Pension funds were about to celebrate their exemption from the costly clearing of OTC derivatives trades, when the banks pointed out the increasing costs of non-cleared trades that were heading their way finds Dan Barnes.
Having temporarily escaped the costs of the European markets
and infrastructure regulation (Emir), pensions funds will be
hit, indirectly, by the Capital Requirements Directive 4 (CRD
4). Although Emir is still not finalised - negotiations between
the European Commission (EC), European Parliament and the
Council of the European Union continue - as it stands, it will
impose central clearing for the vast majority of
over-the-counter (OTC) derivatives trades.
The regulation supports the Group of 20 (G20) countries'
resolution to centrally clear OTC derivatives to reduce the
systemic risk it felt exists in the bilateral trading
However, in recognition of the lack of risk that pension
funds pose to the market through their use of derivatives
purely as hedging against their one-way, long-only investment
strategies, the transactions of these funds have been granted
an exemption, for three years, from having to be centrally
"Risk will not become systemic when one is...
This article is available exclusively to subscribers and trialists
Please log in to continue reading or register for access. As a Registered user you get full access to trial the site for 7 days and can continue reading Analysis, Opinion, Whitepapers and archive news after the trial has finished.
Already a user? |
Login to view the content