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EMIR clearing bell tolls louder

The review period for EMIR’s RTS expired this weekend without murmur from the Parliament or the Council, both bodies had publicly stated that they would be making no objection. The end of the scrutiny period sends the RTS for publication on the Official Journal, marking a 20-day countdown for entry into force, the OJ is published daily Tuesday to Saturday, making 24 November 2015 the first possible birthday. The first clearing deadline occurs six months after entry into force, Category 1 entities would therefore have to be compliant from 21 June 2016, Category 2 by 21 December 2016 and Category 3 by 21 June 2017.

Publication sets the implementation clock ticking, redoubling focus on the numerous questions still to be resolved. The Category 1 frontloading window opens two months after entry into force, compelling the retroactive clearing of all trades executed after that date and effectively triggering the application of punitive capital rules to non-QCCPs, irrespective of how many times the actual capital rules are further delayed. As the clearing clock ticks louder, something has to give, the already-diluted frontloading rules will either have to be delayed, or the stalemate over US equivalence must be ended in the next two months. Given ESMA’s August 2015 recommendation in the EMIR review, that problems inherent in frontloading’s retrospective pricing may outweigh its contribution to systemic risk transparency, the requirement may be abandoned before the curtain closes on the pantomime of US equivalence.

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