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Markets Regulation

February Newsletter

The purpose of this communication is to keep you up to date on the near-term regulatory changes which are impacting financial markets globally.


  • Margin for non-cleared VM requirements apply from 1 March
  • EMIR Cat 1 counterparties go live with clearing of additional EEA currencies and CDS
  • US issues executive order on reducing regulations and controlling regulatory costs
  • Industry bodies are mobilising on Brexit issues

Information accurate as of 6 March 2017.

Margin and Collateral

EMIR Phase 1 go live on 4 Feb: with minimum 'noise' the larger EU and Swiss banks went live with new IM and VM requirements for non-cleared derivatives on 4 February.

Variation Margin (VM) go-live on 1 Mar: VM requirements for all FC and NFC+ counterparts (and their equivalents in US) applied from 1 March. There was significant concern in the industry on re-papering readiness, with ISDA reporting average of ~30% of CSAs compliant in the week preceding the deadline.

Regulatory guidelines ahead of deadline: in the week ending 24 February there were a number of announcements from regulatory bodies on the approach to trading from 1 March. Falling short of formal relief, they indicated that regulators would take a 'risk based' approach to continued trading while good faith measures to bring all CSAs into compliance continued. See announcements from ESMA, FCA, IOSCO, CFTC and Federal Reserve, and commentary from ISDA. See also our statement on continued trading or contact our Margin Documentation team.


EEA currencies go live: on 9 Feb EMIR mandatory clearing started for IRS in additional EEA currencies (SEK, PLN, and NOK) and CDS for Cat 1 counterparties (clearing members). Category 2 counterparties will follow on 9 August.  


Further clarity: ESMA has updated two Q&A documents on market structures and transparency under MiFID II. They provided clarity on aspects of OTF operation as well as the organisational level at which firms must perform the SI calculations.

Packages: ESMA also clarified in a report a number of characteristics that define if a packaged product is deemed liquid, including the need for components to be subject to a clearing obligation and a mandate to trade on a trading venue. 

ESMA letter: ESMA has written to the EC to highlight a concern that multiple SIs could establish networks to connect internal matching platforms, thereby circumventing obligations to establish themselves as OTFs.

Regulatory Divergence

US emphasis on de-regulation: the US President has issued an Executive Order on reducing regulations and controlling regulatory costs, which requires US Government agencies to rescind two Federal regulations for every one new regulation issued.

EU seeks refinement: ESMA’s chair spoke at an ALDE seminar, suggesting improvements were possible in the EU’s legislative framework, but not suggesting any row-back. In a similar vein, the EC’s vice-president of financial regulation said the EU was “sensitive to talk of unpicking financial legislation which applies to carefully negotiated international standards and rules”.


Industry speaks: the BBA is mobilising on Brexit with a series of "quick briefs" covering the need for a transition plan, a point that representatives of the government’s Brexit task force seem to be missing. Concurrently, the Financial Markets Law Committee (FMLC) has published a letter sent to the Treasury Select Committee, advising that it has begun work to identify, analyse and address legal uncertainties relating to the UK’s withdrawal from the EU.

Trade & Transaction Reporting

EMIR Q&A: ESMA published a revision to reporting Q&A to clarify that the revised technical standards on reporting, applicable 1 November, are go forward only. Firms are only required to submit reports relating to legacy trades when a reportable event takes place. Furthermore, the Q&A explains how those reports will be validated by the trade repositories


SONIA reform: following analysis of the Q4 2016 consultation responses, the Bank of England has published an additional consultation around refining the rate calculation approach and has advised that the transition to reformed SONIA will occur in March or April 2018.


DLT for Securities: both ESMA and IOSCO have prepared reports that cover the risks and opportunities that distributed ledger technology (DLT) present for financial markets. Once the solution looking for a problem, ESMA identify that DLT could provide more efficient post-trade processes, enhanced reporting and data management capabilities and reduced costs. IOSCO foresee relevance to investors, securities markets and their regulators.

Capital Rule Revisions

Council engaged: the first working group of the European Council reviewed the EC’s CRR2 and CRDV proposals. All of the key areas were covered, with support for a 3% leverage ratio and the introduction of Net Stable Funding Ratio (NSFR) although some concerns over a divergence from Basel standards for NSFR were voiced. Likely to take considerable time to complete the Council review and Parliament have yet to start their review.

Further information

A list of regulatory acronyms is available here. For regulation milestones see the ISDA compliance calendar.  Additional information is available on our website.

For any questions please email MarketsRegulation@natwestmarkets.com.

The Royal Bank of Scotland © 2017