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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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Esma: Swap Reporting Rule-Breakers Shouldn't ‘Sleep Calmly’

By Tom Osborn
Published September 26, 2014 Risk

“Nobody is talking about millions in fines yet. But we need to ensure... we aren't talking about millions in fines seven years from now,” Esma official tells conference

European regulators do not have endless patience for market participants that are breaching the continent's derivatives reporting rules, even if it is through no fault of their own, a senior staffer from the European Securities and Markets Authority (Esma) has suggested.

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Barnier Hints at Longer Pensions Clearing Exemption

By Cecile Sourbes
Published September 12, 2014 Risk

The EC's head of internal markets, Michel Barnier, has hinted that the regulator will extend the pension funds derivatives clearing exemption beyond 2015

The European Commission's outgoing head of the internal market and services division, Michel Barnier, has hinted that the EC will extend the temporary exemption pension funds have from mandatory clearing of their over-the-counter derivatives trades beyond 2015.

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D.E. Shaw: Buyside Irked Over Counterparty Trading Constrictions

By Beth Shah
Published September 9, 2014 Global Capital

US regulation may mean investment managers that are operated and managed out of the US will have to constrict their trading to US counterparties, therefore introducing barriers to trading opportunities and hampering their competition.

Speaking at the International Swaps and Derivatives Association’s 2014 Annual North America Conference on Tuesday, Darcy Bradbury, managing director and director of external affairs at the D.E. Shaw Group, noted where a firm is established has become an issue. If an investment manager operates out of, and is headquartered in the US, they will be subject to US rules for a US entity despite perhaps having funds that are in other jurisdictions, for example the Cayman Islands, Bradbury said. “A UK manager might have an offshore location as well and the establishment language in both [the European Market Infrastructure Regulation] and [Markets in Financial Instruments Directive and Regulation] doesn’t give them a lot of flexibility,” she said.

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Frontloading Still a Thorn in Industry's Side

Published September 2, 2014 Automated Trader

Published responses to ESMA's clearing obligation consultation show an industry still grappling with the potential fallout of implementation.

Under the European Market Infrastructure Regulation, firms will be clearing interest rate and credit default swaps through central counter parties. For IRS, four classes of swaps are up; basis swaps, fixed-to-float interest rate swaps, forward rate agreements and overnight index swaps on a range of currencies and maturities.

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EBA: Objections Over WGMR Rules Not Our Fault

By Fiona Maxwell, Duncan Wood
Published September 2, 2014 Risk.net

The European Banking Authority has defended its interpretation of WGMR requirements, which dealers describe as overly confusing

European regulators have defended their stance on global margin requirements for uncleared derivatives, arguing they are bound by the original recommendations from the Working Group on Margin Requirements (WGMR). But banks insist they would be unable to implement the requirements owing to confusion over the complex rules, and an industry group has called for a two-year delay to the implementation date.

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Industry Fears Mifid Shake-up of Futures Clearing

By Cecile Sourbes
Published August 26, 2014 Risk.net

Dealers fear European rules designed to broaden access to over-the-counter derivatives clearing houses could be extended to the futures market, where a similar service already exists but is subject to much looser rules. If the stricter OTC standards were applied in the exchange-traded world, the service would require a radical rethink and may not be possible at all, banks and industry bodies argue.

The concerns were sparked by the European Securities and Markets Authority (Esma), in its draft standards on the implementation of the revised Markets in Financial Instruments Directive (Mifid II). In its May 22 proposals, Esma asked market participants whether there was any reason to have different rules on indirect clearing in the exchange-traded and OTC markets.

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Collateral Optimization Benefits the Big

By Mike Kentz
Published August 23, 2014 IFR

Market participants expecting to glean material cost-savings in the over-the-counter swaps market through collateral optimization strategies may want to think again, according to a report from Deloitte.

Only the largest swaps users capable of making significant investment in IT systems and navigating the changing cost of collateral that will occur with the eventual rise in rates should dive into building internal optimization capabilities, the report said.

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