

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ESMA Names Products for Mandatory Swaps Clearing

By Helen Bartholomew
Published October 2, 2014 IFR

Europe’s swaps clearing mandate will not kick in until mid-2015 at the earliest, with financial firms leading a three-year phase-in that will result in full compliance in 2018, when the new rules finally become effective for non-financial firms.

The European Securities and Markets Authority – Europe’s key regulator for the market - yesterday issued final draft regulatory technical standards for the clearing of interest rate swaps. The final report represents a central pillar of the European Markets Infrastructure Regulation aimed at reducing systemic risk and boosting transparency across the US$710trn over-the-counter-derivatives market.

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ESMA Trying to Avoid Commodities Rerun of Forex Spat

By Fiona Maxwell
Published September 29, 2014 Risk

Esma has released proposed guidance to clarify whether certain commodity derivatives are subject to Emir's reporting and clearing requirements

The European Securities and Markets Authority (Esma) is trying to ensure Europe's reporting and clearing obligations are applied consistently by establishing a shared definition for certain commodity derivatives. A legislative fix is not possible until 2017, so proposed guidance was issued on September 29 to cover the interim period.

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Catch Me If You Can: Emir Reporting Crackdown Looks Tricky

By Fiona Maxwell
Published September 29, 2014 Risk

Laughter is not the usual response to questions about the enforcement of new regulations, but it's surprisingly common when asking treasurers and lawyers whether they fear being fined for breaching Europe's seven-month-old derivatives reporting rules. Three sources for this article chuckle throughout their interviews – on and off, admittedly. One lawyer keeps a straight face until asked how authorities will track down offenders, and then dissolves. So, what's the joke?

"Just the idea of it is quite ridiculous," says Pedro Madeira, London-based assistant treasurer at UK airline operator Heathrow Limited. "For them to properly go counterparty-by-counterparty, verify which firms have complied and which have not, check that all trades reported were done correctly and matched up, and then fine all those that have not complied is absolutely impossible. It would be way too much for them to handle – if they even tried to, they would become the largest employer in the City by far."

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