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06 February 2013

EACT/Raeburn: So ECON went and did it - What should the real economy be thinking?

Raeburn writes on his blog that he is still puzzled by the vote in ECON, in effect rejecting ESMA's rule drafting for EMIR. EACT has "no interest in seeing the whole fabric of ESMA's rules being put back into the melting pot".

We began with a scratching of heads – from where had come this rather belated push by ECON to protect the interests of the real economy in derivatives regulation?

One cynical answer that has been volunteered to me is that it was primarily a result of aggressive lobbying by ISDA and AFME – the usual suspects, some would add, and not the sort of company that the real economy naturally welcomes or feels comfortable with. And in the next breath the energy companies are mentioned.

That the energy companies have been lobbying hard should not surprise us. These are the companies most affected by the single most egregious piece of drafting by ESMA, which removes the exemption from clearing once a single asset class threshold has been breached. The politicians and lawyers can be left to decide whether in doing so ESMA exceeded its mandate in the Level I legislation. But the asset class breach rule is the one area with which we should be really concerned and grateful to ECON for their resolution.

The next puzzle is over where we go next. There are two stages here. Firstly, we need to see whether Parliament votes through the resolution; we will have the answer on this by tomorrow afternoon. The second stage – assuming that there is sufficient support for the resolution – is described to me by old Brussels hands as ‘uncharted territory’. So no easy signposts there.

The stance of the EACT is becoming clearer:

  • we think that ECON has raised real concerns, especially so with the asset class breach rule
  • but we have no interest in seeing the whole fabric of ESMA’s rules being put back into the melting pot
  • implementation delay, whilst bad for global regulatory progress, may be seen as less bad given the lack of proper preparation for implementation.

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