EMIR takes the limelight back from MiFID II

The arrival of MiFID II just before Christmas ensured a heavy workload for the derivatives industry as they returned to their desks in the New Year.

But as if living and breathing the contents of the more than 1,600-page report wasn’t enough, the European Commission has thrown a number of changes to its European Market Infrastructure Regulation into the mix for good measure. 

At the same time as MiFID II landed on desks in December, the European Commission delayed the introduction of frontloading requirements for the buy-side – under EMIR - to five months after the regulatory technical standards (RTS) of new central clearing rules come into force for interest rate swaps. 

This was arguably one of the most pressing topics around EMIR, and in the past week ESMA confirmed it agrees – on the most part – with the Commission’s proposals.

ESMA and the European Commission have made further moves to shake up the complex and far-reaching regulation, including:

     - Dropping mandatory clearing for FX non-deliverable forwards (for now)

     - Exempting pension funds for central clearing mandates (for two years)

     - Rejecting the Commission’s proposal for a three-year exemption for non-EU intra-group interest rate transaction from clearing 

Regulators cited FX clearing’s infancy and international convergence as two reasons for exempting the asset class from mandatory central clearing. The pension funds delay was down to a lack of solutions from Europe’s clearers, and the intra-group decision showed that ESMA isn’t afraid to reject the Commission’s proposals, as it came up with its own suggestions on the rule.

Despite the latest flurry of alterations, the reaction to these decisions has been positive. ESMA appears to have made decisions based on market responses to its consultation papers by delaying some mandates, while importantly reaching an agreement with the Commission on frontloading requirements. 

Equivalency rules still remain a thorn in the industry’s side, but recent agreements and comments made during a regulatory trip to Asia have shown progress, while the stalemate with the US still continues.

But for now the market is pleased to enjoy a few small wins.