Assessing the practical impacts of the EU derivatives trading obligation

Abstract

Derivatives trading obligations represent one of a number of types of
obligations that will fundamentally change the over-the-counter (OTC)
derivatives markets. Global regulatory change is underway to implement G20
commitments. In the European Union (EU), this is primarily taking place
through the Markets in Financial Instruments Regulation and the European
Market Infrastructure Regulation. Although there are clear commonalities
between the EU and other third-country regimes, market participants may face
challenges when complying with multiple trading obligation regimes unless
equivalence decisions are made that recognise compliance with third-country
regimes or allow the execution of transactions on third-country venues. While
the trading obligation in the EU will not come into force until 2018, market
participants may want to engage with relevant consultation processes and
regulators to reduce the risk of market fragmentation and a negative impact
on liquidity.