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Non-cleared margin rules – rumoured EU finger removal

Today’s Risk magazine quotes a number of unofficial sources who expect the EC to finalise the non-cleared margin RTS at a meeting on 4 October. The adoption would then be published in the OJ late November, entering into force 20 days later and entering into application one month after that.  This projected timeline would result in a phase 1 start date for EU IM/VM rules on, or close to, 20 January 2017.

The projection rests on a number of assumptions, that the RTS can and will be adopted on 4 October and that the Parliament and Council swiftly signal their lack of objection. The need to re-establish concordance with the BCBS “global” schedule is thought to outweigh the possibility of objections from either body. Falling between the year-end code-freeze and the BCBS 1 March 2017 phase 2 start, the projected 20 January date would allow the EU to catch up with the US, Japan and Canada, then adhere to the common timetable out to 2020. Singapore, Australia and Hong Kong delayed finalisation of their own rules, pending clarification from the EU. They are likely to include themselves in any EU-US re-synchronisation.

The above or similar dates make eminently good sense, and have been our own working assumption; however, the Official Journal is the only definitive EU source. While the EU bureaucratic behemoth is capable of surprising speed and decision when needed, it is equally capable of complete insensitivity to legislative urgency or market imperative. 20 January 2017 represents the earliest likely date for application of the delayed EU roll-out. Finalisation from late November will leave a small window in which to amend or replace CSAs and negotiate custody agreements. Whether the first few days of the US IM/VM regime are better characterised as traffic jam or train wreck, market participants have been warned of the consequence of delay.

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