Emir rules will be binding from 2013, says EU official

Time is not on the side of the European Securities and Market Authority (Esma) as it draws up technical standards for European market infrastructure regulation (Emir), says EC official.

European rules governing the mandatory clearing of standardised over-the-counter derivatives will be binding from January 2013, despite the short timeframe for the European Securities and Markets Authority (Esma) to write technical standards, according to Patrick Pearson, head of the financial markets infrastructure unit at the European Commission (EC).

The final text of the European Market Infrastructure Regulation (Emir) was signed off by the Council of the European Union today, and will be voted on by the European Parliament on March 29, said Pearson, speaking at the Risk Annual Summit (March 21). “The European Parliament, I can guarantee you, will unanimously vote on March 29 to get that piece of legislation on the statute books,” he added.

However, Emir requires Esma to draw up technical standards on issues ranging from risk standards for central counterparties (CCPs) to what contracts will be eligible for clearing. Esma was originally required to finalise its technical guidance by June, but this has been extended to September in the final Emir text. That gives just three months for those technical standards to be implemented before the mandatory clearing obligation is due to come into effect.

Pearson conceded time is short, but is confident European regulators are up to the task. “They need to give me those standards by the end of September at the latest, because that is when the EC will see if we are happy with them and we will turn those standards into binding legislation that will become applicable on January 1 next year. So time is short. But I think the regulators are pretty nimble on their feet,” he said.

Meanwhile, European regulators continue to work with their counterparts in the US and elsewhere to ensure their respective rulebooks are consistent. There are still areas of difference but Pearson said the regulators are aware of the importance of the issue.

“It is not easy because we come from our own legislative backgrounds, and you can’t expect Gary Gensler at the US Commodity Futures Trading Commission and Mary Schapiro at the US Securities and Exchange Commission to adopt implementing laws that go against the grain of what Congress decided in title VII of the Dodd-Frank Act,” he said.

“But there is a lot of willingness and understanding that Europe and the US need to get our acts together. What we will come up with we suspect will be followed by the rest of the world: by Asia, by Latin America and further. There is a lot of talk. There has been a lot of disagreement and there is a lot of agreement about some things,” added Pearson.

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