GUEST COMMENT: Derivatives market in Europe

Lobbying the EU is always a challenge at the best of times. Sometimes months of effort appear to lead to nowhere. However, on this occasion the combined efforts of PLSA and our European body, Pensions Europe, not only led somewhere but also led to somewhere we wanted to go.

I refer to the European Commission’s (EC’s) recent announcement on regulation of the derivatives markets. Pension schemes have an exemption from central clearing of their over-the-counter derivatives trades. This saves them from converting their assets (principally bonds) into the cash that would be required as collateral for a central clearing process. Even the market’s greatest minds haven’t yet devised a straightforward way of doing this, so central clearing would be expensive and cumbersome.

It was this impracticality that led the EC to extend the pensions exemption to 2017 and then August 2018. Now the EC has announced an extra three-year extension, with a potential further two years beyond that. The news came in a package of reforms of the European Market Infrastructure Regulation (EMIR), which sets the framework for the EU derivatives markets.

This gives pension schemes some certainty for the medium term at least, although we should be in no doubt that central clearing is still the long-term goal. Of course, it is not a permanent solution, but it is one that takes the issue away to beyond the date when the UK will have left the EU.

    Share Story:

Recent Stories


Private markets – a growing presence within UK DC
Laura Blows discusses the role of private market investment within DC schemes with Aviva Director of Investments, Maiyuresh Rajah

The DB pension landscape 
Pensions Age speaks to BlackRock managing director and head of its DB relationship management team, Andrew Reid, about the DB pensions landscape 

Podcast: Who matters most in pensions?
In the latest Pensions Age podcast, Francesca Fabrizi speaks to Capita Pension Solutions global practice leader & chief revenue officer, Stuart Heatley, about who matters most in pensions and how to best meet their needs
Podcast: A look at asset-backed securities
Royal London Asset Management head of ABS, Jeremy Deacon, chats about asset-backed securities (ABS) in our latest Pensions Age podcast

Advertisement Advertisement Advertisement