Jonathan Hill, Europe’s chief financial Commissioner, believes mandatory clearing of interest rate derivatives will likely begin from April 2016.
The announcement follows agreements made with the European Securities and Markets Authority (ESMA) over the clearing obligation, which has now finalised the framework for the rules.
“The first clearing rules for certain interest rate products might be in place as soon as April of next year,” says Jonathan Hill, Commissioner for Financial Stability, Financial Services and Capital Markets Union.
Europe’s derivatives industry has been plagued with uncertainty over the clearing rules. BNY Mellon specifically pulled out of the European OTC client clearing business last year because of the delayed clearing mandate. Nomura, State Street and RBS have also exited European swaps client clearing.
However, the announcement from Commissioner Hill is perhaps the strongest indication that this uncertainty will come to an end.
“It has taken us some time to refine the rules in cooperation with ESMA, but as this first set of requirements will set the blueprint for those that follow, it has been crucial to get this right,” says Hill.
In addition, Commissioner Hill confirmed that an extended two year relief period will be provided to Europe’s pension funds from the clearing mandate in order to, “look at possible solutions to the challenges that pension funds face when clearing.”
This could mean Europe’s pension funds may not have to clear OTC derivatives until 2018.