Yesterday, 1st September, was the date on which rules around margin on uncleared OTC derivatives were supposed to take effect for the largest counterparties across the globe. The principles of these rules were established as part of the 2009 G20 Pittsburgh commitments following the financial crisis.

In the EU, the commitments are implemented as part of EMIR. Recently a delay has been announced pushing the start of the rules for the largest banks to next year. Other jurisdictions have also delayed the start, for example in Singapore. However, others, such as in Japan, have gone ahead yesterday, resulting in the regulations only applying to part of the global market. In addition, since the rules were only finalised late in the process, many have not completed all of the required preparations, such as the putting in place of new documentation and methods (for example the ISDA SIMM, see here).

The result of the uneven roll out out has been dissatisfaction at the possibility of regulatory arbitrage. According to this article on the Reuters web site, the US have given a one month breathing space to some. However the article describes the negative effect that the rules are having in Asia. The US’s stance has also caused some concerns, as outlined in this post on The OTC Space by Bill Hodgson about  a letter posted by the CFTC on this topic. The letter is also referred to in this article on The Trade.

Most in the European energy and commodities markets will not yet be affected by these rules. However those who become financial counterparties under MiFID II, and also those who are “NFC+”, will need to comply as the timetable unfolds.