Before ESMA left for their summer holidays, they made it abundantly clear that EMIR will apply in one form or another outside of the EU. This threatens to disrupt trading flows globally as early as 15 September.
By this date, parties trading derivatives must agree in writing the arrangements under which OTC derivative portfolios will be reconciled and agree procedures relating to the identification, recording and monitoring of disputes and their resolution. This is partly dependent on the classification of those counterparties (see article here) and the legal certainty on which those trades are predicated (see here).
However, to date, only 24 counterparties have officially logged their information on the ISDA EMIR Protocol site. With only 33 days left as of publication, this has left many banks in a panic, with some threatening to cease trading with their counterparties if they do not sign up by September, as to do so might leave the bank exposed.
Therefore, this is one issue that goes beyond the financial sector and will hit funds and corporates alike just as hard if a solution cannot be reached. We will be following this story closely in the lead up to 15 September and we encourage readers to watch this space.