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Collateral vs. settlement. What’s in a name?
SIFMA has published a letter to the Prudential Regulators confirming a market-wide move to explicitly classify variation margin (VM) as settlement rather than collateral. The exercise has substantial implications for the amount of regulatory capital that must be held against cleared OTC derivatives. The effect is to radically reduce the potential future exposure (PFE) element […]
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FCA Art. 55 last-minute no-action
On 30 December 2015 the Central Waivers Team of the FCA published a “modification by consent” of its Article 55 BRRD transposition, which itself came into force on 1 January 2016. Although acting to disapply IFPRU 11.6.3R, the modification direction replicates the short-term waiver issued by the PRA on 25 November 2015, enabling an agreed […]
Financial Contracts Data and the BRRD. A Lack of Resolve?
Introduction On 17 December 2015, the EBA published its “Draft Regulatory Technical Standards on a minimum set of the information on financial contracts that should be contained in the detailed records and the circumstances in which the requirement should be imposed” (the RTS) as required by Article 71(7) of the Bank Recovery and Resolution Direction […]
Merry Christmas! The SFTR Enters into Force on 12 January 2016!!
An early Christmas present arrived on 23 December 2015, when the Securities Financing Transactions Regulation (SFTR) was published in the Official Journal of the EU. For more details on the SFTR itself, see this blog post. The SFTR enters into force on the 20th day following its publication in the Official Journal of the EU […]
MiFID II cross-selling final report
ESMA has published a final report containing guidelines on cross-selling practices under MiFID II. The final report follows the 22 December 2014 consultation paper (JC/CP.2014/05) issued by the Joint Committee of the European Supervisory Authorities. Article 24(11) MiFID II requires ESMA, in cooperation with the EBA and EIOPA, to create guidelines for the supervision and […]
Indirect Clearing: In Search of One Template To Rule Them All
Background EMIR introduced a clearing obligation in relation to “OTC derivative contracts” of any class that has been declared subject to a clearing obligation and which are transacted between particular types of counterparty[1]. MiFIR[2] extended the scope of the clearing obligation to all derivative transactions concluded on a regulated market. There are three basic ways […]
CFTC final non-cleared margin rules
Commissioners yesterday voted 2-to-1 to pass margin rules for uncleared swaps. The rules are broadly in line with those passed by the Prudential Regulators on 30 October 2015. Initial margin (IM) will be exchanged between covered swap entities (CSEs) and SDs, MSPs and financial end-users, subject to the $8bn gross notional exposure. IM may be […]
Near-final EU benchmark regulation: transparency by statement
On 4 December 2015, the final compromise text of the EU benchmark regulation was released. The text already received approval from the Council and the European Parliament on 24 November 2015, and from the Permanent Representatives Committee (COREPER) on 9 December 2015. The next step is to submit the regulation to the European Parliament for […]
MiFID II ITS final report no. 3
On 11 December 2015 ESMA issued the latest set of MiFID II Implementing Technical Standards (ITS). The ITS delineates the practical standards which will give uniform effect to the regulatory Technical Standard’s delegated acts- Euro legalese for what generally amounts to a set of prescribed forms and rules for their completion. This third ruleset, succeeding […]
ESMA throws in the equivalence towel
ESMA has today published a consultation paper seeking to cut through the Gordian knot of EU-US CCP equivalence. On Friday 11 December 2015, the Commission approved the fourth extension of the QCCP deadline to 15 June 2016. The major bone of contention between regulators of the world’s two largest derivatives trading blocs has been the […]