Pension funds have been granted a two-year exemption to new rules regarding derivatives trading.
The European Commission announced yesterday that newly-established central clearing houses for derivatives required more time to assess the impact of new rules on pension funds.
“Imposing such a requirement on pension funds would require very far-reaching and costly changes to business models.” —European CommissionThe European Market Infrastructure Regulation (EMIR) requires the establishment of central clearing houses for the trading of certain types of derivatives.
These counterparties are expected to raise costs for pension funds and other parties substantially under the current iteration of the rules, as investors would need to hold more collateral against the derivatives they trade.
Pension funds would still be expected to use central clearing houses alongside other investors and traders, but the delay gives the clearing houses time to “find solutions for pension funds”, a statement from the European Commission said.
“Given that pensions hold neither significant amounts of cash nor highly liquid assets, imposing such a requirement on them would require very far-reaching and costly changes to their business model which could ultimately affect pensioners’ income,” the Commission said.
Banks and brokers will begin using the new clearing houses in the second quarter of this year, reports CIO’s sister title The Trade. Larger asset managers will start using them in January 2016.
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