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EU Regulatory Agenda: Into 2015

December 23, 2014, Lexology.com

2014 was an active year for financial regulation in the EU with a push to finalize much of the outstanding primary legislation on the regulatory reform agenda in advance of the European Parliamentary elections in May 2014. This resulted in the adoption of many EU Regulations and Directives in the first half of the year. There is still, however, some outstanding legislation still going through the EU legislative process, and much of the legislation that has been adopted envisages further legislation and regulation in the form of delegated regulations to be adopted by the EU Commission comprising technical standards to be drafted by the European Supervisory Authorities (the “ESAs”)1. We have set out below the likely key areas of activity during 2015.

Derivatives Reporting. The European Market Infrastructure Regulation (“EMIR”), providing for the regulation of derivatives in the EU, has been in force since 2012 but many of the key provisions are only now beginning to come into effect. Rules requiring reporting of derivative transactions to trade repositories started to be phased in from February 2014 and are now largely implemented. There were, however, some difficulties in implementation of the rules which represented a logistical and administrative challenge for many market participants. Many of these issues have now been resolved, but in November 2014 ESMA proposed various changes to the relevant technical standards to seek to resolve certain issues. It is therefore likely that there will be some technical amendments to the derivatives reporting regime in early 2015.

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Industry Divided as Regulators Mull NDF Clearing

By David Wigan
November 12, 2014, EuroMoney

European proposals for mandatory clearing of non-deliverable forwards (NDFs) published in October seemed to be a decisive step toward a new framework for FX derivatives trading. However, responses to the consultation reveal deep divisions among FX market participants over the way forward.

As its counterpart in the US – the Commodity Futures Trading Commission (CFTC) – considers its position, the European Securities and Markets Authority (ESMA) on October 1 launched a public consultation in respect of an NDF clearing obligation under European Market Infrastructure Regulation (EMIR), with responses published on its website on Friday.

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CFTC Deference Needed for EC to Recognize U.S. Clearing Houses

By Hazel Sheffield
November 10, 2014, GlobalCapital

The European Commission is discussing  its rules on anti-procyclicality with the Commodity Futures Trading Commission in an effort to grant equivalence to US clearing houses. However, the US must look to reciprocate by acting with deference to countries’ regimes, according to Patrick Pearson, head of financial market infrastructure at the European Commission.

The US has not been granted equivalence under the European Market Infrastructure Regulation despite several other regimes achieving this status in recent weeks. On November 7, Pearson said that the EC will soon recognise clearing regimes in Canada, Mexico, India and New Zealand as equivalent, at a conference hosted by the Asia Securities Industry and Financial Markets Association. This followed the EC’s decision on October 30 to grant equivalence to clearing regimes in Singapore, Japan, Australia and Hong Kong. Now Pearson has told GlobalCapital that the CFTC needs to deliver on deference to the regimes of other countries if it is to be deemed equal.

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Eurex CEO Slams European Clearing Mandate Delay

By Aaron Woolner
October 29, 2014 Risk

The global nature of OTC derivative markets means a synchronised approach to clearing is required, according to Andreas Preuss, Eurex chief executive

The European Union's decision to delay the introduction of its over-the-counter derivative clearing mandate to 2015 is "unfortunate" and creates an "implemented disadvantage" for the aim of increasing safety in the sector, according to Andreas Preuss, chief executive of Frankfurt-based Eurex.

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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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