See this interesting article on the Reuters web site, which talks about potential issues between Asian and European regulators, on the handing of third country trades under the forthcoming rules on handling uncleared OTC derivatives.
As can be seen in the EBA consultation document, the proposals include a rule which states that any trade between an EU entity and an unrecognised third country will be subject to these rules, even NFCs below the threshold.
The rules introduce mandatory variation and initial margin on all covered OTC derivatives that have not been cleared, which could require significant capital.
As well as causing Asia/Europe issues, the currently proposal approach may well cause some issues for European trades that cross into an unrecognised country. This could in some cases affect the energy and commodities markets, if trades are covered by MiFID II and thus EMIR. This would include financial non spot trades and also physical forwards traded via an MTF (Multilateral Trading Facility). When MiFID II comes in this scope could widen further with the introduction of OTFs (Organised Trading Facility). We also await guidance on what constitutes a “physical” trade under MiFID Annex C.