For all the appropriate safeguards built into the derivatives regulatory framework after the financial crisis, certain aspects of the reforms impose unnecessary compliance costs and burdens on end users, for little benefit. Regulators in both the US and Europe are now reviewing their rules with an eye to making them more efficient and less complex. By recognizing what works well and what could work better, the objective is to make the regulatory framework stronger and reduce the excessive burdens that discourage trading, investment and hedging.
In the European Union (EU), one part of this process has been effected via a review of the European Market Infrastructure Regulation (EMIR). According to the European Commission (EC), the aim is to “eliminate disproportionate costs and burdens to small companies” that might impede their access to markets, without putting financial stability at risk.
The EC has already proposed a number of possible changes to EMIR that go some way to meeting this objective. However, ISDA believes certain other, targeted modifications would further strengthen the framework, create greater certainty for derivatives users, and eliminate remaining areas of complexity. This paper outlines some of those proposed modifications.