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European Commission to review OTC regulations for pension funds 

March 13, 2015

Sophie Baker, Pensions & Investments

The European Commission will review legislation that could force pension funds to centrally clear over-the-counter derivatives transactions.

The European Market Infrastructure Regulation requires that over-the-counter derivatives trades are cleared through central counterparties, which in turn require that cash be posted as margin against these trades. Pension funds were granted a temporary exemption until August 2015, which can be extended until only 2018 before a legislative change is necessary.

“While it is too early to (make) a decision, I will be launching a review of the EMIR legislation shortly, which will provide an opportunity for reflection,” said Lord Jonathan Hill of Oareford, European commissioner for financial stability, financial services and capital markets union, speaking Thursday at the National Association of Pension Funds annual investment conference in Edinburgh.

“I know you are also concerned that EMIR will increase the cost of hedging for pension schemes through the requirement of the posting of an initial margin and consequently will lead to a reduction in equity investments.”

Read More: Pensions & Investments 

 
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