24 April 2015
The timing of the last stages of the EU derivatives reforms remains uncertain.
It is still unclear when the Commission will adopt the Regulatory Technical Standards (RTS) imposing the first clearing obligation under the EU regulation on OTC derivatives, central counterparties and trade repositories (EMIR). ESMA has delivered its opinion on the Commission’s amended draft RTS imposing the clearing obligation on interest rate derivatives, which differed from the Commission on the treatment of intra-group transactions and the method for categorising investment funds. However, the remaining difficulties in reaching agreement with the US on the recognition of CCPs may also be influencing the timing of adoption of the RTS. Even when the Commission adopts the RTS, the RTS cannot be published in the Official Journal unless and until the European Parliament and the Council have indicated that they have no objection to the proposed RTS (or the objection period has expired). Therefore, there is a diminishing likelihood that the first clearing obligation will be in effect (even for dealers) by the end of 2015 as, under the current proposals for phase-in, this would require the RTS to be published in the Official Journal (OJ) in early June so that they come into force by end June 2015.
In March 2015 the Basel Committee on Banking Supervision (BCBS) and the International Organisation of Securities Commissions (IOSCO) announced their intention to delay the start of the requirements to margin uncleared OTC derivatives and to phase in the requirements for variation margin. The European Supervisory Authorities (ESAs) are expected to propose an alignment of the EU timetable for margining uncleared OTC derivatives under EMIR with the revised BCBS-IOSCO framework. However, it is not yet clear when the ESAs will publish a new consultation document or revised proposals under EMIR.
Clifford Chance has prepared an update to its illustrative implementation timeline for EMIR. The timeline assumes that the Commission adopts the draft RTS on interest rate derivatives without further amendment by early May 2015, the Parliament and the Council confirm that they do not object and the RTS are published in the OJ and come into force in June 2015 (even though this may now be unlikely), the Commission extends the Article 89(1) EMIR transitional period for pension schemes for a further two years until 16 August 2017 and the ESAs amend the implementation timetable in the draft margin RTS to align with BCBS-IOSCO’s March 2015 revised framework.