European authorities have set 28 November as the date for finalising the new rules that will redefine the continent’s over-the-counter (OTC) derivatives trading environment.
“We are aiming to have a text finalised on 28 November,” confirmed MEP Sharon Bowles, who is responsible for chairing the process. “There is still a lot of work to do and this date seems optimistic, but we are entering the signing off phase.”
The new rules – known as the European markets infrastructure directive (EMIR) – were originally conceived as the region’s response to the Group of 20’s pledge to reduce risk and increase transparency in the OTC derivatives space following the collapse of Lehman Brothers in September 2008. The new rules are scheduled for implementation by the end of next year.
The rule-making process is now in the trialogue phase, which requires the European Parliament and the Council of the European Union to agree on a final version of the text with input from the European Commission.
A spokesperson for the European Commission confirmed the 28 November date but was unable to comment on whether it would be the last trialogue meeting.
As well as standardising OTC derivatives so they can be traded on-exchange and centrally cleared, EMIR will introduce new data collection and storage requirements to a market segment that was worth US$601 trillion in notional value at the end of December 2010, according to data from the Bank for International Settlements.
More complex derivative products will remain OTC, but will be subject to higher capital charges because of the greater risk associated with them. Pan-European securities watchdog the European Securities and Markets Authority will be responsible for determining which derivatives are suitable to be centrally cleared and traded on exchange.
EMIR will also attempt to establish a competitive environment by mandating fair and open access to both trading venues and clearing houses in the OTC derivatives market.
EMIR is designed to complement the Markets in Financial Instruments Directive (MiFID II) and MiFIR, a separate regulation that will enforce new rules on EU member states and cannot be reinterpreted. MiFIR will include rules for organised trading facilities, a new category of trading venue designed to encompass OTC derivatives.