European lawmakers hope to adopt rules forcing derivatives counterparties to post collateral against their uncleared swaps exposures this year, earlier than expected having abandoned the initial global deadline of September 1.
Under the revised timetable, the rules could come into effect as early as December 17, around a month earlier than expected.
According to industry lawyers, MEP Roberto Gualtieri, chair of the European Parliament’s Committee on Economic and Monetary Affairs (ECON), circulated draft recommendations to the committee yesterday.
Under a fast-tracked written procedure, he has given committee members just 24 hours to object to the recommendations. If there are no objections, the rules will be considered as adopted and passed to Martin Schulz, president of the European Parliament by the end of today.
That would allow the European Parliament to adopt them at the plenary session scheduled for October 24–27. The new rules would then come into force on November 17, subjecting the largest dealers to the requirements from December 17.
If ECON members object, a vote on the recommendations would likely take place on November 8–10.
“This accelerated process is motivated by the EU having missed the first phase-in date of September 1 and by a desire to increase market certainty,” said Deepak Sitlani, derivatives partner at Linklaters.
“Whilst certainty of rules in good time before the entry into force of variation margin requirements is to be welcomed, it would mean that those dealers subject to EU rules will need to establish initial margin arrangements before Christmas.”
After missing the September deadline, European lawmakers are battling to get new rules in place in time to meeting the globally agreed timetable for all derivatives participants to begin exchanging variation margin on their uncleared swaps exposures from March 2017.
Market participants have warned that a mid-December go-live date for counterparties with over €2.25trn of uncleared swaps exposures is the latest opportunity for implementation before 2017. Most banks have code freezes from late December that could prevent them from adopting new technology and processes until mid-January.