The final sign off of the European markets infrastructure regulation (EMIR) will avoid potentially lengthy delays after regulators agreed a last minute deal related to the treatment of non-financial swaps users.
The European Parliament was expected to reject two of the technical standards for EMIR drawn up by the European Securities and Markets Authority (ESMA) relating to when non-financial firms would have to clear swaps through central counterparties (CCPs).
If the standards were rejected, ESMA would have been required to redraft its technical standards, causing a three-to-six month delay.
However, the Parliament struck a deal with the European Commission that allows non-financial users of derivatives to be phased into EMIR at a yet-to-be-determined date. This will cover corporate entities that use OTC derivatives for hedging purposes.
The technical standards – which also determine approach for deciding which classes of derivatives should be cleared and margin requirements – are now due to be formally signed off by the 19 February.
Sven Giegold, a member of the Green Party that sits on the Parliament's Economic and Monetary Affairs Committee, said avoiding further delays for EMIR was welcome, although the legislative process in Brussels needed to improve to allow mechanisms to alter legislation efficiently.
"While the procedure for adopting the rules was certainly not optimum, rejecting these essential rules would have been throwing the baby out with the bathwater," Giegold said. "Future procedures for adopting these detailed rules or 'delegated acts' must be more transparent and respect the scrutiny role of the European Parliament."
EMIR mandates the central clearing and reporting of OTC derivatives that can be standardised, to improve the transparency of the swaps market in the wake of the financial crisis.
Michel Barnier, the European Commissioner for internal market and services, welcomes the agreement and stated the next step would be to resolve extraterritorial issues.
"Next week I will be travelling to the USA and will meet amongst others with Gary Gensler, chairman of the Commodity Futures Trading Commission. With my visit I hope to make progress towards a system whereby the EU and the USA recognise the application of their respective rules on both sides of the Atlantic as equivalent."