Brussels, 04/07/2012 (Agence Europe) - On Wednesday 4 July, the Council of Ministers formally rubber-stamped the inter-institutional agreement in principle of February 2012 on a draft EU regulation on derivatives (see EUROPE 10585 and 10551), which will come into force in January 2013.
In line with the G20 guidelines, the EU rules aim to shed light on derivatives deals which were sold in the past over the counter (OTC) in secrecy. The new rules require deals to be cleared though centralised clearing houses (CCPs) for all standardised products. The European Securities and Management Authority (ESMA) will decide which type of derivatives are to be cleared through CCPs. Non-standardised contracts that are still sold OTC will be subject to strict rules like extra capital requirements. In order to be given authorisation, CCPs must meet capital requirements and its own members must contribute to a bailout fund. National authorities, in cooperation with the College of Supervisors (regulators), will licence CCPs and regulate them. The inter-institutional negotiations were in deadlock for months over the degree of power to be granted to ESMA in terms of scrutinising CCPs. ESMA will have binding mediation powers in the event of persistent disagreement between national regulators in the Colleges of Supervisors. CCPs registered outside the EU will have to receive authorisation to operate in the EU from ESMA.
Trade repositories. Any derivatives transactions, whether on regulated platforms or over the counter, will have to be reported to national trade repositories overseen by European and national regulators. The information will be published for types of derivatives. ESMA will be responsible for regulating the repositories.
Non-financial firms, like airlines hedging against currency losses, will have to pay clearing houses for their derivatives deals as soon as their contracts reach a certain figure decided by ESMA or the European Commission, but will not have to report their deals to the trade repositories.
The Bank of International Settlements says the derivatives market was worth more than US$700 trillion in 2011, most of which was currency exchange rate or interest rate derivatives and sovereign debt credit default swaps. (MB/transl.fl)