Derivatives updates

Canada

Final version of Guideline E-22
  • Canada
  • April 13 2016

The Office of the Superintendent of Financial Institutions recently published the final version of Guideline E-22 – Margin Requirements for Non-centrally Cleared Derivatives. The guideline is intended to provide clear and comprehensive guidance to all federally regulated financial institutions on the variation and initial margin requirements that will take effect from September 2016. The final version is the result of a public consultation and thus includes several revisions.

Canada further harmonises derivatives trade reporting rules
  • Canada
  • April 06 2016

The Canadian Securities Administrators recently announced proposed changes to Multilateral Instrument 96-101 Trade Repositories and Derivatives Data Reporting and its related Companion Policy. The participating jurisdictions propose to limit the trade reporting disseminated publicly to certain asset classes and underlying benchmarks that exhibit sufficient market activity.

Is it clear yet? Final countdown to clearing of derivatives
  • Canada
  • March 23 2016

The Canadian Securities Administrators recently published the proposed National Instrument 94-101 Mandatory Central Counterparty Clearing of Derivatives and its companion policy, which introduce mandatory clearing of certain over-the-counter derivative transactions. It is hoped that this will mitigate counterparty risk in the derivatives market, increase financial stability and eliminate opportunities for regulatory arbitrage.

Canadian provinces implement derivatives scope and trade reporting rules
  • Canada
  • March 09 2016

The securities regulatory authorities in Alberta, British Columbia, Saskatchewan, New Brunswick, Newfoundland and Labrador, the Northwest Territories, Nova Scotia, Nunavut, Prince Edward Island and Yukon recently adopted derivatives product determination and trade reporting rules. The rules define instruments subject to the trade repositories rule and set out derivatives data reporting requirements.

CSA publishes customer clearing instrument
  • Canada
  • February 24 2016

The Canadian Securities Administrators' proposed rule on customer clearing contains requirements for the treatment of customer collateral by clearing intermediaries and derivatives clearing agencies. The new rule recognises that multiple clearing intermediaries may be involved in a transaction, and that derivative clearing infrastructure and service providers are primarily located outside Canada.


European Union

EU regulatory changes affecting derivatives: what's already in force and what's to come
  • European Union
  • December 21 2016

Five years on from the G20's commitment to implement measures to increase transparency and reduce risk in the derivative markets, there have been significant changes to regulations affecting the derivatives markets in the European Union. However, many new rules are still not yet in force and some, such as the margin requirements under the European Market Infrastructure Regulation, will not be fully implemented until 2020.

Getting ready for EU margin requirements
  • European Union
  • October 26 2016

The European Commission recently published the final delegated regulation on the margin requirements for derivative trades not cleared by a central counterparty. Under the European Market and Infrastructure Regulation, certain counterparties will need to exchange both initial and variation margin in respect of derivative trades not cleared by a central counterparty. These rules will have far-reaching consequences for derivatives documentation.

Top tips to negotiate OTC derivatives clearing arrangements
  • European Union
  • August 24 2016

The European Commission has introduced a new EU regulation on over-the-counter derivatives, central counterparties and trade repositories. The regulation provides clearing obligation and risk mitigation techniques for certain derivative contracts, trade reporting, registration, financial and risk management requirements for clearing organisations and new trade execution requirements.

Derivatives clearing: issues for pension schemes
  • European Union
  • March 30 2016

Almost four years since the EU Over-the-Counter (OTC) Derivatives, Central Counterparties and Trade Repositories Regulation came into force, one of its main requirements – to clear certain OTC derivative trades through a central counterparty – is now coming into effect. The clearing obligation will affect many derivatives users, including pension schemes.

MiFID II commodity derivatives: an update
  • European Union
  • February 10 2016

Implementation of the new EU Markets in Financial Instruments Directive has been delayed until January 2018. The directive introduces a number of changes, including an expanded range of commodity derivatives, narrower exemptions for firms dealing in commodity derivatives, changes to mandatory position limits and reporting requirements and an expansion of the European Securities and Markets Authority's power.


USA

Contributed by Shearman & Sterling LLP
Second Treasury report issued: implications for derivatives market
  • USA
  • December 06 2017

The US Department of the Treasury recently released its second in a series of four reports evaluating the US financial regulatory system. As it relates to the derivatives markets, the report does not advocate fundamental changes in the regulatory framework but suggests a change in regulatory emphasis. Further, it makes a series of specific recommendations that would broadly make incremental improvements suggested by market participants.

Final rule issued on qualified financial contracts: what you need to know
  • USA
  • November 08 2017

The Board of Governors of the Federal Reserve System recently adopted a final rule requiring US global systemically important banking institutions (GSIBs), their subsidiaries and the US operations of foreign GSIBs (covered entities) to amend many of their qualified financial contracts in order to restrict their counterparties' ability to immediately terminate such contracts in the event that the covered entity or an affiliate enters into bankruptcy or resolution proceedings.

CFTC extends and revises relief for position aggregation requirements and notice filings
  • USA
  • September 20 2017

The Commodity Futures Trading Commission (CFTC) has extended and revised no-action relief that provides an exemption from compliance with certain aggregation requirements for CFTC-specified position limits for futures and option trading. CFTC staff have indicated that they may consider further modifications to these requirements during the term of the relief.

CFTC provides time-limited no-action relief for aggregation notice filings for position limits
  • USA
  • March 29 2017

The Commodity Futures Trading Commission Division of Market Oversight (DMO) recently issued a time-limited no-action letter stating that, from February 2017 to August 2017, it will not recommend an enforcement action for failure to file a notice when relying on certain aggregation exemptions from federal position limit levels. The DMO also announced the availability of a portal that provides the form and manner for filing aggregation exemption notices.

Regulators issue guidance on non-compliance with impending variation margin requirements
  • USA
  • March 29 2017

The US prudential regulators – including the Federal Reserve Board, the Office of the Comptroller of the Currency and the International Organisation of Securities Commissions – recently issued guidance as to the implementation of variation margin requirements on uncleared swaps. The guidance indicates how the respective supervisory authorities and regulators will approach compliance with the variation margin requirements.


United Kingdom

Distributed ledger technology and derivatives – is the FCA looking to regulate innovation?
  • United Kingdom
  • May 10 2017

The UK Financial Conduct Authority (FCA) recently published a discussion paper to gauge market participants' views on how the future development of distributed ledger technology (DLT) should be regulated by the FCA in FCA-regulated markets. As industry efforts to use DLT continue, the FCA expects that in the second half of 2017 and into 2018 there will be more movement from the 'proof of concept' stage to 'real-world' deployments.

What would Brexit mean for derivative transactions?
  • United Kingdom
  • June 08 2016

While the impact of Brexit would depend on the precise terms of the outcome of the exit negotiations, there are potential issues that may affect derivative transactions. Given the importance of the derivatives market to the United Kingdom, a post-Brexit UK government would be keen to ensure that the protections for derivative transactions remain in place, and that the United Kingdom continues to benefit from any cross-border arrangements.


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