13 March 2014

FN: National interests threaten EMIR progress

Specifically, the worries relate to the power that groups of national regulators have to approve clearing houses from other countries under the new rules. They come after Germany's Eurex Clearing, the Deutsche Börse-owned clearing house, said in a member circular yesterday that its approval would be delayed after failing to receive the required sign-offs from other national regulators.

According to people familiar with the matter, there are concerns that some national regulators might be trying to delay approvals so that clearing houses in other countries do not move ahead and have more time to prepare for the introduction of swap clearing earlier than others.

One of the core requirements of EMIR is the need for swaps that have historically been traded bilaterally to be guaranteed by a clearing house, in order to mitigate counterparty and systemic risk. Under EMIR, clearing houses first have to apply for recognition from their national regulator. The regulator then prepares a risk assessment that is submitted to a so-called "college of regulators", a group of representatives from national authorities, which is required to vote on the application within 30 days. Once a clearing house has passed the necessary approvals under EMIR, the clock starts ticking on the date by which some swaps would need to be cleared.

The first clearing house to receive approval under EMIR would have a head-start in trying to attract clients and could also use its status as the first regulated clearer to its advantage when marketing its services. Eurex said that its clearing house application was deemed completed on October 11, 2013 by the German regulator BaFin, and that the subsequent risk assessment report was submitted to the college on February 10. A delay also hit the approval of Nasdaq OMX’s clearing house last November. The Nordic exchange operator was told by the Swedish FSA in May that its clearing house application was complete but said at the time: "it became obvious in discussions in October with the Swedish FSA that there was a need for some additional material and analysis".

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