Inconsistent approaches to client clearing documentation could slow adoption of OTC Clearing within Europe says Citi’s Andrew Sterry.
With the European Market Infrastructure Regulation (EMIR)
now approved in Brussels, the ESMA consultation on technical
standards in progress, and the G20 commitment to make the
clearing of OTC derivatives mandatory implemented by the end of
this year, the buy-side is starting to select its clearing
partners. Among the various uncertainties surrounding the
implementation and effect of EMIR, one fundamental issue needs
to be addressed as a matter of urgency: the standardization of
client clearing documentation.
Without a viable industry standard document for use within
Europe, a log-jam will occur which might not be effectively
resolved in time for many buy-side market participants to have
their transactions cleared in accordance with EMIR. Even if
EMIR follows the precedent set by Dodd-Frank, and promotes a
phased implementation approach according to entity type and
product, any possible extension of time to implement EMIR could
still be too short.
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