The member states of the EU have reached agreement on the trading of derivatives – a crucial piece of financial legislation that pitted the United Kingdom against the rest of the EU.
The deal, reached by EU finance ministers at their meeting in Luxembourg, means that officials representing the member states have a mandate to negotiate with the European Parliament on the European Market Infrastructure Regulation (EMIR).
The regulation aims to change the way that over-the-counter (OTC) derivatives are cleared, forcing them through central clearing houses to increase transparency. This would replace the current practice of trades being settled directly between the two parties.
The UK, concerned about the effect that EU legislation could have on the City of London, where most derivatives are traded, had pushed for the regulation to be widened to cover all derivatives.
As part of the compromise, the UK dropped this demand. But it claimed a partial victory, with the European Commission agreeing to make a proposal to regulate non-OTC derivatives at a later date. This is likely to be as early as 19 October, when it presents its Markets in Financial Instruments directive and regulation proposals (MIFID and MIFIR).
The UK won several additional concessions, including a restriction on the ability of the European Securities and Markets Authority (ESMA) to take decisions on which clearing-houses to authorise for OTC derivative trades. The UK also managed to re-introduce a clause to create greater competition among clearing houses.
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