EU delays reform to futures market by a year

Brussels is delaying by a year the introduction of rules to boost competition in Europe’s futures markets, postponing the measures less than two weeks before they were due to go live, Report says, citing Financial Times.

The European Parliament and Croatia, which holds the EU’s rotating presidency, made a move after regulators warned that the sector was behind in its preparations for the so-called “open access” regime.

The changes, which were due to take effect on July 4, allow investors to use a clearinghouse of their choice, rather than remain with the venue they transacted. Clearinghouses sit between the two parties in trade and manage the broader risk to the market if one side defaults.

This month, the European Securities and Markets Authority said the coronavirus pandemic had left the industry struggling to meet the deadline.

The open-access rules are intended to promote competition among exchanges and clearing houses in Europe’s €73tn futures market. Investors can bet on the movements in the price of everything from interest rates to crude oil. Significant market participants and countries, including Germany, had lobbied against the changes.

The legal step would have made it explicitly possible for a trade to be agreed on one platform, but then cleared by a competing one. The plans were part of a sweeping overhaul in 2014 of the EU’s trading rule book, known as Mifid. The measure was strongly backed at the time by pre-Brexit Britain, with the City of London seeing it as a way to open up the European market.