When the G20 set out to "sort" OTC derivatives in 2009 the target date to have it all complete was 31 December 2012. Well we know that the water has flowed under that bridge some time ago and while US politicians might claim some sort of compliance (ar at least knowing how they would comply) most of the world missed the target completely.
Recognising that the original target would be missed, the market looked at what would happen and when. In doing so they had two major complaints; the first was that a lot of clarity was still missing (and indeed still is) and the second was the unco-ordinated and inconsistent way the rules were being put in place by different jurisdictions. As well as making it hard to plan, this raised the cost of compliance for more complex organisations and looked to be creating (unintentionally, I believe) opportunities for regulatory arbitrage.
A few developments in recent weeks have me thinking that the likely new date, and one worth putting a little money on is 31 December 2014.
Why do I say that?
Well two developments and a little experience suggest this date. The first is an increasing number of initiatives now talking about Q1 or early 2014 as their start/target date. This includes clearing under EMIR and the issuance of LEI (Legal Enity Identifier) numbers. This latter piece of infrastructrure is key to "joining" a lot ot the reporting and clearing data together. Right now one can use something like an CICI, as issued in the US, but this is not the end game. LEIs were due to be available by 31 March 2013, but all went very quiet. Now a source with good knowledge advises that they will be available and gain traction in 2014.
In terms of co-ordination I had been hearing that US regulators were wary of pushing mandatory clearing ahead of Europe (ie EMIR) and today I heard that Asia regulators are also not wanting to be early movers and potentially disadvantage their markets and firms.
This sound like good'ish news. If the world can start to link implementation and are currently talking as a group about the first half of 2014, then this sounds like a plan, albeit slightly ad-hoc. That said most of these plans are over-ambitious and will likely slip, but I am pretty sure that the politicians will not want to slip another year number in the date ie to 2015!
So while the market signs now seem to be pointing at the first half od 2014, but experience suggests it is more likely to be second half 2014 and once you slip to the second half you may as well set 31 December 2014.
This does not mean we cannot or should not be doing work now, but rather that the traction and heaving lifting related to this is now looking to me at least as if it will be 2014, with plenty of thinking, planning and preparatory work done in late 2013.
Anyone agree? Disagree?
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