Thursday, February 09, 2012 1:44:42 PM

Breakthrough for EU OTC derivatives regulation

The European market infrastructure regulation (EMIR), a new regulatory framework for over-the-counter derivatives based on criteria set by the G20, has been approved by the European Parliament and the Council of the European Union.

The two bodies had been in disagreement over the role of the European Securities and Markets Authority (ESMA) in resolving disputes between national securities regulators on the authorisation of central counterparties used to clear standardised OTC derivatives.

But after several rounds of ‘trialogue’ talks facilitated by the European Commission, a text has been agreed that, according to the Commission, retains the principle of “strong cooperation between all of the public authorities concerned from all the member states involved” in the authorisation process for individual CCP. 

According to a text released by the Commission, legitimate concerns by a national regulator or central bank over the authorisation of a CCP can be addressed via a mechanism “that allows those authorities to raise their concerns and, if necessary, to request ESMA to take a final decision using a procedure of binding mediation”.

Single market commissioner Michel Barnier said the agreement on the regulation was “a key step in our effort to establish a safer and sounder regulatory framework” for Europe’s financial markets.

Barnier said: “The regulation ensures that information on all European derivative transactions will be reported to trade repositories and be accessible to supervisory authorities, including ESMA, to give policy makers and supervisors a clear overview of what is going on in the markets. The era of opacity and shady deals is over.”

The regulation will enable standarised derivatives to be traded on exchange-like trading venues, cleared through CCPs governed by strict organisational, business conduct and prudential requirements, and traded on central reporting repositories.

Following the agreement, the European Parliament will vote in a plenary session on the regulation and the Council will formally adopt the rules. ESMA has been set a deadline of June 2012 for drafting the technical standards underpinning the regulation.

Barnier asserted that the European Union had now fulfilled its G20 commitments in this field “on time”, calling on other jurisdictions to take “appropriate steps”.


Chris Hall +44 (0)20 7397 3819