ESMA Technical Standards Rejected by the EU Parliament
As reported below the EU parliament voted by 24 to 20 to reject the draft Technical Standards from ESMA. to implement EMIR. The objection regards smaller non-financial parties and how they are swept into clearing, but the rejection means the whole package of rules is now back on the drawing board for a further period of consultation, drafting and re-review. Assume the ESMA timeline is now moved back 3 to 6 months into late 2014.
This also extends the regulatory arbitrage period between the US and the EU. Within the next 9 months most firms caught by the Dodd Frank Act will have to route OTC products into clearing as mandated by the CFTC, whereas firms in Europe outside the reach of the DFA are unaffected.
I still think firms should do an economic analysis on the comparative environments for their portfolios – measuring CVA, RWAs and IM so that they are fully aware of the implications of clearing, or not clearing, rather than be pushed into it.